KASNEB CPA Advanced key terms

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. It is a market-based exit price, not an entity-specific value.

The amount by which an asset's carrying amount exceeds its recoverable amount, the latter being the higher of fair value less costs of disposal and value in use. Recognised in profit or loss, it lowers future depreciation charges.

An intangible asset arising on a business combination, measured as the consideration transferred plus non-controlling interest less the fair value of identifiable net assets acquired. It is not amortised but tested at least annually for impairment.

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

The tax effect of temporary differences between the carrying amount of an asset or liability and its tax base, recognised as a deferred tax asset or liability at the rate expected to apply when the difference reverses.

The lessee's asset representing its right to use an underlying asset for the lease term, initially measured at the lease liability plus initial direct costs, lease prepayments and estimated restoration obligations.

The IFRS 15 approach: identify the contract with the customer, identify the performance obligations, determine the transaction price, allocate that price to the obligations, and recognise revenue as each obligation is satisfied.

Basic earnings per share is profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares. The diluted figure additionally assumes conversion of all potentially dilutive instruments, showing the worst-case position.

The risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated. It comprises inherent risk, control risk and detection risk, and is reduced by performing further audit procedures.

The amount or nature of misstatement that could influence the economic decisions of users taken on the basis of the financial statements. It guides audit planning, the extent of evidence gathering and evaluation of uncorrected misstatements.

Those matters that, in the auditor's professional judgement, were of most significance in the audit of the current period's financial statements, selected from matters communicated with those charged with governance and described in the auditor's report.

An attitude of questioning mind and critical assessment of evidence, remaining alert to possible misstatement, bias or fraud, and not accepting information at face value without corroboration.

An opinion that is qualified, adverse or a disclaimer of opinion, issued when the auditor concludes the financial statements are materially misstated, or is unable to obtain sufficient appropriate audit evidence.

The assumption that an entity will continue operating for the foreseeable future without intention or necessity to liquidate. Auditors evaluate management's assessment and the adequacy of the related disclosures.

An objective evaluation of the significant judgements and conclusions of the engagement team, performed before the audit report is issued by a partner or other suitably qualified person not involved in the engagement.

Controls over the information technology environment that support reliable functioning of application controls, covering access security, program change management, computer operations, and backup and recovery arrangements.

Taxable income after allowable deductions and exemptions, computed by adjusting accounting profit for non-deductible expenses, non-taxable income, capital allowances and reliefs, then applying the applicable tax rate.

Tax deductions claimed in place of accounting depreciation on qualifying capital expenditure such as plant, machinery and buildings, granted at prescribed rates subject to wear-and-tear or investment-deduction rules.

The pricing of transactions between related parties located in different tax jurisdictions. Prices must follow the arm's length principle, supported by contemporaneous documentation explaining the method used.

A tax deducted at source by the payer on specified payments such as dividends, interest, royalties or payments to non-residents, remitted to the revenue authority and usually creditable against the payee's final liability.

A fixed place of business or dependent agent through which a non-resident carries on business in a country, giving that country the right to tax the business profits attributable to it.

Arranging one's affairs within the letter of the law to reduce tax, frequently challenged by general or specific anti-avoidance rules. It is distinguished from evasion, which involves illegal concealment or misrepresentation of taxable amounts.

A credit, exemption or deduction granted where the same income is taxed by two jurisdictions, aimed at eliminating or reducing the double burden. It is commonly provided under a bilateral tax treaty.

A performance measurement framework that translates strategy into objectives, measures, targets and initiatives across four perspectives: financial, customer, internal business process, and learning and growth.

A costing method that assigns overhead to products or services according to the activities they consume, using cost drivers. It gives more accurate product costs where overheads are large and output is diverse.

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

A theory-of-constraints method that treats materials as the only truly variable cost and measures performance through throughput, inventory and operating expense, directing improvement effort to the bottleneck resource.

The principle that a system's output is limited by its weakest link. Managers identify the constraint, exploit it, subordinate other processes to it, elevate its capacity, and then repeat the cycle.

Comparison of actual with budgeted or standard performance, breaking the difference into price and quantity causes so that responsibility can be assigned and corrective action taken.

A budget or forecast continually updated by adding a new period as each period elapses, keeping the planning horizon constant and reducing reliance on a fixed annual budget.

The average cost of a firm's long-term financing, weighted by the market value proportions of debt and equity, used as the discount rate for projects of average business risk.

The sum of the present values of a project's expected cash inflows less its outflows, discounted at the cost of capital. A positive result indicates the project creates value for shareholders.

A model pricing equity as the risk-free rate plus a risk premium equal to beta multiplied by the market risk premium, distinguishing systematic risk, which is rewarded, from diversifiable risk.

The conflict that arises when managers, acting as agents, pursue their own interests rather than those of shareholders as principals, addressed through incentive schemes, monitoring and governance structures.

The system of rules, structures and processes by which a company is directed and controlled, covering board composition, accountability, audit, risk oversight and relations with stakeholders.

A situation in which a professional's personal, financial or other interest could compromise, or appear to compromise, objective judgement, requiring disclosure, removal from the engagement or other safeguards.

The disclosure by an employee or member of an organisation of suspected wrongdoing to an appropriate internal or external body, typically protected by policy or law against retaliation.

The proportion of debt in a company's capital structure, often measured as debt over equity or debt over total capital. Higher gearing raises financial risk and the return investors demand.