ICAM CA(M) cheat sheet

Fundamental accounting equation: Assets = Liabilities + Equity; every transaction preserves this equality, so debits must equal credits in every journal entry.

Accrual basis recognises revenue when the performance obligation is satisfied and expenses when incurred, regardless of cash timing; cash basis recognises only on cash movement.

Depreciation methods: straight line = (cost − residual) / useful life; reducing balance = carrying amount × rate; units of production = (cost − residual) × units used / total units.

Inventory cost formulas under IAS 2: FIFO and weighted average are permitted; LIFO is prohibited. Inventory is measured at the lower of cost and net realisable value.

Revenue under IFRS 15 follows five steps: identify contract, identify performance obligations, determine transaction price, allocate price to obligations, recognise revenue on satisfaction.

Leases under IFRS 16: lessee recognises a right-of-use asset and a lease liability at the present value of future lease payments, discounted at the implicit or incremental borrowing rate.

Impairment under IAS 36: an asset is impaired when carrying amount exceeds recoverable amount, defined as the higher of fair value less costs of disposal and value in use.

Consolidation: parent and subsidiary are combined line by line; intragroup balances, transactions and unrealised profits are eliminated in full; non-controlling interest is presented within equity.

ISA 200 requires the auditor to obtain reasonable, not absolute, assurance and to express an opinion on whether financial statements are free from material misstatement.

Risk model: audit risk = inherent risk × control risk × detection risk; detection risk is the only component the auditor controls directly through the nature, timing and extent of procedures.

Assertions tested include occurrence, completeness, accuracy, cut-off, classification, existence, rights and obligations, valuation, and presentation and disclosure.

Audit evidence is more reliable when obtained from independent external sources, from original documents rather than copies, and from auditor's direct observation or inspection.

Materiality is set at overall financial statement level and, where relevant, at performance materiality (typically a percentage below overall materiality) to reduce aggregation risk.

The auditor's report expresses an unmodified opinion, qualified opinion, adverse opinion or disclaimer; a Key Audit Matter section is required for listed entities under ISA 701.

Independence under the IESBA Code: the auditor must be free from relationships that a reasonable third party would conclude compromise objectivity, including financial interests and close family ties.

ISA 240 presumes a risk of fraud in revenue recognition; the auditor must evaluate management override of controls regardless of assessed risk.

Taxable income = accounting profit adjusted for non-deductible expenses, non-taxable income, and temporary and permanent differences; tax expense = current tax + deferred tax movement.

Deferred tax arises on temporary differences between carrying amount and tax base, measured at the rate expected to apply when the asset is realised or liability settled.

A deferred tax asset is recognised only to the extent that future taxable profit is probable; unrecognised losses are reassessed at each reporting date.

Capital allowances replace depreciation for tax purposes; the difference between accounting depreciation and capital allowances creates a temporary difference.

Withholding tax applies to cross-border payments such as royalties, interest and dividends; the applicable rate may be reduced under a double tax treaty.

Transfer pricing rules require transactions between related parties to be at arm's length; common methods include comparable uncontrolled price, resale price and cost plus.

Tax losses may be carried forward subject to continuity of ownership or same business tests; the specific rules vary by jurisdiction and must be checked.

Indirect taxes such as VAT or GST are collected by the supplier on behalf of the tax authority; output tax less input tax equals the amount payable.

Break-even units = fixed costs / contribution per unit; contribution per unit = selling price − variable cost per unit; margin of safety = (budgeted sales − break-even sales) / budgeted sales.

Contribution margin ratio = contribution / sales; break-even revenue = fixed costs / contribution margin ratio.

Relevant costs are future, incremental cash flows; sunk costs, committed costs and allocated fixed overheads are irrelevant to a decision.

Investment appraisal: NPV discounts all cash flows at the cost of capital and is preferred; IRR is the discount rate giving NPV of zero; payback ignores time value of money.

WACC = (E/V) × Ke + (D/V) × Kd × (1 − tax rate), where V = E + D and Kd is the pre-tax cost of debt.

Standard costing variances: material price = (standard price − actual price) × actual quantity; material usage = (standard quantity − actual quantity) × standard price.

Working capital cycle = inventory days + receivables days − payables days; a shorter cycle reduces financing needs.

Cost of equity under CAPM = risk-free rate + beta × (market return − risk-free rate); beta measures systematic risk only.