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Accounting [IFRS and IAS] Terms and Definitions [A to C]



accounting policies – The specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements [IAS 8, 5]

accounting profit – Profit or loss for a period before deducting tax expense [IAS 12.5]


accrual basis of accounting – The effects of transactions and other events are recognized when they occur (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate. [F.22]

accumulating compensated absences – Compensated absences that are carried forward and can be used in future periods if the current period’s entitlement is not used in full.
[IAS 19, 13]

acquiree – The business or businesses that the acquirer obtains control of in a business combination. [IFRS 3.A]

acquirer – The entity that obtains control of the acquiree [IFRS 3.A]

acquisition date – The date on which the acquirer obtains control of the acquiree. [IFRS 3.A]

active market – A market in which all the following conditions exist:
(a) the items traded within the market are homogeneous;
(b) willing buyers and sellers can normally be found at any time; and
(c) prices are available to the public.
[ IAS 36.6, IAS 38.8, IAS 41.8]

active market – A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. [IAS 39.AG71]

actuarial assumptions – An entity’s unbiased and mutually compatible best estimates of the demographic and financial variables that will determine the ultimate cost of providing post-employment benefits. [IAS 19.72–73]

actuarial gains and losses – (a) Experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and (b) the effects of changes in actuarial assumptions. [IAS 19.7]

actuarial present value of promised retirement benefits – The present value of the expected payments by a retirement benefit plan to existing and past employees, attributable to the service already rendered. [IAS 26.8]

adjusting events after the reporting period –  [See ‘events after the reporting period’ agricultural activity] The management by an entity of the biological transformation of biological assets for sale, into agricultural produce, or into additional biological assets.
[IAS 41.5]

Agricultural produce –  The harvested product of the entity’s biological assets [IAS 41.5]

Amortization (depreciation) – The systematic allocation of the depreciable amount of an asset over its useful life. [IAS 36.6, IAS 38.8]

amortized cost of a financial asset or financial liability – The amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility [IAS 39.9]

antidilution – An increase in earnings per share or a reduction in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions [IAS 33.5]

asset – A resource:
(a) controlled by an entity as a result of past events; and
(b) from which future economic benefits are expected to flow to the entity.
[IAS 38.8, F.49(a)]

assets held by a long-term employee benefit fund – Assets (other than non-transferable financial instruments issued by the reporting entity) that:
(a) are held by an entity (a fund) that is legally separate from the reporting entity and exists solely to pay or fund employee benefits; and
(b) are available to be used only to pay or fund employee benefits, are not available to the
reporting entity’s own creditors (even in bankruptcy), and cannot be returned to the
reporting entity, unless either: (i) the remaining assets of the fund are sufficient to meet all the related employee benefit obligations of the plan or the
reporting entity; or (ii) the assets are returned to the reporting entity to reimburse it for employee benefits already paid.
[IAS 19.7]

associate – An entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. [IAS 28.2]

available-for-sale financial assets – Those non-derivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments, or (c) financial assets at fair value through profit or loss. [IAS 39.9]

basic earnings per share – Profit or loss attributable to ordinary equity holders of the parent entity (the numerator) divided by the weighted average number of ordinary shares
outstanding during the period (the denominator). [IAS 33.10]

biological asset – A living animal or plant. [IAS 41.5]

biological transformation – The processes of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset. [IAS 41.5]

borrowing costs – Interest and other costs that an entity incurs in connection with the borrowing of funds. [IAS 23.5]

business – An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants. [IFRS 3.A]

business combination – A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as ‘true mergers’ or ‘mergers of equals’ are also business combinations as that term is used in IFRS 3. [IFRS 3.A]

capital – Under a financial concept of capital, such as invested money or invested purchasing power, the net assets or equity of the entity. The financial concept of capital is adopted by most entities. Under a physical concept of capital, such as operating capability, the productive capacity of the entity based on, for example, units of output per day. [F.102]

capitalization – Recognizing a cost as part of the cost of an asset. IAS 23.9

carrying amount – The amount at which an asset is recognized after deducting any accumulated depreciation (amortization) and accumulated impairment losses thereon. [IAS 16.6, IAS 36.6, IAS 38.8].

carrying amount – The amount at which an asset is recognized in the statement of financial position. [IAS 40.5, IAS 41.8]

cash – Cash on hand and demand deposits. [IAS 7.6]

cash equivalents – Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. [IAS 7.6]

cash flows – Inflows and outflows of cash and cash equivalents. [IAS 7.6]  cash-generating unit – The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. [IAS 36.6, IFRS 5.A]

cash-settled share-based payment transaction – A share-based payment transaction in which the entity acquires goods or services by incurring a liability to transfer cash or other assets to the supplier of those goods or services for amounts that are based on the price (or value) of the entity’s shares or other equity instruments of the entity. [IFRS 2.A]

cedant – The policyholder under a reinsurance contract. [IFRS 4.A]

change in accounting estimate –  An adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors. [IAS 8.5].

class of assets – A grouping of assets of a similar nature and use in an entity’s operations. [IAS 16.37, IAS 36.127, IAS 38.119].

class of financial instruments – Grouping of financial instruments that is appropriate to the nature of the information disclosed and that takes into account the characteristics of those financial instruments. [IFRS 7.6].

close members of the family of an individual – Those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity. They may include:
(a) the individual’s domestic partner and children;
(b) children of the individual’s domestic partner; and
(c) dependants of the individual or the individual’s domestic partner.
[IAS 24.9]

closing rate – The spot exchange rate at the end of the reporting period. [IAS 21.8]

commencement of the lease term – The date from which the lessee is entitled to exercise
its right to use the leased asset. It is the date of initial recognition of the lease (ie the recognition of the assets, liabilities, income or expenses resulting from the lease, as appropriate). [IAS 17.4]

compensation – Includes all employee benefits (as defined in IAS 19) including employee benefits to which IFRS 2 applies. Employee benefits are all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of the entity. Compensation includes:
(a) short-term employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profit-sharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidized goods or services) for current employees;
(b) post-employment benefits such as pensions, other retirement benefits, post employment life insurance and post-employment medical care;
(c) other long-term employee benefits, including long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits and, if they are not payable wholly within twelve months after the end of the period, profit-sharing, bonuses and deferred compensation;
(d) termination benefits; and
(e) share-based payment.
[IAS 24.9]

component of an entity – Operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. [IFRS 5.A]

compound financial instrument – A financial instrument that, from the issuer’s perspective, contains both a liability and an equity element. [IAS 32.28–29]

consolidated financial statements – The financial statements of a group presented as
those of a single economic entity. [IAS 27.4, IAS 28.2]

construction contract – A contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. [IAS 11.3]

constructive obligation – An obligation that derives from an entity’s actions where:
(a) by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and
(b) as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.
[IAS 37.10]

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