CMA Final Paper 17 key terms

The portion of a subsidiary's net assets and profits that belongs to shareholders other than the parent. Under Ind AS 110 it is presented within equity, separately from the owners of the parent.

The process of combining a parent's and its subsidiaries' financial statements line by line into one set, after eliminating intra-group balances, transactions and unrealised profits, so the group is reported as a single economic entity.

The excess of the consideration transferred plus NCI plus previously held interests over the fair value of identifiable net assets acquired. It is recognised as an asset and tested annually for impairment rather than amortised.

A transaction in which an acquirer obtains control of one or more businesses. Ind AS 103 requires the acquisition method: identify the acquirer, the acquisition date, recognise assets and liabilities at fair value, and measure goodwill.

The power to direct the relevant activities of an investee to affect one's returns, exposure to variable returns, and the ability to use that power. Holding a majority of voting rights is an indicator, not a necessary condition.

A gain recognised in profit or loss when the fair value of identifiable net assets acquired exceeds the consideration plus NCI and previously held interests, after reassessing the measurement of all elements.

The requirement that group entities apply the same accounting policies in consolidated statements. Adjustments are made where a subsidiary uses policies differing from the parent's, for example for depreciation methods or inventory costing.

An entity over which the investor has significant influence, normally 20% or more of voting power but not control or joint control. It is accounted for under the equity method in consolidated financial statements.

Accounting whereby an investment is initially recognised at cost and subsequently adjusted for the investor's share of post-acquisition profit or loss, other comprehensive income and dividends received.

Converting a foreign subsidiary's statements into the presentation currency: assets and liabilities at closing rate, income and expenses at average rate, with exchange differences taken to other comprehensive income and reclassified on disposal.

Requires a lessee to recognise a right-of-use asset and a lease liability at the present value of lease payments, replacing the former operating/finance lease classification, with limited recognition exemptions for short-term and low-value leases.

The rate of interest a lessee would pay to borrow over a similar term, with similar security, the funds needed to buy a leased asset. It is used to discount lease payments when the implicit rate is not readily determinable.

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, prepaid rent and restoration obligations, less incentives received.

A probability-weighted estimate of credit losses over the expected life of a financial asset, reflecting past events, current conditions and forward-looking information. Ind AS 109 requires an allowance even before default occurs.

Comparing an asset's or cash-generating unit's carrying amount with its recoverable amount, the higher of fair value less costs of disposal and value in use, and writing down any excess to profit or loss.

A five-step model: identify the contract, identify performance obligations, determine the transaction price, allocate it to obligations, and recognise revenue when each obligation is satisfied, either at a point in time or over time.

A promise to transfer a distinct good or service to a customer. Distinctness depends on whether the customer can benefit from the item on its own and whether it is separately identifiable within the contract.

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 or certification.

A costing method that assigns overhead to products or services based on the activities they consume, using cost drivers, rather than on volume-based bases such as direct labour hours.

A factor that causes or influences the level of cost in an activity, such as number of set-ups, machine hours or purchase orders. Selecting appropriate drivers is central to activity-based costing.

A market-driven approach in which the allowable cost is derived by subtracting the desired profit margin from the price customers will pay, and the product is then designed to meet that cost.

Accumulating all costs of a product or service over its entire life, from research and development through design, production, distribution, use and disposal, to support pricing and design decisions.

A systematic review of product design and components to reduce cost without sacrificing the function or value that customers require, often used to close a target cost gap.

A constraint-focused costing approach that values inventory at material cost only and measures throughput as sales less material cost, prioritising the bottleneck resource when deciding product mix.

A performance measurement framework that combines financial, customer, internal process, and learning and growth perspectives, linking measures to strategy rather than relying on financial results alone.

A measure chosen to track progress on a critical success factor. Good KPIs are specific, measurable, attributable, relevant and timely, and are linked to action rather than collected for their own sake.

Divisional profit after deducting an imputed charge on the capital employed in the division. Unlike return on investment, it discourages managers from rejecting projects that earn above the cost of capital.

A measure of value created, computed as net operating profit after tax less a charge for capital employed at the weighted average cost of capital. It aims to align managerial decisions with shareholder value.

The price at which goods or services are transferred between divisions of the same entity or between group companies, influencing divisional performance, motivation and the allocation of group profit across tax jurisdictions.

Disclosure of revenue, profit or loss, assets and liabilities by operating segment, defined on the basis of internal reports reviewed by the chief operating decision maker, with quantitative thresholds for separate reporting.

Disclosure under Ind AS 24 of relationships, transactions, outstanding balances and commitments between an entity and its related parties, including key management personnel, regardless of whether a price was charged.

A concise report explaining how an organisation's strategy, governance, performance and prospects create value over time, using six capitals and covering financial, manufactured, intellectual, human, social and natural capital.

SEBI-mandated disclosure for listed companies on environmental, social and governance matters, structured around nine principles, with a requirement for assurance of the top 250 listed entities.

The transfer pricing standard requiring transactions between associated enterprises to be priced as they would be between independent parties, applied through methods such as comparable uncontrolled price, resale price and transactional net margin.

A binding arrangement with the tax authority fixing the transfer pricing methodology for specified transactions over a period, providing certainty and reducing audit risk for the taxpayer.

The location that determines whether a GST supply is intra-state or inter-state and which government receives the tax, fixed by statute for goods and services, including cross-border and immovable property cases.

Credit for GST paid on inputs and input services used in the course or furtherance of business, available subject to conditions such as possession of a valid tax invoice and actual receipt of the goods or services.

A GST arrangement in which the recipient, not the supplier, is liable to pay tax on a notified supply, such as imports of services or supplies from unregistered persons in specified cases.

The blended after-tax cost of a firm's debt and equity, weighted by their proportions in the capital structure. It is used as the discount rate for projects of average risk.

A method of estimating the cost of equity as the risk-free rate plus beta times the market risk premium, where beta measures the sensitivity of the share's returns to market returns.

A measure of systematic risk showing how much a share's returns move relative to the market. A beta above one indicates greater volatility than the market; unlevered beta removes the effect of gearing.

A contract in which two parties exchange interest payment streams, typically fixed for floating, on a notional principal, used to manage exposure to interest rate movements without changing the underlying borrowing.

Optional accounting that matches the timing of gains and losses on a hedging instrument with those on the hedged item, reducing volatility in profit or loss, subject to documentation and effectiveness requirements.

A customised agreement to buy or sell an asset or currency at a fixed price on a future date, traded over the counter, and commonly used to fix the rupee value of foreign currency receivables or payables.

A valuation method that estimates the present value of expected future free cash flows, discounted at a rate reflecting risk, plus a terminal value for cash flows beyond the explicit forecast period.

The value attributed to cash flows beyond the explicit forecast horizon in a DCF, usually computed using the Gordon growth formula on a stable growth rate or an exit multiple of earnings.

The total value of a business to all capital providers, calculated as market capitalisation plus debt, minority interest and preferred shares, less cash and cash equivalents.

A relative valuation method that applies multiples such as EV/EBITDA or price-earnings, derived from listed peers, to the subject company's metric to estimate its value.

The investigation a buyer conducts into a target's financial, legal, tax, operational and commercial position before completing an acquisition, identifying risks, liabilities and value adjustments that shape price and warranties.

Assigning the consideration paid in an acquisition to identifiable assets acquired and liabilities assumed at fair value, with any residual amount recognised as goodwill or a bargain purchase gain.

The system of rules, practices and processes by which a company is directed and controlled, covering board composition, independence, audit, risk oversight and accountability to shareholders and stakeholders.

A board committee of independent directors responsible for overseeing financial reporting, internal controls, the external audit and the auditor's independence, and for reviewing related party transactions.

The requirement that an auditor be free of relationships or interests that could compromise objectivity, including restrictions on providing certain non-audit services to audit clients and mandatory rotation of audit firms.

An attitude of questioning and critical assessment of evidence, remaining alert to conditions indicating possible misstatement due to error or fraud, rather than accepting information at face value.

A mechanism allowing employees and others to report unethical behaviour, fraud or legal violations confidentially and without retaliation, with a defined process for investigation and reporting to the audit committee.