Cambodia CPA key terms

An accounting method that records revenue when earned and expenses when incurred, regardless of when cash changes hands, giving a truer picture of performance than cash receipts alone.

The rule that expenses are recognised in the same period as the revenues they helped generate, so profit for a period reflects the effort consumed to earn it.

Cash received from a customer before goods or services are delivered, recorded as a liability until the performance obligation is satisfied and revenue can be recognised.

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

The amount of consideration an entity expects to be entitled to in exchange for transferring promised goods or services, adjusted for discounts, rebates and variable consideration.

A liability of uncertain timing or amount, recognised when a present obligation exists from a past event, an outflow is probable and the amount can be reliably estimated.

A possible obligation whose existence will be confirmed only by uncertain future events, or a present obligation that fails the recognition criteria, so it is disclosed rather than recorded.

The amount by which an asset's carrying amount exceeds its recoverable amount, written down immediately and charged to profit or loss unless a revaluation surplus covers it.

The higher of an asset's fair value less costs of disposal and its value in use, used as the ceiling for the carrying amount in impairment testing.

The excess of consideration transferred plus non-controlling interest over the fair value of identifiable net assets acquired, recognised only in a business combination and tested annually for impairment.

The process of combining a parent and its controlled subsidiaries into a single set of financial statements, eliminating intragroup balances, transactions and unrealised profits.

The portion of a subsidiary's net assets and profit that belongs to shareholders other than the parent, presented separately within consolidated equity and profit.

The threshold at which omissions or misstatements could influence decisions of users of financial statements, judged by size and nature in the specific circumstances.

The risk that the auditor expresses an inappropriate opinion on materially misstated financial statements; it comprises inherent risk, control risk and detection risk.

The risk that audit procedures fail to detect a material misstatement, which the auditor controls by designing effective substantive testing and appropriate sample sizes.

Procedures such as tests of detail and analytical review that gather direct evidence about the completeness, accuracy and validity of balances and transactions.

Information used by the auditor to reach conclusions on which the opinion is based; it must be sufficient in quantity and appropriate in relevance and reliability.

Direct written response from a third party, such as a bank or customer, to the auditor's request, providing more reliable evidence than internally generated documents.

A written agreement setting out the agreed scope, responsibilities of auditor and management, and the basis of fees before an audit or other engagement begins.

An auditor's opinion that is qualified, adverse or a disclaimer, issued when misstatements are material or the auditor cannot obtain sufficient appropriate evidence.

The base on which income tax is computed after adjusting accounting profit for non-deductible expenses, exempt income, and specific allowances or reliefs under tax law.

Tax recognised on temporary differences between an asset's or liability's carrying amount and its tax base, expected to reverse in future periods.

Tax deducted at source by a payer on certain payments, such as interest, royalties or payments to non-residents, and remitted to the tax authority on the recipient's behalf.

An indirect tax charged on the supply of goods and services at each stage of production, with registered businesses collecting it from customers and offsetting input tax paid.

The setting of prices for transactions between related parties; tax rules require these to follow the arm's length principle so profit is not shifted between jurisdictions.

The principle that a registered company is a legal person distinct from its shareholders and directors, able to own property, contract and be sued in its own name.

The protection that shareholders can lose only the amount unpaid on their shares, not their personal assets, for the company's debts.

A court's exceptional disregard of separate legal personality to hold controllers personally liable, typically where the company was used as a sham or for fraud.

The obligation of directors to act honestly, in good faith and in the company's best interests, avoiding conflicts of interest and unauthorised personal gain.

The requirement that directors apply the diligence, knowledge and experience reasonably expected of someone in their position when making decisions for the company.

Sales revenue less variable costs; it measures how much each unit or sale contributes toward covering fixed costs and then generating profit.

The level of activity at which total revenue equals total cost and profit is zero, calculated as fixed costs divided by contribution per unit.

A future, incremental cash flow that differs between alternatives and should therefore influence a decision; sunk costs and allocated fixed overheads are excluded.

The benefit forgone by choosing one course of action over the next best alternative, included in decision analysis even though no cash is paid.

A system that sets predetermined unit costs for materials, labour and overhead, then compares actual results with those standards to analyse variances.

The breakdown of differences between budgeted or standard figures and actual results into price and quantity causes, so managers can act on controllable deviations.

The sum of a project's future cash flows discounted at the required rate of return, less the initial outlay; a positive result indicates value creation.

The discount rate at which a project's net present value equals zero; it is compared with the cost of capital to decide whether to accept the project.

The rate used to convert future cash flows to present value, reflecting the time value of money and the risk of the cash flows being valued.

The blended after-tax cost of a firm's debt and equity, weighted by their proportions in the capital structure, used as the hurdle rate for investments.

The proportion of debt relative to equity in a company's capital structure; higher gearing raises financial risk and the return required by shareholders.

The state of being free from relationships or interests that a reasonable third party would see as compromising objectivity in an assurance engagement.

The ethical principle requiring a professional accountant to avoid bias, conflict of interest or undue influence of others when forming judgements.

A risk that a financial or other interest, such as a fee dependency or shareholding, improperly influences the accountant's judgement or behaviour.

An action or policy, such as independent review or rotation of engagement partner, that reduces an identified ethical threat to an acceptable level.

The ethical duty not to disclose information acquired through professional work without proper authority, except where there is a legal or professional right or duty to do so.

The policies and procedures designed to provide reasonable assurance about reliable reporting, effective operations and compliance with laws and regulations.

Splitting authorisation, custody, recording and reconciliation tasks among different people so that no single person can both commit and conceal an error or fraud.

The record of transactions and system activity that allows each entry to be traced from source document to financial statement and back again.

The use of software to examine full populations of accounting data for patterns, anomalies and exceptions, supporting risk assessment and substantive testing.

Tools and scripts that let auditors extract, test and analyse client data directly from accounting systems, often covering entire transaction populations.