CPAEAM key terms

Recording revenues when earned and expenses when incurred, regardless of when cash changes hands. It matches costs with the benefits they produce and underlies generally accepted reporting under the Conceptual Framework.

The process of identifying when a promised good or service transfers to a customer and measuring the consideration to which the entity expects to be entitled, typically at a point in time or over time.

A promise in a contract with a customer to transfer a distinct good or service. Each obligation is identified separately and satisfied when control of the promised item passes to the customer.

An entity's right to consideration in exchange for goods or services already transferred, where that right is conditional on something other than the passage of time. It differs from a receivable.

Expenses are recognized in the same period as the revenues they helped generate. Costs not yet consumed are carried as assets, and costs with no future benefit are expensed immediately.

A payment made before the related benefit is consumed, recorded as an asset and later charged to expense as the service or coverage period elapses.

The amount by which an asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs of disposal and value in use.

The amount at which an asset or liability is recognized in the statement of financial position, net of accumulated depreciation, amortization, and any accumulated impairment losses.

Systematic allocation of a depreciable asset's cost less residual value over its useful life, reflecting consumption of economic benefits rather than changes in market price.

The period over which an asset is expected to be available for use by the entity, or the number of production units expected to be obtained from it.

The estimated amount an entity would currently obtain from disposing of an asset, after deducting estimated disposal costs, if the asset were already of the age and condition expected at the end of its useful life.

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 notion.

A measurement technique that discounts expected future cash flows at a rate reflecting the time value of money and the risks specific to those flows, used for many liability and asset measurements.

A method of amortizing a financial instrument by applying the rate that exactly discounts estimated future cash flows to the instrument's initial carrying amount, producing constant periodic interest yield.

The amount at which a financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus cumulative amortization of any difference, adjusted for expected credit losses.

Combining the financial statements of a parent and its controlled subsidiaries into a single set of statements, eliminating intragroup balances, transactions, income, and expenses in full.

The equity in a subsidiary not attributable, directly or indirectly, to the parent. It is presented separately within consolidated equity and includes a share of post-acquisition profits.

An asset representing future economic benefits from assets acquired in a business combination that are not individually identified and separately recognized, measured as the excess of consideration over net identifiable assets.

The excess of the acquirer's interest in the fair value of net identifiable assets acquired over the consideration transferred, recognized immediately in profit or loss after reassessing the measurement.

The exchange difference arising when a foreign operation's functional-currency statements are translated into the presentation currency, recognized in other comprehensive income and reclassified on disposal.

The currency of the primary economic environment in which an entity operates, determined mainly by the currency influencing sales prices and the costs of labor, materials, and services.

The ratio at which one currency is exchanged for another. Closing rates translate assets and liabilities, while average rates translate income and expenses of a foreign operation.

Items of income and expense not recognized in profit or loss as required by standards, such as revaluation surplus, remeasurements of defined benefit plans, and translation differences.

The excess of a revalued asset's carrying amount over its previous carrying amount, recognized in other comprehensive income and accumulated in equity rather than in profit or loss.

The risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated. It comprises inherent risk, control risk, and detection risk.

The magnitude of an omission or misstatement that, individually or in aggregate, could reasonably influence the economic decisions of users taken on the basis of the financial statements.

The risk that procedures performed by the auditor will not detect a misstatement that exists and could be material, either individually or when aggregated with other misstatements.

The amount set below overall materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality.

Procedures designed to detect material misstatements at the assertion level, including tests of details and substantive analytical procedures, performed irrespective of assessed control risk.

An audit procedure performed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level.

The process designed and effected by those charged with governance and management to provide reasonable assurance about achieving objectives concerning reliable reporting, effectiveness and efficiency of operations, and compliance with laws.

Dividing incompatible responsibilities, such as authorization, custody of assets, and record keeping, among different people so that no single individual can both perpetrate and conceal an error or fraud.

Information used by the auditor in arriving at the conclusions on which the opinion is based. Its sufficiency relates to quantity and its appropriateness to relevance and reliability.

Written confirmation from management of its responsibility for the financial statements and of the completeness of information provided, dated on or near the date of the auditor's report.

The assumption that an entity will continue in operation for the foreseeable future, without intention or necessity to liquidate or cease trading, which underpins the preparation of financial statements.

An auditor's conclusion that the financial statements give a true and fair view, or are presented fairly in all material respects, in accordance with the applicable financial reporting framework.

The amount on which income tax is computed, derived from accounting profit after adjusting for items that are non-deductible, non-taxable, or subject to different timing for tax purposes.

The amount attributed to an asset or liability for tax purposes, used to compare with carrying amount in determining temporary differences that give rise to deferred tax.

Tax attributable to temporary differences between carrying amounts and tax bases, recognized as a liability or asset and measured at rates expected to apply when the difference reverses.