CMA Final Paper 18 (CFR) key terms

A mandatory accounting standard that prescribes how specific cost elements must be classified, measured and disclosed in cost records maintained under statutory cost accounting rules. It narrows discretion so that cost statements across entities become comparable.

The structured books and statements in which an entity captures material, labour, overhead and other cost data for specified products or services, maintained in the prescribed form so they can be audited and reconciled with financial accounts.

An independent examination of an entity's cost records and cost statements to test whether they comply with prescribed cost accounting standards and rules, culminating in a formal report by a qualified cost auditor.

A professional holding the prescribed qualification and appointment who conducts the cost audit, forms an opinion on the cost statements and reports that opinion to the entity and the regulator.

The formal output of a cost audit, containing the auditor's opinion, observations on compliance with cost standards, annexures of cost data and any qualifications or reservations on the records examined.

Any activity, product, service, contract, customer or organisational unit for which costs are separately accumulated and measured, so that the costing system has a defined focus for allocation.

A measurable factor that causes or influences the level of cost in an activity, such as machine hours or number of set-ups, and which is used as the basis for assigning overhead to cost objects.

A costing method in which fixed production overhead is allocated to units produced, so inventory and cost of goods sold carry both variable and fixed manufacturing costs. Also called full costing.

A costing approach that charges only variable production costs to units, treating fixed costs as period expenses. It supports contribution analysis and short-term decisions but is generally not used for statutory external reporting.

A costing system that assigns overhead to products or services through activities, using cost drivers for each activity pool, giving more accurate costs where products consume overhead in different proportions.

A predetermined rate, usually per labour hour or machine hour, used to charge production overhead to output during a period, with any difference from actual overhead treated as over- or under-absorption.

Sales revenue less all variable costs, representing the amount available to cover fixed costs and then generate profit. It is central to break-even analysis and short-run product-mix decisions.

The level of sales or output at which total revenue equals total cost, so the entity makes neither profit nor loss. It is commonly expressed in units or in sales value.

The excess of budgeted or actual sales over the break-even sales level, indicating how far sales can fall before losses arise. It is often expressed as a percentage of existing sales.

A system that sets predetermined costs for materials, labour and overhead, then compares actual results against those standards to isolate variances for control and performance evaluation.

The process of decomposing the difference between standard and actual cost into identifiable causes, such as price and quantity variances, so that responsibility can be assigned and corrective action taken.

A future, incremental cash flow that differs between alternatives and therefore should affect a decision. Sunk costs and allocated fixed costs that do not change are excluded from the analysis.

The benefit forgone by choosing one course of action over the next best alternative, measured as the contribution or return lost. It is relevant to decisions but is not recorded in the accounting ledger.

The process of determining when and how much revenue to record, generally when control of a promised good or service transfers to the customer, measured at the transaction price allocated to the performance obligation.

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

The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services, adjusted for variable consideration, significant financing and non-cash consideration.

A transaction in which an acquirer obtains control of one or more businesses. It is accounted for using the acquisition method, recognising identifiable assets and liabilities at fair value on acquisition date.

The excess of consideration transferred plus any non-controlling interest over the fair value of identifiable net assets acquired. It is not amortised but tested annually for impairment.

The equity in a subsidiary not attributable, directly or indirectly, to the parent. It is presented separately within consolidated equity and measured at fair value or proportionate share at acquisition.

The process of combining the financial statements of a parent and its subsidiaries into a single set, eliminating intragroup balances and transactions so that the group is reported as one economic entity.

The power to direct the relevant activities of an investee, exposure to variable returns from that involvement, and the ability to use the power to affect those returns. It determines consolidation.

The amount by which the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, being the higher of fair value less costs of disposal and value in use.

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, an exit-price concept.

A contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another. Classification drives measurement at amortised cost or fair value.

A contract, or part of a contract, that conveys the right to use an identified asset for a period in exchange for consideration. Lessees generally recognise a right-of-use asset and a lease liability.

The lessee's asset representing its right to use an underlying asset over the lease term, measured initially at the lease liability plus initial direct costs and any payments made before commencement.

A concise communication about how an organisation's strategy, governance, performance and prospects create value over time, structured around capitals, the business model and material risks and opportunities.

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

The threshold at which information could reasonably influence decisions of primary users. It is judged both quantitatively and qualitatively, and applies to financial statements and sustainability disclosures alike.

Disclosure of an entity's environmental, social and governance performance and impacts, typically following a recognised framework, to inform investors and other stakeholders about risks and outcomes beyond the financial statements.

The principles and rules governing a member's conduct, including integrity, objectivity, professional competence, confidentiality and professional behaviour, supported by a conceptual framework for identifying and addressing threats.

Freedom from relationships or interests that could compromise objectivity in an assurance engagement. It has both a mental state and an appearance dimension, and safeguards may be required where threats exist.

A situation where a member's personal, financial or other interest, or a competing duty to two parties, could improperly influence professional judgement or harm the interests of a client or employer.