Korea IFRS Manager key terms

A set of overarching concepts issued by the IASB that guides the development of standards and the exercise of judgement: objective of financial reporting, qualitative characteristics, elements, recognition, measurement, presentation and disclosure.

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that primary users make from the financial statements; materiality depends on both nature and magnitude.

An event occurring after the reporting period that provides evidence of conditions that existed at the end of the reporting period, requiring recognition or remeasurement of amounts in the financial statements.

An omission or misstatement in prior-period financial statements arising from failure to use, or misuse of, reliable information that was available and could reasonably be expected to have been obtained; corrected retrospectively.

A revision of the carrying amount of an asset or liability, or the amount of periodic consumption of an asset, resulting from new information or new developments; applied prospectively from the date of change.

A promise in a contract with a customer to transfer either a distinct good or service, or a series of distinct goods or services that are substantially the same and transferred in the same pattern.

The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties such as taxes.

Consideration that can vary because of discounts, rebates, refunds, credits, incentives, penalties or similar items; estimated using expected value or most likely amount and included subject to the constraint.

An entity's right to consideration in exchange for goods or services transferred to a customer when that right is conditional on something other than the passage of time, for example future performance.

The price at which an entity would sell a promised good or service separately to a customer; used as the basis for allocating the transaction price to each performance obligation.

The judgement of whether an entity controls a specified good or service before it is transferred to the customer (principal, revenue recognised gross) or arranges for another party to provide it (agent, revenue recognised net).

An asset representing a lessee's right to use an underlying asset for the lease term, measured initially at the lease liability plus initial direct costs and prepayments, less lease incentives received.

The non-cancellable period of a lease, plus periods covered by an extension option the lessee is reasonably certain to exercise, plus periods after a termination option the lessee is reasonably certain not to exercise.

The rate of interest a lessee would have to pay to borrow over a similar term, with similar security, the funds necessary to obtain an asset of similar value in a similar economic environment.

An accounting policy election for lessees not to recognise a right-of-use asset and lease liability for leases with a term of 12 months or less at commencement and no purchase option; payments are expensed on a straight-line basis.

The probability-weighted estimate of credit losses, measured as the present value of cash shortfalls, over the expected life of a financial asset; recognised regardless of whether a loss event has occurred.

An assessment of whether the contractual cash flows of a financial asset are solely payments of principal and interest on the principal amount outstanding; failure of the test results in classification at fair value through profit or loss.

A method of calculating amortised cost using the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the asset or liability.

A hedge of exposure to variability in cash flows attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecast transaction, with the effective portion recognised in other comprehensive income.

The situation where an investor is exposed, or has rights, to variable returns from its involvement with an investee and has the ability to affect those returns through its power over the investee.

The equity in a subsidiary not attributable, directly or indirectly, to the parent; presented separately within consolidated equity and measured at acquisition either at fair value or at the proportionate share of net assets.

An asset representing future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognised; measured as consideration transferred plus non-controlling interest less net identifiable assets acquired.

The power to participate in the financial and operating policy decisions of an investee but not control or joint control of those policies; presumed when an investor holds 20 per cent or more of the voting rights.

A method of accounting under which an investment is initially recognised at cost and adjusted thereafter for the investor's share of the investee's profit or loss, other comprehensive income and dividends received.

The smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets or groups of assets; used as the level at which impairment is tested when assets do not generate independent cash flows.

The higher of an asset's or cash-generating unit's fair value less costs of disposal and its value in use; an impairment loss is recognised when carrying amount exceeds this amount.

The present value of the future cash flows expected to be derived from an asset or cash-generating unit, estimated using pre-tax cash flow projections and a pre-tax discount rate reflecting current market assessments of risk.

The estimated amount an entity would currently obtain from disposal of an asset, after deducting estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.

Accounting for each part of an item of property, plant and equipment with a cost significant relative to the total cost of the item as a separate component, each depreciated over its own useful life.

Property held to earn rentals, for capital appreciation, or both, rather than for use in the production or supply of goods or services, for administrative purposes, or for sale in the ordinary course of business.

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

An obligation deriving from an entity's actions where, through an established pattern of past practice or published policies, it has indicated to other parties that it will accept certain responsibilities and has created a valid expectation.

A contract in which the unavoidable costs of meeting the obligations under it exceed the economic benefits expected to be received; the present obligation is recognised as a provision measured at the lower of the two amounts.

The present value of the defined benefit obligation at the reporting date less the fair value of plan assets, with the resulting net defined benefit liability or asset recognised in the statement of financial position.

Changes in the net defined benefit liability from experience adjustments, changes in actuarial assumptions, and the return on plan assets excluding amounts in net interest; recognised in other comprehensive income and never reclassified to profit or loss.

For equity-settled share-based payment, the fair value of the equity instruments granted, measured at grant date and recognised as an expense over the vesting period, with a corresponding increase in equity.

The period during which specified vesting conditions, such as service or performance conditions, must be satisfied before an employee becomes unconditionally entitled to a share-based payment award; expense is recognised over this period.

The difference between the carrying amount of an asset or liability in the statement of financial position and its tax base; such differences give rise to deferred tax assets or deferred tax liabilities.

The amount of income taxes recoverable in future periods in respect of deductible temporary differences, unused tax losses carried forward and unused tax credits, recognised only to the extent that taxable profit will be available.

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, not an entity-specific value.

The use of a non-financial asset by market participants that would maximise the value of the asset or of the group in which it would be used, provided that use is physically possible, legally permissible and financially feasible.

Unobservable inputs for an asset or liability used where relevant observable inputs are not available, reflecting the assumptions market participants would use including risk; they sit at the bottom of the fair value hierarchy.