CA Final Financial Reporting flashcards

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

Adjusting event

An event after the reporting date that provides evidence of conditions existing at that date, such as the settlement of a court case confirming a present obligation. Financial statements are adjusted for such events.

Non-adjusting event

An event after the reporting date that indicates conditions arising after that date, such as a fire or a business combination. No adjustment is made, but material events are disclosed in the notes.

Performance obligation

A promise in a contract with a customer to transfer a distinct good or service. Revenue is recognised when each obligation is satisfied, either at a point in time or over time.

Contract asset

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

Amortised cost

The amount at initial recognition less principal repayments, adjusted for cumulative amortisation using the effective interest method, and reduced for any impairment allowance.

Effective interest rate

The rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the asset or liability.

Control (Ind AS 110)

The investor has power over the investee, exposure or rights to variable returns, and the ability to use its power to affect those returns. All three elements must be present.

Goodwill

An asset representing the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognised. It is not amortised but tested annually for impairment.

Projected unit credit method

An actuarial technique that attributes benefit to each period of service, measuring the defined benefit obligation as the present value of benefits accrued to the reporting date.

Contingent liability

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

Tax base

The amount attributed to an asset or liability for tax purposes. A temporary difference arises when the tax base differs from the carrying amount in the financial statements.

Right-of-use asset

An asset representing the lessee's right to use an underlying asset for the lease term, measured initially at the amount of the lease liability plus initial direct costs and lease payments made.

NPA classification

A bank loan is a non-performing asset when interest or principal is overdue for more than 90 days. It is then classified as substandard, doubtful or loss, with prescribed provisioning.

Contractual service margin

The unearned profit in an insurance contract under Ind AS 117, recognised in profit or loss over the coverage period as services are provided. It cannot be negative.

Six capitals

The resources and relationships used and affected by an organisation: financial, manufactured, intellectual, human, social and relationship, and natural capital. They underpin integrated reporting.

CSR obligation

Two percent of the average net profits of the three immediately preceding financial years, for companies meeting the thresholds in Section 135 of the Companies Act, 2013.

Consolidated Fund

The fund into which all government revenues and loans are credited and from which expenditure is met only under parliamentary appropriation.

Corpus fund

An endowment received by a not-for-profit entity that is held as capital and not recognised as income; only the income generated from it is available for expenditure.

WACC

The weighted average cost of capital, calculated as the proportion of equity times the cost of equity plus the proportion of debt times the after-tax cost of debt.

Enterprise value

Market capitalisation plus debt, minority interest and preferred shares, less cash and cash equivalents. It is the value of the operating business before financing.

Intra-group elimination

The process of removing balances, transactions, income and expenses between group entities so that the consolidated statements present the group as a single economic entity.

Fair value hedge

A hedge of exposure to changes in the fair value of a recognised asset or liability. The hedged item and hedging instrument are remeasured at fair value through profit or loss.

Defined contribution plan

A post-employment plan under which the entity pays fixed contributions and has no legal or constructive obligation to pay further amounts if the fund lacks sufficient assets.

Minimum alternate tax

A tax payable by companies on book profit when the normal tax liability is lower. The credit is recognised as an asset when future normal tax liability is probable.

Finance lease

A lease that transfers substantially all the risks and rewards incidental to ownership of the underlying asset to the lessee. The lessor recognises a net investment in the lease.

Functional currency

The currency of the primary economic environment in which the entity operates. It is determined by the currency that mainly influences sales prices and costs.

Net interest margin

Net interest income divided by average earning assets. It measures the spread earned by a bank between interest received and interest paid.

Net asset value per unit

The fair value of a mutual fund scheme's assets less its liabilities, divided by the number of units outstanding at the valuation date.

Materiality (integrated report)

A matter is material if it could substantively affect the organisation's ability to create value over the short, medium or long term, considering its effect on the capitals.

IFRS S2

The IFRS Sustainability Disclosure Standard on climate-related disclosures, requiring governance, strategy, risk management and metrics and targets, including greenhouse gas emissions.

Unspent CSR account

An account into which a company deposits amounts earmarked for ongoing CSR projects but unspent at year end, to be used within three financial years.

Contingency Fund

A fund placed at the disposal of the President to meet unforeseen expenditure pending authorisation by Parliament. Expenditure from it is subsequently recouped.

Quick ratio

Current assets less inventory and prepaid expenses, divided by current liabilities. It measures the ability to meet short-term obligations without relying on inventory sales.

Terminal value

The present value at the end of the forecast period of all cash flows beyond that period, calculated using the Gordon growth model or an exit multiple.

Substantial modification

A change in the terms of a financial liability that is more than minor. The original liability is derecognised and a new liability is recognised at fair value.

Discontinued operation

A component of an entity that represents a separate major line of business or geographical area, or is part of a coordinated plan to dispose of one. Its results are presented separately.

Interim financial report

A financial report covering a period shorter than a full financial year. It may be a complete set of financial statements or a condensed set with selected explanatory notes.

Principal market

The market with the greatest volume and level of activity for the asset or liability. Fair value is measured using the price in that market.

Grant date

The date on which the entity and the employee reach a shared understanding of the terms and conditions of a share-based payment arrangement, and the fair value is measured.

Deferred tax on goodwill

No deferred tax is recognised on the initial recognition of goodwill. Subsequent changes in the carrying amount of goodwill do not create a temporary difference.

Non-controlling interest

The equity in a subsidiary not attributable, directly or indirectly, to the parent. It is presented within equity in the consolidated balance sheet.

Value in use

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 and risks.