ICAN CAP-II flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Present economic resource

An asset is a present economic resource controlled by the entity as a result of past events. The resource has the potential to produce economic benefits.

IFRS 15 core principle

Revenue is recognised to depict the transfer of promised goods or services to customers in an amount reflecting the consideration the entity expects to be entitled to.

Recoverable amount

Under IAS 36, the higher of an asset's fair value less costs of disposal and its value in use. Impairment arises when carrying amount exceeds this figure.

Deferred tax liability

A liability recognised for taxable temporary differences, being amounts that will be deductible or taxable in future periods when the carrying amount of an asset or liability is recovered or settled.

Audit risk model

Audit risk equals inherent risk multiplied by control risk multiplied by detection risk. Detection risk is the component the auditor manages through the nature, timing and extent of procedures.

Performance materiality

An amount set below overall materiality to reduce to an appropriately low level the probability that uncorrected and undetected misstatements together exceed overall materiality.

Adverse audit opinion

Issued when the auditor, having obtained sufficient appropriate evidence, concludes that misstatements are both material and pervasive to the financial statements.

Going concern material uncertainty

Where a material uncertainty exists but disclosures are adequate, the auditor issues an unmodified opinion and includes a separate Material Uncertainty Related to Going Concern section.

Capital allowance

A tax deduction replacing accounting depreciation. Qualifying capital expenditure is relieved through initial and annual allowances, with a balancing adjustment on eventual disposal.

Arm's length principle

Related-party transactions must be priced as they would be between independent parties. Methods include comparable uncontrolled price, resale price, cost plus and profit split.

Input VAT recoverability

Input VAT paid on purchases is recoverable only where the goods or services are used to make taxable supplies. VAT on exempt supplies is not recoverable.

Tax base

The amount attributed to an asset or liability for tax purposes. Temporary difference equals carrying amount less tax base, giving rise to deferred tax.

Porter's five forces

Industry profitability is shaped by rivalry, threat of new entrants, threat of substitutes, buyer bargaining power and supplier bargaining power. Strong forces erode returns.

Ansoff matrix

A growth framework with four options: market penetration, product development, market development and diversification, defined by whether product or market is new or existing.

Core competence

A capability that provides access to markets, contributes significantly to perceived customer value, and is difficult for competitors to imitate or replicate.

Agency problem

A conflict arising from separation of ownership and control, where directors may pursue self-interest rather than shareholder interest. Governance and incentives mitigate it.

Self-review threat

An independence threat arising when the firm evaluates or relies on its own prior work, such as auditing a system it designed or figures it prepared.

Audit committee composition

A board committee of independent non-executive directors, with at least one member having recent and relevant financial experience, overseeing financial reporting and external audit.

Break-even point

The sales volume at which total contribution equals fixed costs and profit is zero. In units it is fixed costs divided by contribution per unit.

Relevant cost

A future, incremental and avoidable cost that differs between alternatives. Sunk costs and apportioned fixed overheads are excluded from decision analysis.

Limiting factor ranking

When one scarce resource constrains output, products are ranked by contribution per unit of that resource to maximise total contribution.

Material usage variance

Standard quantity minus actual quantity, multiplied by standard price. It isolates the cost effect of using more or fewer inputs than the standard allows.

WACC formula

Weighted average cost of capital equals equity proportion times cost of equity plus debt proportion times cost of debt times one minus the tax rate.

Profitability index

Net present value divided by initial investment. Used to rank divisible projects when capital is rationed, because it measures value per unit of scarce capital.

Cash conversion cycle

Inventory days plus receivable days minus payable days. It measures how long cash is tied up before customers pay and after suppliers are paid.

Postal acceptance rule

Where post is contemplated, acceptance is effective when the letter is posted, not when received, unless the offer expressly excludes the rule.

Separate legal personality

On incorporation a company becomes a legal person distinct from its members and directors, able to own property, contract and sue in its own name.

Director's duty to avoid conflicts

A director must avoid situations where they have, or may have, a direct or indirect interest that conflicts with the company's interests, unless authorised.

Benford's law

In many natural datasets the leading digit is not uniformly distributed; digit 1 appears about 30% of the time. Deviations flag possible anomalies for audit follow-up.

ACID properties

Database transactions should be atomic, consistent, isolated and durable, ensuring that partial updates do not corrupt data and committed changes persist.

IPSAS basis

International Public Sector Accounting Standards are accrual-based standards adapted from IFRS for public sector entities, with a cash-basis variant available for transition.

Donor-restricted contribution

A contribution whose use is limited by an external donor condition. Revenue is recognised when the condition is substantially met, and net assets are shown as restricted.