Myanmar CPA Part II key terms

An accounting method that records revenue when earned and expenses when incurred, regardless of when cash moves. It underpins matching of costs with the income they helped generate.

The rule that expenses are recognised in the same period as the revenue they helped produce. It drives adjustments such as depreciation, accruals and deferred cost allocation.

The process of deciding when and how much income from a sale or service is recorded. Under current standards it usually follows transfer of control to the customer, in defined steps.

A distinct promise in a customer contract to deliver a good or service. Each one is recognised separately, and the transaction price is allocated among them.

The amount of consideration an entity expects to be entitled to under a contract, adjusted for variable amounts, financing, non-cash consideration and amounts payable to the customer.

A right to consideration that is conditional on something other than the passage of time, such as completion of a further milestone. It differs from a receivable, which is unconditional.

An obligation to transfer goods or services for which the customer has already paid or an amount is due. Commonly described as deferred or unearned revenue.

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

A possible obligation whose existence depends on uncertain future events, or a present obligation that fails the recognition criteria. It is disclosed rather than recorded on the balance sheet.

The amount by which an asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs of disposal and value in use.

The amount at which an asset or liability is recorded in the financial statements, after deducting accumulated depreciation, amortisation and any impairment.

The systematic allocation of a tangible asset's depreciable amount over its useful life. Methods include straight-line, reducing balance and units of production.

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

The equity in a subsidiary not attributable to the parent. It is presented separately within consolidated equity and measured either at fair value or at the proportionate share of net assets.

Combining the financial statements of a parent and its subsidiaries into a single set, eliminating intragroup balances and transactions, so users see the group as one economic entity.

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

An entity over which an investor has significant influence but not control, usually indicated by holding between 20 and 50 percent of voting rights. Accounted for using the equity method.

An accounting approach in which an investment is initially recorded at cost, then adjusted for the investor's share of the investee's post-acquisition profit and other comprehensive income.

An arrangement over which two or more parties share control. It is classified as a joint operation, where parties share assets and liabilities, or a joint venture, accounted for by the equity method.

The currency of the primary economic environment in which an entity operates. Foreign currency items are translated into it, and it determines how exchange differences are reported.

The gain or loss arising when the same foreign currency amount is translated at different exchange rates. Treatment depends on whether the item is monetary or non-monetary.

Sales revenue less variable costs. It measures how much each unit or sale contributes towards covering fixed costs and generating profit, and it feeds break-even and short-term decisions.

The activity level at which total revenue equals total cost, so profit is zero. In units it equals fixed costs divided by contribution per unit.

The excess of budgeted or actual sales over the break-even level, expressed in units, revenue or percentage. It shows how far sales can fall before a loss arises.

A future, incremental cash cost that differs between alternatives. Sunk costs, committed costs and non-cash items such as allocated depreciation are excluded from the decision.

The benefit forgone by choosing one course of action over the next best alternative. It is a relevant cost even where no cash payment is recorded.

Comparing budgeted or standard figures with actual results to explain differences in price, usage, efficiency and volume, so management can act on the causes.

A system that sets predetermined costs for materials, labour and overhead, then records actual costs against them to value inventory and highlight variances.

A budget adjusted to the actual activity level achieved, so that fixed and variable elements are compared on a like-for-like basis with actual results.

The level of misstatement that could influence the economic decisions of users of the financial statements. It guides the scope of procedures and evaluation of identified errors.

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

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.

The policies and procedures designed to provide reasonable assurance about reliable reporting, effective operations and compliance with laws. Auditors assess it to plan procedures.

A control that separates authorisation, custody, recording and reconciliation so no single person can both commit and conceal an error or fraud.

The income remaining after allowable deductions are subtracted from total income from specified sources. It forms the base on which Myanmar income tax is computed for the year.

An expense incurred wholly and exclusively in producing assessable income that the tax law permits to be subtracted. Capital and private expenses are generally excluded.

Tax deducted at source by a payer on specified payments such as salaries, interest, royalties or payments to non-residents, then remitted to the tax authority on the taxpayer's behalf.

Myanmar's indirect tax levied on the sale of goods and on specified services, charged on the taxable value of the transaction and collected by registered sellers.

A legal obligation of directors and officers to act in the company's best interests, with loyalty, good faith and care, and to avoid conflicts of interest.

The framework of rules, practices and processes by which a company is directed and controlled, balancing the interests of shareholders, management and other stakeholders.

A subcommittee of the board, normally of independent directors, that oversees financial reporting, external audit, internal audit and risk management.

Freedom from relationships or interests that could compromise objectivity. For auditors it covers both independence of mind and independence in appearance.

The principle that a sum received today is worth more than the same sum later, because it can be invested to earn a return. It underlies discounting and capital budgeting.

The sum of a project's expected cash flows discounted at the required rate of return, less the initial outlay. A positive result suggests the project adds value.

The minimum return required by providers of debt and equity finance, weighted by their proportions in the capital structure. It is used as the discount rate in appraisal.

Current assets less current liabilities. Managing it involves balancing inventory, receivables and payables so the business can meet short-term obligations without excess idle funds.

The ethical duty not to disclose information acquired through professional work without proper authority or a legal obligation to do so, and not to use it for personal advantage.

An attitude of questioning and alertness to conditions suggesting possible misstatement, including fraud, rather than accepting information at face value.

Controls over the IT environment as a whole, such as access management, change management, backup and program development, which support the reliable operation of application controls.