CA ANZ Core 5 key terms

Accounting approach that records revenue when earned and expenses when incurred, regardless of when cash moves. It matches costs to the periods that benefit from them, giving a truer view of performance than cash receipts alone.

Assumption that an entity will continue operating for the foreseeable future without forced liquidation. It justifies carrying assets at cost rather than break-up value and underpins the preparation of general purpose financial statements.

Reduction in an asset's carrying amount when its recoverable amount falls below book value. The loss is recognised immediately in profit or loss, reflecting that future economic benefits are lower than previously expected.

The amount at which an asset or liability is recorded on the statement of financial position, being cost less accumulated depreciation, amortisation and any impairment losses, or the revalued figure where the revaluation model applies.

Systematic allocation of a depreciable asset's cost over its useful life. It spreads the consumption of economic benefits across reporting periods and is a non-cash expense, so it is added back when preparing cash flow statements.

Process of combining a parent and its controlled subsidiaries into a single set of financial statements. Intra-group balances and transactions are eliminated so the group reports as one economic entity to external users.

An intangible asset arising on acquisition, measured as consideration transferred plus non-controlling interest less the fair value of identifiable net assets. It represents expected synergies and is not amortised but tested annually for impairment.

Having power over an investee, exposure to variable returns from it, and the ability to use that power to affect those returns. Control determines whether an entity must be consolidated by the reporting parent.

Guiding concept that expenses are recognised in the same period as the revenue they helped generate. It drives accruals, provisions and the capitalisation of costs that will produce future income.

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

A possible obligation whose existence depends on uncertain future events, or a present obligation that cannot be reliably measured or is not probable. It is disclosed rather than recognised in the financial statements.

Sales revenue less variable costs. It measures how much each unit or dollar of sales contributes towards covering fixed costs and generating profit, and it underpins break-even analysis and short-term decision making.

The level of sales at which total revenue equals total costs, producing neither profit nor loss. It is calculated by dividing fixed costs by the contribution margin per unit or the contribution margin ratio.

The excess of budgeted or actual sales over the break-even level, often expressed as a percentage. It indicates how far sales can fall before the business incurs a loss, signalling operating risk.

Decision technique that considers only future costs and revenues that differ between alternatives. Sunk costs and allocated fixed overheads are excluded because they cannot be changed by the decision being made.

The benefit forgone by choosing one course of action over the next best alternative. It is not recorded in the ledger but is essential in relevant costing because it reflects the true economic cost of a decision.

A budget adjusted to the actual activity level achieved, so that variable costs reflect real volume. Comparing it with actual results isolates spending variances from volume variances and improves performance evaluation.

A predetermined unit cost for materials, labour and overhead based on expected efficiency and prices. Standards provide benchmarks for pricing, inventory valuation and variance analysis against actual performance.

Technique of comparing actual results with budgeted or standard figures and breaking the difference into causes such as price and quantity. It highlights areas needing management attention and supports corrective action.

Costing method that assigns overheads to products or services using activities that consume resources and cost drivers that reflect that consumption. It improves accuracy where products differ in complexity and volume.

A factor that causes or influences the level of an activity's cost, such as machine hours, set-ups or orders processed. Selecting appropriate drivers is central to activity-based costing and cost behaviour analysis.

The risk that the auditor expresses an inappropriate opinion on financial statements that are materially misstated. It comprises inherent risk, control risk and detection risk, and it guides the nature and extent of audit procedures.

The threshold at which omissions or misstatements could influence the economic decisions of users of financial statements. It is a matter of professional judgement and determines what is audited, tested and disclosed.

Information gathered by the auditor to support the audit opinion. It must be sufficient in quantity and appropriate in relevance and reliability, and is obtained through inspection, observation, enquiry, confirmation, recalculation and analytical procedures.

Processes designed by those charged with governance to provide reasonable assurance about reliable reporting, effective operations and compliance. The auditor evaluates controls to assess risk and may rely on them to reduce substantive testing.

Control that separates authorisation, custody, recording and reconciliation tasks so no single person controls an entire transaction. It reduces the risk of error and fraud and is a core element of a sound control environment.

The state of being free from relationships or interests that could compromise objectivity, in fact and in appearance. It is a fundamental ethical requirement for auditors and underpins public confidence in assurance.

The total of ordinary income and statutory income derived by a taxpayer during an income year, before deductions are applied. Amounts that are exempt or non-assessable are excluded from this figure.

An amount that may be claimed against assessable income because it was incurred in gaining or producing assessable income, or is expressly allowed by tax law. It reduces taxable income for the income year.

Statutory regime that brings net gains on the disposal of capital assets into assessable income. It applies to assets acquired after the relevant start date, with exemptions and concessions available for certain assets and taxpayers.

A broad-based indirect tax levied on supplies of goods and services, with registered businesses generally claiming credits for tax paid on inputs. The tax is ultimately borne by the final consumer, not the intermediary business.

The amount on which income tax is calculated, being assessable income less allowable deductions, with any tax losses accounted for. Tax rates and offsets are then applied to determine the tax payable.

The sum of a project's expected cash flows discounted to present value at the required rate of return, less the initial outlay. A positive result indicates the investment adds value and should be accepted.

The discount rate at which a project's net present value equals zero. It is compared with the required rate of return to decide acceptance, though it can mislead when comparing projects of different scale or timing.

The weighted average return required by providers of debt and equity finance, reflecting their risk. It is used as the discount rate in investment appraisal and as a benchmark for creating shareholder value.

The mix of debt and equity used to fund an entity's assets and operations. It affects the cost of capital and financial risk, and management seeks a mix that minimises the overall funding cost.

The proportion of debt relative to equity or total capital in a business. Higher gearing magnifies returns to shareholders but increases financial risk and sensitivity to interest rate and earnings changes.

The excess of current assets over current liabilities, representing funds tied up in day-to-day operations. Effective management of receivables, inventory and payables supports liquidity and reduces financing needs.

Any individual or group affected by or interested in an organisation's activities, such as shareholders, employees, customers, suppliers, lenders, regulators and communities. Their interests shape strategy and governance priorities.

Conflict of interest arising when managers act in their own interests rather than those of shareholders. It is mitigated through incentives, monitoring, disclosure and independent boards that align decisions with owner interests.

The framework of rules, practices and processes by which an organisation is directed and controlled. It allocates rights and responsibilities among the board, management and shareholders and sets decision-making accountability.

The level of risk an organisation is willing to accept in pursuit of its objectives, expressed in qualitative or quantitative terms. It guides risk tolerance limits and resource allocation across the entity.

Systematic process of identifying, assessing, treating and monitoring risks that could affect objectives. Treatments include avoidance, reduction, transfer and acceptance, supported by ongoing reporting to the board.

Legal obligation of directors and officers to act in good faith, in the best interests of the company, for proper purposes and with care and diligence. Breach can attract civil and criminal liability.

A situation where a person's private interests or other duties could improperly influence their judgement in a role. It must be disclosed and managed, often by abstaining from decisions or removing the interest.

Allowing a company to incur debts when there are reasonable grounds to suspect it is or will become unable to pay them. Directors can be personally liable, so early advice and monitoring of solvency are essential.

Techniques that examine large datasets to identify patterns, anomalies and insights supporting decision making and assurance. In audit it enables full-population testing, risk profiling and more targeted procedures.

Presentation of data in charts, dashboards or graphs to make patterns, trends and outliers easier to interpret. Effective visuals support management reporting and highlight areas requiring further investigation.

Protective measures and controls safeguarding systems, networks and data from unauthorised access, theft or disruption. It combines technology, processes and user behaviour, and is a key governance and risk oversight responsibility.

A measure selected to track progress towards a critical objective, ideally specific, measurable and linked to strategy. Well-chosen indicators guide management attention and support performance accountability.