CIMA F2 key terms

The process of combining a parent's and its subsidiaries' individual financial statements into a single set, treating the group as one reporting entity by eliminating intra-group balances and transactions.

The basis for consolidation: an investor controls an investee when it has power over relevant activities, exposure to variable returns, and the ability to use its power to affect those returns.

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

An intangible asset recognised on acquisition representing the excess of consideration transferred plus NCI and prior holdings over the fair value of identifiable net assets acquired; not amortised but tested annually for impairment.

The price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, used to value consideration and net assets in a business combination.

A transaction in which an acquirer obtains control of one or more businesses, accounted for using the acquisition method: identify the acquirer, the acquisition date, and recognise and measure goodwill.

An entity over which the investor has significant influence but not control, typically evidenced by holding 20% to 50% of voting rights, accounted for using the equity method.

The power to participate in the financial and operating policy decisions of an investee without control or joint control, presumed when an investor holds 20% or more of voting power.

A method of accounting for associates and joint ventures whereby the investment is initially at cost, then adjusted for the investor's share of post-acquisition profits, other comprehensive income and dividends received.

An arrangement over which two or more parties have joint control, classified either as a joint operation where parties hold rights to assets and obligations for liabilities, or as a joint venture.

A joint arrangement in which the parties with joint control have rights to the net assets of the arrangement, accounted for using the equity method rather than proportionate consolidation.

Adjustments removing transactions and balances between group companies, such as intercompany sales, receivables and payables, so that the consolidated statements show only dealings with external parties.

Profit arising on a sale between group companies that remains within inventory at the reporting date; it is eliminated in full on consolidation, with the NCI share adjusted where the seller is a subsidiary.

Increases or decreases made on consolidation to restate a subsidiary's identifiable assets and liabilities to fair value at acquisition, with related depreciation and deferred tax effects recognised subsequently.

A business combination achieved in stages, where previously held interests are remeasured to fair value at the acquisition date and any resulting gain or loss is recognised in profit or loss.

Derecognition of a subsidiary when control is lost, with any retained interest remeasured to fair value and the resulting gain or loss on disposal recognised in profit or loss.

A reduction in an asset's carrying amount to its recoverable amount when the latter falls below carrying amount, with the loss recognised immediately unless it reverses a previously recognised revaluation surplus.

The higher of an asset's fair value less costs of disposal and its value in use, being the amount an entity expects to recover from the asset through use or sale.

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

The smallest identifiable group of assets that generates cash inflows largely independent of other assets, used as the level at which impairment is tested when individual assets cannot be assessed separately.

Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another, classified by the substance of the contractual arrangement rather than its legal form.

A contractual obligation to deliver cash or another financial asset, or to exchange financial instruments on potentially unfavourable terms, classified as a liability rather than equity.

A financial instrument containing both a liability and an equity component, such as convertible debt, where the liability is measured first at fair value and the equity component is the residual.

The measurement basis for most financial liabilities and held-to-collect debt assets: initial amount adjusted for principal repayments, cumulative effective interest, and any impairment allowance.

A technique allocating interest income or expense over the life of a financial instrument at the rate that exactly discounts estimated future cash flows to the instrument's initial carrying amount.

The probability-weighted estimate of credit losses over the expected life of a financial asset, recognised under IFRS 9 without waiting for a default event to occur.

A tax provision recognised on temporary differences between an asset's or liability's carrying amount and its tax base, measured at the rates expected to apply when the difference reverses.

The difference between the carrying amount of an asset or liability and its tax base, which may be taxable or deductible and gives rise to a deferred tax liability or asset.

The amount attributed to an asset or liability for tax purposes, against which the accounting carrying amount is compared to identify temporary differences and compute deferred tax.

Income arising in the ordinary course of an entity's activities, recognised when a performance obligation is satisfied by transferring a promised good or service to the customer.

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.

The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services, excluding amounts collected on behalf of third parties.

An entity's right to consideration in exchange for goods or services transferred, where that right is conditional on something other than the passage of time, such as future performance.

An entity's obligation to transfer goods or services to a customer for which consideration has already been received, commonly described as deferred or unearned revenue.

A contract conveying the right to control the use of an identified asset for a period in exchange for consideration, recognised by the lessee as a right-of-use asset and a lease liability.

The lessee's asset representing its right to use an underlying asset for the lease term, measured initially at the lease liability plus initial direct costs and prepaid lease payments.

The lessee's obligation to make lease payments, measured at the present value of payments over the lease term discounted at the interest rate implicit in the lease or the lessee's incremental borrowing rate.

A transaction in which an entity sells an asset and leases it back, with the gain recognised only to the extent of rights transferred to the buyer-lessor.

A liability of uncertain timing or amount, recognised when a present obligation from a past event is probable to require settlement and can be reliably estimated.

A possible obligation whose existence will be confirmed only by uncertain future events, or a present obligation that is not recognised because outflow is not probable or cannot be measured reliably; it is disclosed.

A contract in which the unavoidable costs of meeting its obligations exceed the economic benefits expected to be received, for which a provision is recognised at the lower of exit and performance cost.