CA Inter Advanced Accounting flashcards

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

Stage of completion method

Under AS 7, revenue and costs are recognised by reference to the proportion of contract work completed, provided the contract outcome can be estimated reliably and total revenue is probable of collection.

Expected contract loss

When total contract cost is expected to exceed total contract revenue, the entire expected loss is recognised immediately in profit or loss, irrespective of work completed to date.

Performance obligation

A promise in an Ind AS 115 contract to transfer a distinct good or service to the customer; revenue is recognised when each such obligation is satisfied.

Transaction price

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.

Variable consideration constraint

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

Control under Ind AS 110

An investor controls an investee when it has power over the investee, exposure to variable returns, and the ability to use its power to affect those returns.

Non-controlling interest measurement

NCI may be measured at fair value or at its proportionate share of the acquiree's identifiable net assets; the choice is made separately for each business combination.

Bargain purchase gain

Where the fair value of net assets acquired exceeds total consideration plus NCI, the excess is recognised as a gain in profit or loss after reassessing identification and measurement.

Upstream unrealised profit

Profit on inventory sold by a subsidiary to the parent that remains unsold at year end is eliminated and allocated between the parent and NCI in their ownership ratio.

Downstream unrealised profit

Profit on inventory sold by the parent to a subsidiary and still held at year end is eliminated entirely against the parent's share, leaving NCI unaffected.

Goodwill on consolidation

Consideration transferred plus NCI plus fair value of previously held interest, less the fair value of identifiable net assets acquired and liabilities assumed, measured at acquisition date.

Functional currency

The currency of the primary economic environment in which an entity operates; it is determined from factors such as sales prices, costs, and financing currency, not chosen freely.

Closing rate translation

Under Ind AS 21, monetary assets and liabilities denominated in a foreign currency are retranslated at the closing rate, with differences recognised in profit or loss.

Foreign operation translation

Assets and liabilities of a foreign operation are translated at the closing rate and income and expenses at average rates; the resulting exchange difference is recognised in other comprehensive income.

Value in use

The present value of estimated future cash flows expected from an asset, discounted at a pre-tax rate reflecting current market assessments of time value and asset-specific risk.

Impairment reversal

An impairment loss may be reversed if recoverable amount increases, but the reversal is capped at the carrying amount that would have existed without the earlier impairment; goodwill is never reversed.

Cash-generating unit

The smallest identifiable group of assets that generates cash inflows largely independent of other assets, used for impairment testing when individual assets cannot be tested separately.

Right-of-use asset

Under Ind AS 116, the lessee's asset measured at the initial lease liability plus payments made at or before commencement, initial direct costs, and estimated restoration costs.

Lease liability measurement

The present value of lease payments not paid at commencement, discounted at the interest rate implicit in the lease or, if not readily determinable, the lessee's incremental borrowing rate.

Short-term lease exemption

A lessee may elect not to recognise a right-of-use asset and liability for leases with a term of twelve months or less, recognising payments as an expense on a straight-line basis.

Temporary difference

The difference between the carrying amount of an asset or liability and its tax base, which gives rise to deferred tax asset or liability under the balance-sheet approach of Ind AS 12.

Deferred tax asset recognition

Recognised for deductible temporary differences and unused losses only to the extent it is probable that future taxable profit will be available against which they can be utilised.

Minimum alternate tax credit

MAT paid in excess of normal tax is recognised as an asset where it can be carried forward and set off against future normal tax within the permitted period.

Amalgamation in nature of merger

Pooling of interests applies where all conditions of AS 14 are met: all assets and liabilities are transferred, shareholders receive substantially the same proportionate interest, and business is intended to continue.

Amalgamation in nature of purchase

Any amalgamation not meeting the merger conditions; the transferee records assets and liabilities at fair value or agreed consideration, and the difference is treated as goodwill or capital reserve.

Internal reconstruction

Reorganisation of a company's capital structure without liquidation, using reduction of share capital, capital reduction account, and write-off of accumulated losses against paid-up capital or reserves.

Banking company NPA

A loan asset becomes non-performing where interest or instalment remains overdue for more than ninety days, requiring classification as substandard, doubtful, or loss asset.

Insurance premium reserve

In insurance company accounts, a reserve for unexpired risk is created for the portion of premium relating to the unexpired period of the policy, computed as a prescribed percentage of net premium.

Electricity supply undertaking

A statutory undertaking applying the prescribed double-account form, with capital expenditure shown separately from revenue account and a net revenue appropriation account.

Weighted average cost of capital

The average cost of a firm's sources of finance, weighted by their market or book values, used to discount project cash flows in capital budgeting decisions.

Net present value rule

A project is acceptable where the present value of cash inflows at the cost of capital exceeds the initial outlay; among mutually exclusive projects, the highest positive NPV is chosen.

Mutual fund NAV

Net asset value per unit equals the market value of the scheme's investments plus current assets less current liabilities and accrued income, divided by the number of units outstanding.