Intermediate Accounting Practice key terms

A promise in a contract with a customer to transfer a distinct good or service, or a bundle of goods or services that is substantially the same and transferred in the same pattern.

The amount of consideration an entity expects to be entitled to in exchange for transferring promised goods or services, adjusted for variable consideration, significant financing components, noncash consideration, and consideration payable to the customer.

An entity's right to consideration in exchange for goods or services transferred when that right is conditioned 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 the entity has received consideration, or for which consideration is due, from the customer.

Portion of the transaction price that is not fixed, such as discounts, rebates, refunds, credits, incentives, or penalties, estimated using either the expected value or most likely amount method and constrained to amounts highly probable not to reverse.

Requirement that variable consideration be included in the transaction price only to the extent it is highly probable that a significant reversal will not occur when the uncertainty is resolved.

Revenue recognition pattern used when the customer simultaneously receives and consumes benefits, the entity creates or enhances an asset the customer controls, or the performance does not create an asset with alternative use and the entity has a right to payment for progress.

Measure of progress toward satisfying a performance obligation based on resources consumed, such as costs incurred, labor hours, or machine hours, relative to total expected inputs.

Contra-asset estimate of the amount of receivables not expected to be collected, measured under the current expected credit loss model using historical loss experience, current conditions, and reasonable forecasts.

Technique that groups receivable balances by how long they have been outstanding and applies higher expected loss rates to older buckets to estimate the allowance for credit losses.

Estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation; used to measure inventory at the lower of cost or NRV.

Inventory measurement rule requiring inventory measured on a first-in, first-out or average cost basis to be written down when net realizable value falls below cost.

Interest cost added to the cost of an asset during the period required to get it ready for its intended use, limited to actual interest incurred or avoidable interest, whichever is lower.

An asset that necessarily takes a substantial period of time to prepare for its intended use or sale, such as a constructed building or a manufactured inventory item with a long production cycle.

Systematic allocation of the depreciable cost of a tangible long-lived asset over its useful life, using methods such as straight-line, units of production, or declining balance.

Amount by which the carrying amount of a long-lived asset or asset group exceeds its fair value when the carrying amount is not recoverable, measured as the excess of carrying amount over fair value.

First step in testing property, plant, and equipment for impairment: compare the carrying amount with the sum of undiscounted expected future cash flows from the asset group.

Write-down recognized when the fair value of a reporting unit is less than its carrying amount, limited to the amount of goodwill assigned to that reporting unit.

Operating segment or one level below an operating segment used to test goodwill for impairment, representing the level at which discrete financial information is available and reviewed by management.

Debt security the entity has the positive intent and ability to hold until maturity, measured at amortized cost, with unrealized gains and losses not recognized in earnings.

Measurement category for trading securities and equity investments without readily determinable fair value elections, where unrealized changes in fair value are reported in current earnings.

Revenues, expenses, gains, and losses excluded from net income under GAAP, including certain unrealized gains and losses on available-for-sale debt securities and pension adjustments.

Cumulative balance of items reported in other comprehensive income that have not been reclassified to net income, presented as a separate component of stockholders' equity.

Amortization technique that applies the market rate at issuance to the carrying amount of a bond to determine interest expense, with the difference from the cash coupon adjusting the premium or discount.

Face amount of a bond plus unamortized premium or minus unamortized discount, representing the net liability reported on the balance sheet.

Lease that transfers substantially all risks and rewards of ownership to the lessee, capitalized as a right-of-use asset and lease liability with interest and amortization expense.

Lease that does not transfer control of the underlying asset to the lessee; the lessee records a right-of-use asset and lease liability and recognizes a single straight-line lease expense.

Lessee's asset representing the right to use an underlying asset for the lease term, initially measured at the lease liability plus initial direct costs and prepaid rent, less incentives.

Balance sheet amount reflecting taxes payable in future periods because of temporary differences between the book basis and tax basis of assets and liabilities, measured at enacted rates.

Reduction of a deferred tax asset when it is more likely than not that some or all of the asset will not be realized, based on available evidence about future taxable income.

Difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years.

Actuarial present value of all benefits earned by employees to date under a defined benefit pension plan, using assumed discount rate and future compensation levels.

Periodic cost of a defined benefit plan composed of service cost, interest cost, expected return on plan assets, amortization of prior service cost, and amortization of net actuarial gains or losses.

Shares of an entity's own stock that have been reacquired and are not retired, recorded as a contra-equity account that reduces total stockholders' equity.

Cost recognized over the requisite service period for equity awards, measured at grant-date fair value for stock options and at grant-date market price for restricted stock.

Fair value of an equity award measured on the date the award is granted, using an option-pricing model for options and the stock price for restricted shares, fixed for expense recognition.

Earnings per share computed by adjusting net income and weighted-average shares for the assumed conversion or exercise of dilutive potential common shares, such as options, warrants, and convertible securities.

Technique for measuring the dilutive effect of options and warrants: assumed proceeds are used to repurchase shares at the average market price, and only the incremental shares are added to the denominator.

Potential common shares whose inclusion in diluted earnings per share would increase earnings per share or decrease a loss per share, and which are therefore excluded from the computation.

Cash flow statement presentation that starts with net income and adjusts for noncash items and changes in working capital to derive cash flows from operating activities.

Cash inflows and outflows from transactions that enter into the determination of net income, including cash collected from customers and cash paid to suppliers and employees.

Amount at which a financial asset or liability is measured at initial recognition minus principal repayments, plus or minus cumulative amortization of premiums or discounts, adjusted for impairment.