CPALE flashcards

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

Net realizable value

The estimated selling price of inventory in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale, used under IAS 2.

Revaluation surplus

The excess of the fair value of property, plant, and equipment over its carrying amount in the revaluation model, recognized in other comprehensive income under IAS 16.

Provision versus contingent liability

A provision is a present obligation that is probable and reliably estimable and is recognized; a contingent liability is a possible obligation or one that is not probable or not reliably measurable and is only disclosed.

Deferred tax liability

A tax effect arising from a taxable temporary difference, where the carrying amount of an asset exceeds its tax base, expected to be paid in future periods under IAS 12.

Goodwill on acquisition

The excess of the aggregate of consideration transferred, non-controlling interest, and previously held interest over the fair value of identifiable net assets acquired under IFRS 3.

Bargain purchase gain

The excess of the fair value of identifiable net assets acquired over the aggregate consideration, NCI, and previously held interest, recognized in profit or loss under IFRS 3.

Equity method

A method under IAS 28 where the investment is initially at cost and adjusted for the investor's share of post-acquisition profit or loss and other comprehensive income.

Right-of-use asset

An asset recognized by a lessee under IFRS 16 representing the right to use an underlying asset over the lease term, measured at the initial amount of the lease liability.

Audit risk model

The relationship AR = IR x CR x DR, where audit risk equals the product of inherent risk, control risk, and detection risk, with detection risk inversely related to assessed risks.

Reasonable assurance

A high but not absolute level of assurance that the financial statements are free from material misstatement, reflecting the inherent limitations of an audit under ISA 200.

Modified opinion types

Under ISA 705, a qualified opinion, an adverse opinion, or a disclaimer of opinion, chosen based on whether the matter is material, pervasive, and involves misstatement or insufficiency of evidence.

Independence in appearance

The avoidance of facts and circumstances that a reasonable and informed third party would perceive as compromising objectivity, required by the IESBA Code alongside independence of mind.

Sampling risk

The risk that the auditor's conclusion based on a sample differs from the conclusion that would be reached if the entire population were subjected to the same procedure.

External confirmation

Audit evidence obtained as a direct written response to the auditor from a third party, which is generally more reliable than internally generated evidence under ISA 505.

Going concern assumption

The assumption that the entity will continue in operation for at least twelve months, assessed by the auditor under ISA 570 with disclosure or modification when a material uncertainty exists.

Subsequent events review

Procedures performed by the auditor between the date of the financial statements and the date of the auditor's report to identify events requiring adjustment or disclosure under ISA 560.

TRAIN law

The Tax Reform for Acceleration and Inclusion law, which restructured Philippine individual income tax rates, exempting the first P250,000 of net taxable income for pure compensation earners.

Zero-rated VAT

A VAT rate of 0% applied to certain transactions such as export sales, where input tax may be credited, as distinguished from VAT-exempt transactions.

Estate tax rate

The Philippine tax imposed on the net taxable estate of a decedent at the flat rate of 6% under the TRAIN law, with a standard deduction of P5,000,000.

Documentary stamp tax

A tax on specified documents and transactions, such as the P15 per P1,000 of consideration on the sale of real property, imposed by the Philippine Tax Code.

One-person corporation

A corporation formed by a single natural person under the Revised Corporation Code, with a single stockholder who may be the sole director and president.

Minimum subscription requirement

Under the Revised Corporation Code, at least 25% of the authorized capital stock must be subscribed and at least 25% of the subscription must be paid at incorporation.

Data Privacy Act consent

Under RA 10173, consent must be freely given, specific, and informed, and personal information must be processed for a declared and legitimate purpose.

Covered transaction reporting

Under the Anti-Money Laundering Act, covered institutions report transactions exceeding the threshold and suspicious transactions to the Anti-Money Laundering Council.

Holder in due course

Under the Negotiable Instruments Law, a holder who takes the instrument for value, in good faith, and without notice of defect, taking free from personal defenses.

Insurable interest

Under the Insurance Code, a pecuniary interest in the subject matter of insurance; it must exist at policy inception for life and at the time of loss for property.

Derivative suit

An action brought by a stockholder on behalf of the corporation against directors or third parties for wrongs done to the corporation, when the board refuses to act.

Contract of sale

Under the Civil Code, a contract where one party obligates himself to deliver a thing and the other to pay a certain price in money.

Break-even point

The level of sales at which total revenues equal total costs and operating income is zero, computed as fixed costs divided by contribution margin per unit or ratio.

Margin of safety

The excess of actual or budgeted sales over break-even sales, expressed in pesos or as a percentage, indicating the cushion before losses occur.

Variable costing

A costing method where product cost includes only direct materials, direct labor, and variable overhead, with fixed overhead treated as a period cost.

Net present value

The present value of a project's cash inflows minus the present value of its cash outflows, discounted at the cost of capital; a positive NPV indicates acceptance.