CMA Final Paper 18 (CFR) flashcards

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

Cost Accounting Standard 2

Defines capacity levels-installed, available, normal, and actual-and requires abnormal idle capacity cost to be excluded from product cost and reported separately in the cost statement.

Abnormal loss treatment

Losses beyond normal levels, such as abnormal wastage, spoilage, or idle time, are excluded from product cost and charged to the cost statement or profit and loss separately.

Form CRA-1

The prescribed format for maintaining cost records under the Companies (Cost Records and Audit) Rules; it captures cost accounting policy, capacity, inputs, outputs, and cost statements.

Cost records retention

Cost records must be preserved for eight financial years under Section 148 read with the Rules, and must reconcile with the audited financial statements.

Cost auditor appointment

Appointed by the Board on the Audit Committee's recommendation and ratified by members within 180 days of the financial year start; must be a cost accountant in practice.

Form CRA-3

The cost audit report format containing the auditor's report, annexure, and observations on adequacy of cost records, consistency of policies, and reconciliation with financial statements.

Form CRA-4 filing

The e-form used to file the cost audit report with the Ministry of Corporate Affairs within 30 days of receipt of the signed report from the cost auditor.

True and fair view

Section 129 requires financial statements to give a true and fair view and comply with accounting standards; deviations must be disclosed with their financial effect.

Schedule III

Prescribes the form and content of the balance sheet, statement of profit and loss, and notes, including current/non-current classification and mandatory disclosures.

Form AOC-1

The statement attached to consolidated financial statements disclosing details of subsidiaries, associates, and joint ventures, including shareholding and net assets or share of profit.

Current asset test

An asset is current if realised, consumed, or sold within twelve months, held primarily for trading, or is cash and cash equivalents without restriction.

Exceptional items

Material items of income or expense arising from ordinary activities that are disclosed separately on the face of the statement of profit and loss to aid comparability.

Five-step revenue model

Ind AS 115: identify the contract, identify performance obligations, determine transaction price, allocate price to obligations, and recognise revenue when each obligation is satisfied.

Variable consideration

Discounts, rebates, and penalties included in the transaction price only to the extent a significant reversal is highly improbable, estimated by expected value or most likely amount.

Principal versus agent

An entity recognising gross revenue is a principal if it controls the good or service before transfer; otherwise it is an agent recognising only commission.

Goodwill formula

Consideration transferred plus non-controlling interest plus previously held interest minus the fair value of net identifiable assets acquired; not amortised but tested annually for impairment.

Bargain purchase gain

Negative goodwill arising when the fair value of net assets acquired exceeds consideration; recognised in profit or loss after reassessing identification and measurement.

Common control combination

A business combination of entities under the same ultimate control, excluded from Ind AS 103 and accounted for using the pooling of interests method at carrying values.

Control under Ind AS 110

Power over the investee, exposure to variable returns, and the ability to use that power to affect returns; all three elements must be present for consolidation.

Equity method

Applied to associates and joint ventures: the investment is initially at cost and adjusted for the investor's share of post-acquisition profit or loss and other comprehensive income.

Loss of control

On losing control, derecognise the subsidiary's assets and liabilities, measure any retained interest at fair value, and recognise the resulting gain or loss in profit or loss.

Expected credit loss

A probability-weighted estimate of credit losses discounted at the effective interest rate, incorporating forward-looking information, applied to financial assets at amortised cost.

Amortised cost criteria

A financial asset is measured at amortised cost if held within a hold-to-collect business model and its cash flows are solely payments of principal and interest.

Right-of-use asset

Recognised by a lessee at the present value of lease payments plus initial direct costs and restoration costs, then depreciated over the lease term.

Short-term lease exemption

A lessee may expense lease payments on a straight-line basis for leases with a term of twelve months or less that contain no purchase option.

Six capitals

The Integrated Reporting framework's resources: financial, manufactured, intellectual, human, social and relationship, and natural, used to explain value creation over time.

BRSR Core

A subset of key performance indicators under the SEBI Business Responsibility and Sustainability Report requiring reasonable assurance in a phased manner for listed companies.

Management commentary

IFRS Practice Statement 1 guidance covering business nature, strategy, resources, risks, results, and forward-looking prospects to accompany financial statements.

DuPont decomposition

Return on equity expressed as net profit margin multiplied by asset turnover multiplied by the equity multiplier, isolating profitability, efficiency, and leverage drivers.

Working capital cycle

Inventory days plus receivable days minus payable days; a lengthening cycle absorbs cash and increases short-term borrowing requirements.

Altman Z-score

A distress prediction model combining working capital, retained earnings, EBIT, market value of equity, and sales ratios; a score below 1.81 signals distress.

Auditor independence threat

Self-interest, self-review, advocacy, familiarity, and intimidation threats to independence must be identified and addressed through safeguards or by declining the engagement.