CA ANZ Core 3: FAR flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Fundamental qualitative characteristics

Relevance and faithful representation. Relevance includes predictive value, confirmatory value and materiality; faithful representation requires completeness, neutrality and freedom from material error.

Asset definition per Framework

A present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits for the entity.

Materiality threshold

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions of primary users. It is entity-specific and applies to recognition, measurement and disclosure.

Going concern disclosure

When management identifies material uncertainties about going concern, the entity discloses the uncertainties and basis of preparation. If not a going concern, it discloses that fact and the reasons.

Ordinary shares in EPS

Basic EPS divides profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding, weighted from the date consideration is receivable.

Current asset classification

An asset is current if realised in the normal operating cycle, held primarily for trading, expected to be realised within twelve months, or is unrestricted cash or a cash equivalent.

OCI reclassification categories

Other comprehensive income items are split into those that may be reclassified to profit or loss (e.g., cash flow hedges) and those that will not be reclassified (e.g., revaluation surplus).

Five-step revenue model

Identify the contract, identify performance obligations, determine the transaction price, allocate it to performance obligations, and recognise revenue when each obligation is satisfied.

Variable consideration constraint

Variable consideration is included in the transaction price only to the extent it is highly probable that no significant reversal of cumulative revenue will occur when uncertainty resolves.

Over-time revenue criteria

Revenue is recognised over time if the customer simultaneously receives and consumes benefits, controls the asset as it is created, or the asset has no alternative use with an enforceable right to payment.

Contract acquisition costs

Incremental costs of obtaining a contract are capitalised if expected to be recovered, then amortised on a systematic basis consistent with the transfer of goods or services to the customer.

Revaluation surplus treatment

An increase in a revalued asset is recognised in OCI and accumulated in equity as a revaluation surplus. A decrease is expensed to the extent it exceeds any existing surplus.

Development cost capitalisation

Development costs are capitalised only when technical feasibility, intention and ability to complete, probable future benefits, adequate resources and reliable cost measurement are all demonstrated.

Recoverable amount

The higher of an asset's fair value less costs of disposal and its value in use. An impairment loss arises when carrying amount exceeds recoverable amount.

Impairment allocation to CGU

An impairment loss for a cash-generating unit reduces goodwill first, then other assets pro rata to carrying amount, not below the highest of fair value less costs of disposal, value in use or zero.

Lease liability initial measurement

The present value of lease payments not paid at commencement, discounted using the interest rate implicit in the lease or the lessee's incremental borrowing rate if that rate is not readily determinable.

Short-term lease exemption

A lessee may elect not to recognise a right-of-use asset and lease liability for leases with a term of twelve months or less, recognising lease payments as an expense on a straight-line or other systematic basis.

Finance lease lessor

A lessor recognises a net investment in the lease equal to the gross investment discounted at the interest rate implicit in the lease, and recognises finance income over the lease term.

SPPI contractual cash flow test

Cash flows are solely payments of principal and interest if they are consistent with a basic lending arrangement, with interest reflecting time value, credit risk and other basic lending risks and costs.

Expected credit loss model

A loss allowance is measured at twelve-month expected credit losses initially and at lifetime expected credit losses when credit risk has increased significantly since initial recognition.

Fair value definition

The price 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 under AASB 13.

Level 3 fair value inputs

Unobservable inputs for the asset or liability, used when observable inputs are not available, reflecting assumptions market participants would use, including risk adjustments.

Provision recognition criteria

A provision is recognised when a present legal or constructive obligation arises from a past event, an outflow of resources is probable, and the amount can be reliably estimated.

Onerous contract provision

A provision is recognised for the present obligation under a contract when the unavoidable costs of meeting the contract's obligations exceed the economic benefits expected to be received under it.

Defined benefit remeasurements

Actuarial gains and losses, the return on plan assets excluding interest income, and asset ceiling effects are recognised in OCI and are never reclassified to profit or loss.

Goodwill measurement formula

Consideration transferred plus non-controlling interest plus fair value of previously held interest, less the fair value of identifiable net assets acquired, equals goodwill or a bargain purchase gain.

Acquisition-related costs

Costs such as advisory, legal and valuation fees incurred to effect a business combination are expensed as incurred, not included in consideration transferred or goodwill.

Control under AASB 10

An investor controls an investee when it has power over the investee, exposure or rights to variable returns, and the ability to use its power to affect those returns.

Deferred tax measurement

Deferred tax is measured at the tax rates expected to apply when the temporary difference reverses, based on rates enacted or substantively enacted by the reporting date.

Functional currency

The currency of the primary economic environment in which the entity operates, determined considering sales prices, competitive forces, regulations, and financing and operating cash flows.

Foreign operation translation

Assets and liabilities are translated at the closing rate and income and expenses at transaction-date or average rates, with differences recognised in OCI as a translation reserve.

Cash conversion cycle

Inventory days plus receivables days minus payables days. A shorter cycle indicates faster conversion of inventory and receivables into cash relative to payment of suppliers.