CTA Finance & Accounting cheat sheet

Conceptual framework: relevance and faithful representation are fundamental qualitative characteristics; comparability, verifiability, timeliness and understandability are enhancing.

Revenue recognition (IFRS 15 / ASC 606) five steps: identify contract, identify performance obligations, determine transaction price, allocate price to obligations, recognise revenue on satisfaction.

Lease accounting (IFRS 16): lessee recognises a right-of-use asset and lease liability at present value of lease payments; short-term and low-value leases may be expensed.

Expected credit loss model: impairment allowance equals probability-weighted losses over the instrument's life; 12-month ECL applies at Stage 1, lifetime ECL at Stages 2 and 3.

Goodwill is not amortised under IFRS; it is tested annually for impairment and written down to recoverable amount (higher of fair value less costs to sell and value in use).

Deferred tax arises from temporary differences between carrying amount and tax base; measure at enacted or substantively enacted rates expected to apply on reversal.

Statement of cash flows: operating (indirect start from profit, adjust non-cash and working capital), investing (non-current assets), financing (equity and borrowings).

Consolidation: control exists with power over the investee, exposure to variable returns, and ability to use power to affect returns; intragroup balances and unrealised profits are eliminated.

Contribution margin = selling price − variable cost per unit; contribution/sales ratio = contribution ÷ revenue; break-even units = fixed costs ÷ contribution per unit.

Margin of safety = (actual or budgeted sales − break-even sales) ÷ actual or budgeted sales; expresses cushion as a percentage of current volume.

Operating leverage = contribution ÷ operating profit; higher leverage magnifies profit sensitivity to volume changes.

Overhead absorption rate = budgeted overhead ÷ budgeted activity base; under- or over-absorption = actual overhead − absorbed overhead.

Activity-based costing assigns costs to activities then to products via cost drivers; it is most justified where overheads are large and products differ in complexity.

Relevant costing: exclude sunk costs and committed fixed costs; include opportunity costs and incremental cash flows only.

Variance analysis: price variance = (standard price − actual price) × actual quantity; usage variance = (standard quantity − actual quantity) × standard price.

Throughput accounting: throughput = sales − material cost; bottleneck resource allocation follows throughput per unit of bottleneck time; throughput accounting ratio = throughput per bottleneck minute ÷ cost per bottleneck minute.

Weighted average cost of capital = (E/V × Ke) + (D/V × Kd × (1 − t)); use market values of equity and debt as weights.

CAPM: Ke = risk-free rate + beta × equity risk premium; asset beta is relevered using Modigliani–Miller with tax: βe = βa × [1 + (1 − t)D/E].

NPV = present value of cash inflows − initial investment; accept if NPV > 0. IRR is the discount rate giving NPV = 0; IRR can mislead with non-conventional cash flows.

Working capital cycle = inventory days + receivable days − payable days; a shorter cycle reduces financing need.

Money market hedge: borrow or lend in the foreign currency now to fix the domestic value of a future foreign currency cash flow.

Interest rate parity links spot and forward rates through relative interest rates; purchasing power parity links spot rates through relative inflation.

Forward rate agreement or interest rate futures fix a borrowing rate from a future date; an interest rate swap exchanges fixed for floating interest payments.

Dividend valuation: share price = D1 ÷ (Ke − g) under constant growth, where g = retention ratio × return on retained earnings.

Value added tax: output tax on sales minus input tax on purchases; a business acts as tax collector, so VAT is not a cost unless input tax is irrecoverable.

Taxable profit typically starts from accounting profit and adjusts for disallowable expenses, non-taxable income, and capital allowances replacing depreciation.

Capital allowances give tax relief on qualifying capital expenditure; balancing allowances or charges arise on disposal when proceeds differ from tax written-down value.

Deferred tax is recognised on temporary differences at the expected reversal rate; it is a balance sheet liability or asset, not a current tax payment.

Transfer pricing rules require intra-group transactions to be at arm's length; documentation and country-by-country reporting thresholds vary by jurisdiction.

Withholding tax applies to certain cross-border payments such as dividends, interest and royalties; double tax treaties usually reduce the domestic rate.

Tax avoidance is arranging affairs within the letter of the law; tax evasion is illegal concealment or misrepresentation and attracts penalties and criminal liability.

Late filing and late payment typically trigger fixed penalties plus interest; penalties often escalate with the duration of the default.

Audit risk = inherent risk × control risk × detection risk; the auditor controls detection risk through the nature, timing and extent of procedures.

Materiality is set at overall financial statement level and often lower for specific classes; performance materiality is below overall materiality to leave a buffer.

Assertions tested: occurrence, completeness, accuracy, cut-off, classification and presentation for transactions; existence, rights and obligations, completeness and valuation for balances.

COSO internal control components: control environment, risk assessment, control activities, information and communication, monitoring activities.

Segregation of duties separates authorisation, custody, recording and reconciliation; it is the primary defence against fraud and error in cash and purchasing.

Audit opinion types: unmodified, qualified (material but not pervasive), adverse (material and pervasive misstatement), disclaimer (inability to obtain evidence, material and pervasive).

Going concern: if material uncertainty exists but disclosure is adequate, issue an unmodified opinion with a separate material uncertainty section; if disclosure is inadequate, qualify or disadverse.

Risk response: for significant risks the auditor must obtain substantive procedures, and cannot rely solely on analytical procedures.

Threat categories in the ethics code: self-interest, self-review, advocacy, familiarity and intimidation; evaluate significance and apply safeguards or decline the engagement.

Independence requires both independence of mind (state of mind) and independence of appearance (avoiding facts a reasonable third party would perceive as compromising).

Confidentiality continues after the professional relationship ends; disclosure is permitted only when required by law or authorised by the client.

Agency: an agent binds the principal when acting within actual or apparent authority; the principal is then liable on the contract.

Contract formation requires offer, acceptance, consideration and intention to create legal relations; a counter-offer destroys the original offer.

Negligence claim requires a duty of care, breach of that duty, causation and loss; professional advisers are judged against the standard of a reasonably competent peer.

Directors' duties typically include acting within powers, promoting the success of the company, exercising independent judgement, avoiding conflicts and not accepting benefits from third parties.

Money laundering stages are placement, layering and integration; reporting obligations require suspicious activity reports and a nominated officer.

Conceptual framework: relevance and faithful representation are fundamental qualitative characteristics; comparability, verifiability, timeliness and understandability are enhancing.

Revenue recognition (IFRS 15 / ASC 606) five steps: identify contract, identify performance obligations, determine transaction price, allocate price to obligations, recognise revenue on satisfaction.

Lease accounting (IFRS 16): lessee recognises a right-of-use asset and lease liability at present value of lease payments; short-term and low-value leases may be expensed.

Expected credit loss model: impairment allowance equals probability-weighted losses over the instrument's life; 12-month ECL applies at Stage 1, lifetime ECL at Stages 2 and 3.

Goodwill is not amortised under IFRS; it is tested annually for impairment and written down to recoverable amount (higher of fair value less costs to sell and value in use).

Deferred tax arises from temporary differences between carrying amount and tax base; measure at enacted or substantively enacted rates expected to apply on reversal.

Statement of cash flows: operating (indirect start from profit, adjust non-cash and working capital), investing (non-current assets), financing (equity and borrowings).

Consolidation: control exists with power over the investee, exposure to variable returns, and ability to use power to affect returns; intragroup balances and unrealised profits are eliminated.

Contribution margin = selling price − variable cost per unit; contribution/sales ratio = contribution ÷ revenue; break-even units = fixed costs ÷ contribution per unit.

Margin of safety = (actual or budgeted sales − break-even sales) ÷ actual or budgeted sales; expresses cushion as a percentage of current volume.

Operating leverage = contribution ÷ operating profit; higher leverage magnifies profit sensitivity to volume changes.

Overhead absorption rate = budgeted overhead ÷ budgeted activity base; under- or over-absorption = actual overhead − absorbed overhead.

Activity-based costing assigns costs to activities then to products via cost drivers; it is most justified where overheads are large and products differ in complexity.

Relevant costing: exclude sunk costs and committed fixed costs; include opportunity costs and incremental cash flows only.

Variance analysis: price variance = (standard price − actual price) × actual quantity; usage variance = (standard quantity − actual quantity) × standard price.

Throughput accounting: throughput = sales − material cost; bottleneck resource allocation follows throughput per unit of bottleneck time; throughput accounting ratio = throughput per bottleneck minute ÷ cost per bottleneck minute.

Weighted average cost of capital = (E/V × Ke) + (D/V × Kd × (1 − t)); use market values of equity and debt as weights.

CAPM: Ke = risk-free rate + beta × equity risk premium; asset beta is relevered using Modigliani–Miller with tax: βe = βa × [1 + (1 − t)D/E].

NPV = present value of cash inflows − initial investment; accept if NPV > 0. IRR is the discount rate giving NPV = 0; IRR can mislead with non-conventional cash flows.

Working capital cycle = inventory days + receivable days − payable days; a shorter cycle reduces financing need.

Money market hedge: borrow or lend in the foreign currency now to fix the domestic value of a future foreign currency cash flow.

Interest rate parity links spot and forward rates through relative interest rates; purchasing power parity links spot rates through relative inflation.

Forward rate agreement or interest rate futures fix a borrowing rate from a future date; an interest rate swap exchanges fixed for floating interest payments.

Dividend valuation: share price = D1 ÷ (Ke − g) under constant growth, where g = retention ratio × return on retained earnings.

Value added tax: output tax on sales minus input tax on purchases; a business acts as tax collector, so VAT is not a cost unless input tax is irrecoverable.

Taxable profit typically starts from accounting profit and adjusts for disallowable expenses, non-taxable income, and capital allowances replacing depreciation.

Capital allowances give tax relief on qualifying capital expenditure; balancing allowances or charges arise on disposal when proceeds differ from tax written-down value.

Deferred tax is recognised on temporary differences at the expected reversal rate; it is a balance sheet liability or asset, not a current tax payment.

Transfer pricing rules require intra-group transactions to be at arm's length; documentation and country-by-country reporting thresholds vary by jurisdiction.

Withholding tax applies to certain cross-border payments such as dividends, interest and royalties; double tax treaties usually reduce the domestic rate.

Tax avoidance is arranging affairs within the letter of the law; tax evasion is illegal concealment or misrepresentation and attracts penalties and criminal liability.

Late filing and late payment typically trigger fixed penalties plus interest; penalties often escalate with the duration of the default.

Audit risk = inherent risk × control risk × detection risk; the auditor controls detection risk through the nature, timing and extent of procedures.

Materiality is set at overall financial statement level and often lower for specific classes; performance materiality is below overall materiality to leave a buffer.

Assertions tested: occurrence, completeness, accuracy, cut-off, classification and presentation for transactions; existence, rights and obligations, completeness and valuation for balances.

COSO internal control components: control environment, risk assessment, control activities, information and communication, monitoring activities.

Segregation of duties separates authorisation, custody, recording and reconciliation; it is the primary defence against fraud and error in cash and purchasing.

Audit opinion types: unmodified, qualified (material but not pervasive), adverse (material and pervasive misstatement), disclaimer (inability to obtain evidence, material and pervasive).

Going concern: if material uncertainty exists but disclosure is adequate, issue an unmodified opinion with a separate material uncertainty section; if disclosure is inadequate, qualify or disadverse.

Risk response: for significant risks the auditor must obtain substantive procedures, and cannot rely solely on analytical procedures.

Threat categories in the ethics code: self-interest, self-review, advocacy, familiarity and intimidation; evaluate significance and apply safeguards or decline the engagement.

Independence requires both independence of mind (state of mind) and independence of appearance (avoiding facts a reasonable third party would perceive as compromising).

Confidentiality continues after the professional relationship ends; disclosure is permitted only when required by law or authorised by the client.

Agency: an agent binds the principal when acting within actual or apparent authority; the principal is then liable on the contract.

Contract formation requires offer, acceptance, consideration and intention to create legal relations; a counter-offer destroys the original offer.

Negligence claim requires a duty of care, breach of that duty, causation and loss; professional advisers are judged against the standard of a reasonably competent peer.

Directors' duties typically include acting within powers, promoting the success of the company, exercising independent judgement, avoiding conflicts and not accepting benefits from third parties.

Money laundering stages are placement, layering and integration; reporting obligations require suspicious activity reports and a nominated officer.

Conceptual framework: relevance and faithful representation are fundamental qualitative characteristics; comparability, verifiability, timeliness and understandability are enhancing.

Revenue recognition (IFRS 15 / ASC 606) five steps: identify contract, identify performance obligations, determine transaction price, allocate price to obligations, recognise revenue on satisfaction.

Lease accounting (IFRS 16): lessee recognises a right-of-use asset and lease liability at present value of lease payments; short-term and low-value leases may be expensed.

Expected credit loss model: impairment allowance equals probability-weighted losses over the instrument's life; 12-month ECL applies at Stage 1, lifetime ECL at Stages 2 and 3.

Goodwill is not amortised under IFRS; it is tested annually for impairment and written down to recoverable amount (higher of fair value less costs to sell and value in use).

Deferred tax arises from temporary differences between carrying amount and tax base; measure at enacted or substantively enacted rates expected to apply on reversal.

Statement of cash flows: operating (indirect start from profit, adjust non-cash and working capital), investing (non-current assets), financing (equity and borrowings).

Consolidation: control exists with power over the investee, exposure to variable returns, and ability to use power to affect returns; intragroup balances and unrealised profits are eliminated.

Contribution margin = selling price − variable cost per unit; contribution/sales ratio = contribution ÷ revenue; break-even units = fixed costs ÷ contribution per unit.

Margin of safety = (actual or budgeted sales − break-even sales) ÷ actual or budgeted sales; expresses cushion as a percentage of current volume.

Operating leverage = contribution ÷ operating profit; higher leverage magnifies profit sensitivity to volume changes.

Overhead absorption rate = budgeted overhead ÷ budgeted activity base; under- or over-absorption = actual overhead − absorbed overhead.

Activity-based costing assigns costs to activities then to products via cost drivers; it is most justified where overheads are large and products differ in complexity.

Relevant costing: exclude sunk costs and committed fixed costs; include opportunity costs and incremental cash flows only.

Variance analysis: price variance = (standard price − actual price) × actual quantity; usage variance = (standard quantity − actual quantity) × standard price.

Throughput accounting: throughput = sales − material cost; bottleneck resource allocation follows throughput per unit of bottleneck time; throughput accounting ratio = throughput per bottleneck minute ÷ cost per bottleneck minute.

Weighted average cost of capital = (E/V × Ke) + (D/V × Kd × (1 − t)); use market values of equity and debt as weights.

CAPM: Ke = risk-free rate + beta × equity risk premium; asset beta is relevered using Modigliani–Miller with tax: βe = βa × [1 + (1 − t)D/E].

NPV = present value of cash inflows − initial investment; accept if NPV > 0. IRR is the discount rate giving NPV = 0; IRR can mislead with non-conventional cash flows.

Working capital cycle = inventory days + receivable days − payable days; a shorter cycle reduces financing need.

Money market hedge: borrow or lend in the foreign currency now to fix the domestic value of a future foreign currency cash flow.

Interest rate parity links spot and forward rates through relative interest rates; purchasing power parity links spot rates through relative inflation.

Forward rate agreement or interest rate futures fix a borrowing rate from a future date; an interest rate swap exchanges fixed for floating interest payments.

Dividend valuation: share price = D1 ÷ (Ke − g) under constant growth, where g = retention ratio × return on retained earnings.

Value added tax: output tax on sales minus input tax on purchases; a business acts as tax collector, so VAT is not a cost unless input tax is irrecoverable.

Taxable profit typically starts from accounting profit and adjusts for disallowable expenses, non-taxable income, and capital allowances replacing depreciation.

Capital allowances give tax relief on qualifying capital expenditure; balancing allowances or charges arise on disposal when proceeds differ from tax written-down value.

Deferred tax is recognised on temporary differences at the expected reversal rate; it is a balance sheet liability or asset, not a current tax payment.

Transfer pricing rules require intra-group transactions to be at arm's length; documentation and country-by-country reporting thresholds vary by jurisdiction.

Withholding tax applies to certain cross-border payments such as dividends, interest and royalties; double tax treaties usually reduce the domestic rate.

Tax avoidance is arranging affairs within the letter of the law; tax evasion is illegal concealment or misrepresentation and attracts penalties and criminal liability.

Late filing and late payment typically trigger fixed penalties plus interest; penalties often escalate with the duration of the default.

Audit risk = inherent risk × control risk × detection risk; the auditor controls detection risk through the nature, timing and extent of procedures.

Materiality is set at overall financial statement level and often lower for specific classes; performance materiality is below overall materiality to leave a buffer.

Assertions tested: occurrence, completeness, accuracy, cut-off, classification and presentation for transactions; existence, rights and obligations, completeness and valuation for balances.

COSO internal control components: control environment, risk assessment, control activities, information and communication, monitoring activities.

Segregation of duties separates authorisation, custody, recording and reconciliation; it is the primary defence against fraud and error in cash and purchasing.

Audit opinion types: unmodified, qualified (material but not pervasive), adverse (material and pervasive misstatement), disclaimer (inability to obtain evidence, material and pervasive).

Going concern: if material uncertainty exists but disclosure is adequate, issue an unmodified opinion with a separate material uncertainty section; if disclosure is inadequate, qualify or disadverse.

Risk response: for significant risks the auditor must obtain substantive procedures, and cannot rely solely on analytical procedures.

Threat categories in the ethics code: self-interest, self-review, advocacy, familiarity and intimidation; evaluate significance and apply safeguards or decline the engagement.

Independence requires both independence of mind (state of mind) and independence of appearance (avoiding facts a reasonable third party would perceive as compromising).

Confidentiality continues after the professional relationship ends; disclosure is permitted only when required by law or authorised by the client.

Agency: an agent binds the principal when acting within actual or apparent authority; the principal is then liable on the contract.

Contract formation requires offer, acceptance, consideration and intention to create legal relations; a counter-offer destroys the original offer.

Negligence claim requires a duty of care, breach of that duty, causation and loss; professional advisers are judged against the standard of a reasonably competent peer.

Directors' duties typically include acting within powers, promoting the success of the company, exercising independent judgement, avoiding conflicts and not accepting benefits from third parties.

Money laundering stages are placement, layering and integration; reporting obligations require suspicious activity reports and a nominated officer.

Conceptual framework: relevance and faithful representation are fundamental qualitative characteristics; comparability, verifiability, timeliness and understandability are enhancing.

Revenue recognition (IFRS 15 / ASC 606) five steps: identify contract, identify performance obligations, determine transaction price, allocate price to obligations, recognise revenue on satisfaction.

Lease accounting (IFRS 16): lessee recognises a right-of-use asset and lease liability at present value of lease payments; short-term and low-value leases may be expensed.

Expected credit loss model: impairment allowance equals probability-weighted losses over the instrument's life; 12-month ECL applies at Stage 1, lifetime ECL at Stages 2 and 3.

Goodwill is not amortised under IFRS; it is tested annually for impairment and written down to recoverable amount (higher of fair value less costs to sell and value in use).

Deferred tax arises from temporary differences between carrying amount and tax base; measure at enacted or substantively enacted rates expected to apply on reversal.

Statement of cash flows: operating (indirect start from profit, adjust non-cash and working capital), investing (non-current assets), financing (equity and borrowings).

Consolidation: control exists with power over the investee, exposure to variable returns, and ability to use power to affect returns; intragroup balances and unrealised profits are eliminated.

Contribution margin = selling price − variable cost per unit; contribution/sales ratio = contribution ÷ revenue; break-even units = fixed costs ÷ contribution per unit.

Margin of safety = (actual or budgeted sales − break-even sales) ÷ actual or budgeted sales; expresses cushion as a percentage of current volume.

Operating leverage = contribution ÷ operating profit; higher leverage magnifies profit sensitivity to volume changes.

Overhead absorption rate = budgeted overhead ÷ budgeted activity base; under- or over-absorption = actual overhead − absorbed overhead.

Activity-based costing assigns costs to activities then to products via cost drivers; it is most justified where overheads are large and products differ in complexity.

Relevant costing: exclude sunk costs and committed fixed costs; include opportunity costs and incremental cash flows only.

Variance analysis: price variance = (standard price − actual price) × actual quantity; usage variance = (standard quantity − actual quantity) × standard price.

Throughput accounting: throughput = sales − material cost; bottleneck resource allocation follows throughput per unit of bottleneck time; throughput accounting ratio = throughput per bottleneck minute ÷ cost per bottleneck minute.

Weighted average cost of capital = (E/V × Ke) + (D/V × Kd × (1 − t)); use market values of equity and debt as weights.

CAPM: Ke = risk-free rate + beta × equity risk premium; asset beta is relevered using Modigliani–Miller with tax: βe = βa × [1 + (1 − t)D/E].

NPV = present value of cash inflows − initial investment; accept if NPV > 0. IRR is the discount rate giving NPV = 0; IRR can mislead with non-conventional cash flows.

Working capital cycle = inventory days + receivable days − payable days; a shorter cycle reduces financing need.

Money market hedge: borrow or lend in the foreign currency now to fix the domestic value of a future foreign currency cash flow.

Interest rate parity links spot and forward rates through relative interest rates; purchasing power parity links spot rates through relative inflation.

Forward rate agreement or interest rate futures fix a borrowing rate from a future date; an interest rate swap exchanges fixed for floating interest payments.

Dividend valuation: share price = D1 ÷ (Ke − g) under constant growth, where g = retention ratio × return on retained earnings.

Value added tax: output tax on sales minus input tax on purchases; a business acts as tax collector, so VAT is not a cost unless input tax is irrecoverable.

Taxable profit typically starts from accounting profit and adjusts for disallowable expenses, non-taxable income, and capital allowances replacing depreciation.

Capital allowances give tax relief on qualifying capital expenditure; balancing allowances or charges arise on disposal when proceeds differ from tax written-down value.

Deferred tax is recognised on temporary differences at the expected reversal rate; it is a balance sheet liability or asset, not a current tax payment.

Transfer pricing rules require intra-group transactions to be at arm's length; documentation and country-by-country reporting thresholds vary by jurisdiction.

Withholding tax applies to certain cross-border payments such as dividends, interest and royalties; double tax treaties usually reduce the domestic rate.

Tax avoidance is arranging affairs within the letter of the law; tax evasion is illegal concealment or misrepresentation and attracts penalties and criminal liability.

Late filing and late payment typically trigger fixed penalties plus interest; penalties often escalate with the duration of the default.

Audit risk = inherent risk × control risk × detection risk; the auditor controls detection risk through the nature, timing and extent of procedures.

Materiality is set at overall financial statement level and often lower for specific classes; performance materiality is below overall materiality to leave a buffer.

Assertions tested: occurrence, completeness, accuracy, cut-off, classification and presentation for transactions; existence, rights and obligations, completeness and valuation for balances.

COSO internal control components: control environment, risk assessment, control activities, information and communication, monitoring activities.

Segregation of duties separates authorisation, custody, recording and reconciliation; it is the primary defence against fraud and error in cash and purchasing.

Audit opinion types: unmodified, qualified (material but not pervasive), adverse (material and pervasive misstatement), disclaimer (inability to obtain evidence, material and pervasive).

Going concern: if material uncertainty exists but disclosure is adequate, issue an unmodified opinion with a separate material uncertainty section; if disclosure is inadequate, qualify or disadverse.

Risk response: for significant risks the auditor must obtain substantive procedures, and cannot rely solely on analytical procedures.

Threat categories in the ethics code: self-interest, self-review, advocacy, familiarity and intimidation; evaluate significance and apply safeguards or decline the engagement.

Independence requires both independence of mind (state of mind) and independence of appearance (avoiding facts a reasonable third party would perceive as compromising).

Confidentiality continues after the professional relationship ends; disclosure is permitted only when required by law or authorised by the client.

Agency: an agent binds the principal when acting within actual or apparent authority; the principal is then liable on the contract.

Contract formation requires offer, acceptance, consideration and intention to create legal relations; a counter-offer destroys the original offer.

Negligence claim requires a duty of care, breach of that duty, causation and loss; professional advisers are judged against the standard of a reasonably competent peer.

Directors' duties typically include acting within powers, promoting the success of the company, exercising independent judgement, avoiding conflicts and not accepting benefits from third parties.

Money laundering stages are placement, layering and integration; reporting obligations require suspicious activity reports and a nominated officer.

Conceptual framework: relevance and faithful representation are fundamental qualitative characteristics; comparability, verifiability, timeliness and understandability are enhancing.

Revenue recognition (IFRS 15 / ASC 606) five steps: identify contract, identify performance obligations, determine transaction price, allocate price to obligations, recognise revenue on satisfaction.

Lease accounting (IFRS 16): lessee recognises a right-of-use asset and lease liability at present value of lease payments; short-term and low-value leases may be expensed.

Expected credit loss model: impairment allowance equals probability-weighted losses over the instrument's life; 12-month ECL applies at Stage 1, lifetime ECL at Stages 2 and 3.

Goodwill is not amortised under IFRS; it is tested annually for impairment and written down to recoverable amount (higher of fair value less costs to sell and value in use).

Deferred tax arises from temporary differences between carrying amount and tax base; measure at enacted or substantively enacted rates expected to apply on reversal.

Statement of cash flows: operating (indirect start from profit, adjust non-cash and working capital), investing (non-current assets), financing (equity and borrowings).

Consolidation: control exists with power over the investee, exposure to variable returns, and ability to use power to affect returns; intragroup balances and unrealised profits are eliminated.

Contribution margin = selling price − variable cost per unit; contribution/sales ratio = contribution ÷ revenue; break-even units = fixed costs ÷ contribution per unit.

Margin of safety = (actual or budgeted sales − break-even sales) ÷ actual or budgeted sales; expresses cushion as a percentage of current volume.

Operating leverage = contribution ÷ operating profit; higher leverage magnifies profit sensitivity to volume changes.

Overhead absorption rate = budgeted overhead ÷ budgeted activity base; under- or over-absorption = actual overhead − absorbed overhead.

Activity-based costing assigns costs to activities then to products via cost drivers; it is most justified where overheads are large and products differ in complexity.

Relevant costing: exclude sunk costs and committed fixed costs; include opportunity costs and incremental cash flows only.

Variance analysis: price variance = (standard price − actual price) × actual quantity; usage variance = (standard quantity − actual quantity) × standard price.

Throughput accounting: throughput = sales − material cost; bottleneck resource allocation follows throughput per unit of bottleneck time; throughput accounting ratio = throughput per bottleneck minute ÷ cost per bottleneck minute.

Weighted average cost of capital = (E/V × Ke) + (D/V × Kd × (1 − t)); use market values of equity and debt as weights.

CAPM: Ke = risk-free rate + beta × equity risk premium; asset beta is relevered using Modigliani–Miller with tax: βe = βa × [1 + (1 − t)D/E].

NPV = present value of cash inflows − initial investment; accept if NPV > 0. IRR is the discount rate giving NPV = 0; IRR can mislead with non-conventional cash flows.

Working capital cycle = inventory days + receivable days − payable days; a shorter cycle reduces financing need.

Money market hedge: borrow or lend in the foreign currency now to fix the domestic value of a future foreign currency cash flow.

Interest rate parity links spot and forward rates through relative interest rates; purchasing power parity links spot rates through relative inflation.

Forward rate agreement or interest rate futures fix a borrowing rate from a future date; an interest rate swap exchanges fixed for floating interest payments.

Dividend valuation: share price = D1 ÷ (Ke − g) under constant growth, where g = retention ratio × return on retained earnings.

Value added tax: output tax on sales minus input tax on purchases; a business acts as tax collector, so VAT is not a cost unless input tax is irrecoverable.

Taxable profit typically starts from accounting profit and adjusts for disallowable expenses, non-taxable income, and capital allowances replacing depreciation.

Capital allowances give tax relief on qualifying capital expenditure; balancing allowances or charges arise on disposal when proceeds differ from tax written-down value.

Deferred tax is recognised on temporary differences at the expected reversal rate; it is a balance sheet liability or asset, not a current tax payment.

Transfer pricing rules require intra-group transactions to be at arm's length; documentation and country-by-country reporting thresholds vary by jurisdiction.

Withholding tax applies to certain cross-border payments such as dividends, interest and royalties; double tax treaties usually reduce the domestic rate.

Tax avoidance is arranging affairs within the letter of the law; tax evasion is illegal concealment or misrepresentation and attracts penalties and criminal liability.

Late filing and late payment typically trigger fixed penalties plus interest; penalties often escalate with the duration of the default.

Audit risk = inherent risk × control risk × detection risk; the auditor controls detection risk through the nature, timing and extent of procedures.

Materiality is set at overall financial statement level and often lower for specific classes; performance materiality is below overall materiality to leave a buffer.

Assertions tested: occurrence, completeness, accuracy, cut-off, classification and presentation for transactions; existence, rights and obligations, completeness and valuation for balances.

COSO internal control components: control environment, risk assessment, control activities, information and communication, monitoring activities.

Segregation of duties separates authorisation, custody, recording and reconciliation; it is the primary defence against fraud and error in cash and purchasing.

Audit opinion types: unmodified, qualified (material but not pervasive), adverse (material and pervasive misstatement), disclaimer (inability to obtain evidence, material and pervasive).

Going concern: if material uncertainty exists but disclosure is adequate, issue an unmodified opinion with a separate material uncertainty section; if disclosure is inadequate, qualify or disadverse.

Risk response: for significant risks the auditor must obtain substantive procedures, and cannot rely solely on analytical procedures.

Threat categories in the ethics code: self-interest, self-review, advocacy, familiarity and intimidation; evaluate significance and apply safeguards or decline the engagement.

Independence requires both independence of mind (state of mind) and independence of appearance (avoiding facts a reasonable third party would perceive as compromising).

Confidentiality continues after the professional relationship ends; disclosure is permitted only when required by law or authorised by the client.

Agency: an agent binds the principal when acting within actual or apparent authority; the principal is then liable on the contract.

Contract formation requires offer, acceptance, consideration and intention to create legal relations; a counter-offer destroys the original offer.

Negligence claim requires a duty of care, breach of that duty, causation and loss; professional advisers are judged against the standard of a reasonably competent peer.

Directors' duties typically include acting within powers, promoting the success of the company, exercising independent judgement, avoiding conflicts and not accepting benefits from third parties.

Money laundering stages are placement, layering and integration; reporting obligations require suspicious activity reports and a nominated officer.