ICAB AL Corporate Reporting key terms

A coherent set of principles that guides how financial statements are prepared and presented, defining the objective of reporting, qualitative characteristics of useful information, elements of statements, and recognition and measurement bases.

The attributes that make financial information useful to users, namely relevance and faithful representation as fundamental traits, supported by comparability, verifiability, timeliness and understandability as enhancing traits.

The quality of information that depicts economic substance completely, neutrally and free from material error, so users can rely on it as a truthful picture of the transactions and events it purports to portray.

The threshold at which omitting or misstating information could influence decisions users make on the basis of financial statements, judged by size and nature of the item in context.

The exercise of caution when making judgements under uncertainty, so assets and income are not overstated and liabilities and expenses are not understated, without permitting deliberate understatement or creation of hidden reserves.

The principle that transactions and events are accounted for and presented according to their economic substance and reality, not merely their legal form, so linked arrangements are reported as they truly operate.

The building blocks defined in the conceptual framework that financial statements portray: assets, liabilities, equity, income and expenses, each with defined essential characteristics used to decide recognition.

The conditions that must be met before an item is included in the financial statements, typically that it meets an element definition and can be measured reliably, with relevance and faithful representation preserved.

The method used to quantify an element in the financial statements, such as historical cost, fair value, value in use, fulfilment value or current cost, each producing different information about performance and position.

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, reflecting exit value in the principal market.

A three-level ranking of inputs used to measure fair value: quoted prices in active markets, observable inputs other than quoted prices, and unobservable inputs, with disclosure of the level used.

A measurement technique that discounts expected future cash flows at a rate reflecting current market assessments of time value of money and the risks specific to the cash flows being valued.

A reduction in the carrying amount of an asset to its recoverable amount when that amount falls below book value, with the loss recognised immediately in profit or loss unless a standard requires otherwise.

The higher of an asset's fair value less costs of disposal and its value in use, representing the maximum economic benefit expected to be recovered from continued use and eventual sale.

The present value of the future cash flows expected to be derived from an asset or cash-generating unit, including its eventual disposal, discounted at a pre-tax rate reflecting current market assessments of risk.

The smallest identifiable group of assets that generates cash inflows largely independent of other assets, used for impairment testing when individual assets cannot be assessed separately for recoverability.

The write-down of acquired goodwill when the recoverable amount of the cash-generating unit to which it belongs falls below carrying amount, with reversals prohibited once recognised under current standards.

A transaction in which an acquirer obtains control of one or more businesses, accounted for by recognising and measuring identifiable assets acquired, liabilities assumed and any non-controlling interest at acquisition-date values.

The power to direct the relevant activities of an investee, exposure to variable returns from that involvement, and the ability to use the power to affect those returns, determining whether consolidation is required.

The process of combining the financial statements of a parent and its subsidiaries into a single set, eliminating intragroup balances and transactions and presenting the group as one economic entity.

The equity in a subsidiary not attributable, directly or indirectly, to the parent, presented separately within consolidated equity and measured either at fair value or proportionate share of net assets at acquisition.

The power to participate in financial and operating policy decisions of an investee without controlling or jointly controlling them, presumed when an investor holds twenty per cent or more of voting power absent evidence to the contrary.

Investees over which an investor has significant influence, or in which it holds joint control with others, accounted for using the equity method in consolidated financial statements.

An accounting approach in which an investment is initially recognised at cost and subsequently adjusted for the investor's share of the investee's profit or loss, other comprehensive income and equity movements.

A contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration, giving the lessee a right-of-use asset and a corresponding lease liability.

An asset representing a lessee's right to use an underlying asset for the lease term, measured initially at the lease liability plus initial direct costs and adjusted for prepayments, incentives and restoration obligations.

The present value of lease payments not yet paid, discounted using the interest rate implicit in the lease or the lessee's incremental borrowing rate, subsequently increased by interest and reduced by payments.

The process of recognising revenue when a promised good or service is transferred to a customer in an amount reflecting the consideration the entity expects to be entitled to, applied through a five-step model.

A promise in a contract with a customer to transfer a distinct good or service, or a series of distinct goods or services that are substantially the same, recognised when each obligation is satisfied.

The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services, adjusted for variable consideration, financing components and non-cash consideration.

Balances arising from contracts with customers: a contract asset where the entity has performed but not yet acquired an unconditional right to payment, and a contract liability where consideration is received before performance.

Liabilities of uncertain timing or amount, recognised when a present obligation from a past event exists, an outflow is probable and the amount can be reliably estimated, measured at best estimate.

A possible obligation whose existence depends on uncertain future events, or a present obligation that fails the recognition criteria, disclosed rather than recognised unless the outflow is remote.

A contract in which the unavoidable costs of meeting its obligations exceed the economic benefits expected to be received, for which the present obligation is recognised as a provision.

The tax effect of temporary differences between the carrying amount of assets and liabilities and their tax base, recognised as a deferred tax liability or asset and measured at expected future tax rates.

The difference between the carrying amount of an asset or liability in the statement of financial position and its tax base, which reverses over time and gives rise to deferred tax balances.

Recognition of a deferred tax asset only to the extent that taxable profit will probably be available against which deductible temporary differences and unused tax losses can be utilised.

The process of categorising financial assets and liabilities by their contractual cash flow characteristics and the entity's business model, determining whether they are measured at amortised cost or fair value.

The measurement of a financial instrument at initial amount less principal repayments, adjusted for cumulative amortisation of the effective interest method and any impairment allowance.

The rate that exactly discounts estimated future cash payments or receipts through the expected life of a financial instrument to its gross carrying amount, used to allocate interest over time.

A probability-weighted estimate of credit losses over the life of a financial asset, recognised as an impairment allowance reflecting forward-looking information rather than waiting for default.

Optional accounting that aligns the recognition of gains and losses on hedging instruments with the hedged item, applied only when designated relationships meet effectiveness and documentation requirements.

A transaction in which goods or services are received in exchange for equity instruments or cash amounts based on the entity's share price, measured at grant-date fair value for equity-settled awards.

The present value of expected future payments required to settle employee benefit obligations earned to date, measured actuarially and adjusted for unrecognised service cost and plan assets.

Changes in the present value of a defined benefit obligation or fair value of plan assets arising from experience adjustments and changes in actuarial assumptions, recognised in other comprehensive income under current standards.

Items of income and expense not recognised in profit or loss as required or permitted by standards, such as revaluation surplus, remeasurements and certain hedging gains, presented separately and accumulated in equity.

The cumulative increase in the carrying amount of property, plant and equipment above historical cost under the revaluation model, recognised in other comprehensive income and held within equity.

A primary statement showing movements during the period in each component of equity, including total comprehensive income, transactions with owners, and reconciliation of opening and closing balances.

The requirement that financial statements present fairly the financial position, performance and cash flows of an entity, achieved by applying standards with additional disclosure when compliance alone is insufficient.

The assumption that an entity will continue in operation for the foreseeable future, without intention or necessity to liquidate or curtail operations, underpinning the preparation of financial statements.

Events occurring between the end of the reporting period and the date financial statements are authorised for issue, adjusting figures where they provide evidence of conditions existing at period end.

Components of an entity whose results are regularly reviewed by the chief operating decision maker, disclosed to enable users to evaluate the nature and financial effects of the business activities undertaken.

Information about relationships, transactions and outstanding balances with parties that control, are controlled by, or exercise significant influence over the entity, disclosed because such dealings may not be at arm's length.

A ratio expressing profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares outstanding, presented with diluted figures reflecting potential shares.

Reporting for a period shorter than a full financial year, applying the same accounting policies as annual statements and disclosing sufficient information for users to understand changes since the last annual report.

A framework for communicating how an organisation's strategy, governance, performance and prospects create value over time, using multiple capitals and addressing connectivity of financial and non-financial information.