ACCA FR key terms

A set of principles issued by the IASB that guides how financial statements are prepared and how new standards are developed, covering the objective of reporting, qualitative characteristics, element definitions and measurement.

The assumption that an entity will continue in operation for the foreseeable future, so assets are not stated at break-up values and liabilities are split into current and non-current in the normal way.

Accounting that records income when it is earned and expenses when they are incurred, regardless of when cash changes hands, so reported profit reflects period activity rather than period cash flows.

A qualitative characteristic meaning information is capable of making a difference to users' decisions because it has predictive value, confirmatory value, or both; materiality is the entity-specific aspect of relevance.

A qualitative characteristic meaning information completely, neutrally and accurately depicts the economic phenomena it claims to represent, free from bias and free from material error or omission.

Exercising caution when making judgements under conditions of uncertainty, so that assets and income are not overstated and liabilities and expenses are not understated, while remaining neutral rather than deliberately conservative.

Recording and presenting transactions according to their economic reality rather than solely their legal form, for example recognising a leased asset when substantially all risks and rewards have passed to the lessee.

Information is material if omitting, misstating or obscuring it could reasonably influence decisions of primary users; it is entity-specific and depends on both the size and the nature of the item.

The process of including in the primary statements an item that meets the definition of an element and satisfies the recognition criteria, typically relevant information and a faithful, measurable cost or value.

The amount at which an asset or liability is recognised in the statement of financial position, after deducting accumulated depreciation, amortisation or impairment losses where applicable.

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, an exit-price, market-based measure.

The systematic allocation of the depreciable amount of a tangible non-current asset over its useful life, reflecting the pattern in which the asset's economic benefits are consumed.

A fall in the recoverable amount of an asset below its carrying amount, recognised as an expense so that the asset is not reported above the amount recoverable through use or sale.

The systematic allocation of the cost or revalued amount of an intangible asset over its finite useful life; intangibles with indefinite lives are not amortised but are tested annually for impairment.

A liability of uncertain timing or amount, recognised only when a present obligation arising from a past event exists, an outflow of resources is probable and a reliable estimate can be made.

A possible obligation whose existence depends on uncertain future events, or a present obligation that is not recognised because an outflow is not probable or cannot be measured reliably; it is disclosed instead.

A possible asset arising from past events whose existence will be confirmed only by uncertain future events outside the entity's control; it is not recognised, and is disclosed only when an inflow is probable.

A promise in a contract with a customer to transfer a distinct good or service; revenue is recognised when, or as, each separate obligation is satisfied.

A lessee's asset representing the right to use an underlying asset for the lease term, measured initially at the present value of lease payments plus initial direct costs and any restoration costs.

Tax expected to be paid or recovered in future periods because of temporary differences between the carrying amounts of assets and liabilities and their corresponding tax bases.

A way of calculating amortised cost using the rate that exactly discounts estimated future cash flows to the instrument's initial carrying amount, allocating interest income or expense over its expected life.

A transaction in which goods or services are settled in the entity's own equity instruments or in cash based on its share price; equity-settled awards are measured at grant-date fair value.

Profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the period, a widely used measure of return delivered to shareholders.

A measure of financial risk comparing borrowings with equity or with total capital, showing how heavily an entity relies on debt finance and how vulnerable profit is to interest costs.

Operating profit divided by finance costs, showing how many times operating profit covers interest payable and therefore the margin of safety available to lenders.

The average period between acquiring inventory and collecting cash from customers; a lengthening cycle absorbs working capital and can signal deteriorating liquidity.

Operating profit divided by capital employed, usually equity plus non-current liabilities, measuring how efficiently the long-term funds invested in the business are converted into operating profit.

Cash generated from operations after tax and capital expenditure, representing the cash left for servicing debt, paying dividends or funding further investment.

The power to direct the relevant activities of an investee, combined with exposure to variable returns and the ability to use that power to affect those returns; control makes the investee a subsidiary.

An entity controlled by another entity, the parent; its assets, liabilities, income and expenses are consolidated line by line into the group financial statements.

An entity over which the investor has significant influence, normally indicated by holding 20% or more of the voting rights, accounted for in group accounts using the equity method.

The excess of the consideration transferred plus non-controlling interest over the fair value of identifiable net assets acquired, representing benefits such as reputation and workforce that cannot be separately identified.

The share of a subsidiary's net assets and profit attributable to shareholders other than the parent, presented separately within group equity and within group profit.

Sales, loans, dividends and other dealings between companies inside the same group; they are eliminated in full on consolidation so that only transactions with external parties are reported.

A primary statement that analyses cash movements into operating, investing and financing activities and reconciles opening and closing cash, highlighting liquidity and solvency.

Using software to examine large datasets for patterns, trends and anomalies, supporting forecasting, risk assessment and more effective analytical review of financial information.

Software, such as robotic process automation, that performs repetitive accounting tasks like data capture, reconciliations and invoice processing, reducing error and freeing time for judgement-based work.

Presenting financial information graphically in charts and dashboards so that trends, comparisons and outliers can be communicated quickly and clearly to decision makers.

Accounting software hosted online rather than on local servers, allowing real-time recording and shared access from any location, with automatic updates, backup and integration with other systems.