ICAN Professional Case Study key terms

A reporting approach that presents how an organisation's strategy, governance, performance and prospects create value over time, linking financial capital with human, intellectual, social, natural and manufactured capitals.

The resource stocks an organisation uses and affects: financial, manufactured, intellectual, human, social and relationship, and natural capital. Integrated reporting explains how strategy draws on and transforms these stocks.

The process by which an organisation increases, preserves or erodes the capitals available to it and to others over the short, medium and long term, as a result of its business model and interactions with stakeholders.

The system through which an organisation converts inputs, through its activities, into outputs and outcomes that aim to fulfil strategic purpose and create value in the short, medium and long term.

The foundation for developing IFRS standards: it defines the objective of general purpose financial reporting, qualitative characteristics, elements of financial statements, recognition, measurement and concepts of capital and capital maintenance.

A qualitative characteristic requiring information to depict economic phenomena completely, neutrally and free from error. It is one of the two fundamental characteristics, alongside relevance.

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that primary users make from the financial statements, judged in the context of the entity's circumstances.

The amount or threshold set by the auditor below which misstatements are unlikely to influence users' economic decisions. It guides risk assessment, the extent of testing and evaluation of uncorrected misstatements.

The auditor's formal conclusion on whether financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework. It may be unmodified or modified (qualified, adverse or disclaimer).

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

An attitude of questioning mindset, alertness to conditions indicating possible misstatement due to error or fraud, and critical assessment of evidence, maintained throughout the audit and other assurance engagements.

The assumption that an entity will continue in operation for the foreseeable future, without intention or necessity to liquidate or cease trading. Management assesses it; auditors evaluate the appropriateness of that assessment.

The blended required return on a firm's capital, weighting the after-tax cost of debt and the cost of equity by their market-value proportions. It is commonly used as the discount rate for project appraisal.

The return shareholders require for holding a company's equity, reflecting the risk-free rate plus a premium for systematic risk. Often estimated using the capital asset pricing model.

A measure of how sensitive a security's returns are to movements in the market portfolio. A beta above one indicates greater systematic risk than the market; it feeds directly into the capital asset pricing model.

The mix of debt and equity an entity uses to finance its assets and operations. Its design balances tax shields from debt against financial distress and agency costs.

The extent to which a firm uses borrowed funds, measured by gearing or debt-to-equity ratios. Higher leverage magnifies returns to shareholders but also magnifies volatility and default risk.

A solvency ratio dividing earnings before interest and tax by interest expense. It shows how many times operating profit can absorb finance costs, indicating headroom before covenant or payment stress.

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

The discount rate at which a project's net present value equals zero. Comparing it with the cost of capital indicates whether a project is acceptable, though it can mislead with non-conventional cash flows.

A condition in a loan agreement requiring the borrower to maintain specified financial ratios or limits, or restricting actions such as further borrowing or dividend payments. Breach can trigger default or acceleration.

A tax deduction granted instead of accounting depreciation, allowing the cost of qualifying capital assets to be written off against taxable profits under prescribed rules and rates.

Tax attributable to temporary differences between the carrying amount of assets and liabilities and their tax bases, and to unused tax losses. It is recognised as a liability or asset on the statement of financial position.

The amount attributed to an asset or liability for tax purposes. Differences between tax base and carrying amount create temporary differences that give rise to deferred tax.

The pricing of transactions between related entities in different tax jurisdictions. Rules generally require arm's length prices, supported by documentation, to prevent profit shifting.

Arranging affairs within the letter of the law to reduce tax liability, as distinct from illegal evasion. Aggressive schemes may be challenged under general anti-avoidance rules or disclosure regimes.

A fixed place of business or dependent agent through which an enterprise carries on business in another jurisdiction, giving that jurisdiction taxing rights over attributable profits under domestic law and treaties.

A one-page visual linking strategic objectives across financial, customer, internal process and learning perspectives, showing cause-and-effect relationships that describe how value will be delivered.

A performance management framework translating strategy into objectives, measures, targets and initiatives across financial and non-financial perspectives, balancing lagging outcomes with leading drivers.

A measure selected because it is critical to tracking progress toward a strategic objective. Good indicators are specific, measurable, attributable and linked to accountable owners.

The amount and type of risk an organisation is willing to accept in pursuit of its objectives, expressed qualitatively or quantitatively and set by the board to guide decision-making and limits.

A structured record of identified risks, their causes, likelihood, impact, inherent and residual ratings, owners and mitigating controls. It supports prioritisation and monitoring by management and the board.

The policies, procedures and systems designed to provide reasonable assurance about achieving objectives relating to operations, reporting and compliance. It comprises control environment, risk assessment, control activities, information and communication, and monitoring.

A governance structure distinguishing management and internal controls (first line), risk and compliance oversight functions (second line), and independent internal audit (third line), with governing bodies outside them providing oversight.

A board subcommittee of independent non-executive directors responsible for overseeing financial reporting, external audit, internal audit and the effectiveness of internal control and risk management.

The principles governing accountants' conduct, typically integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour, supported by a conceptual framework for identifying and addressing threats.

Freedom from conditions that could compromise objectivity, comprising independence of mind (state of mind) and independence in appearance (avoiding facts a reasonable third party would perceive as compromising objectivity).

A situation where an individual's personal, financial or other interests could improperly influence professional judgement or duties. It must be identified, disclosed and managed, sometimes by withdrawal.

Raising concerns, internally or to an appropriate external body, about suspected wrongdoing such as fraud, unsafe practice or breach of law. Effective frameworks protect reporters from retaliation.

The examiner-style skill of drawing together financial, strategic, governance, tax and ethical evidence from a case to reach a supported conclusion, rather than describing each element in isolation.

Presenting analysis to decision-makers in a form suited to their needs: a clear structure, quantified impacts, explicit assumptions, balanced options and a recommendation with rationale and next steps.