PIPFA Intermediate flashcards

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

Going concern assumption

Financial statements are prepared on the basis that the entity will continue operating for the foreseeable future without liquidation or ceasing trade; otherwise a different basis must be disclosed.

Accrual basis

Transactions and events are recognised when they occur, not when cash is received or paid; income and expenses are matched to the period to which they relate.

Materiality

Information is material if omitting or misstating it could influence economic decisions of users; materiality depends on size and nature of the item.

IAS 16 cost model

Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses; depreciation is allocated systematically over the asset's useful life.

Revaluation surplus

Under the revaluation model, increases in carrying amount above cost are recognised in other comprehensive income and accumulated in equity as a revaluation surplus.

Recoverable amount

Under IAS 36, the higher of an asset's fair value less costs of disposal and its value in use; an asset is impaired when carrying amount exceeds recoverable amount.

Value in use

The present value of estimated future cash flows expected from continuing use of an asset and its eventual disposal, discounted at a pre-tax rate reflecting current market assessments.

IFRS 15 transaction price

The amount of consideration an entity expects to be entitled to, adjusted for variable consideration, significant financing components, non-cash consideration and amounts payable to customers.

Performance obligation

A promise to transfer a distinct good or service to a customer; revenue is recognised when each obligation is satisfied, either at a point in time or over time.

Right-of-use asset

Under IFRS 16, the lessee recognises an asset representing its right to use the leased item, measured initially at the lease liability plus initial direct costs and prepayments.

Deferred tax liability

Arises from taxable temporary differences, where the carrying amount of an asset exceeds its tax base; it is measured at the tax rate expected on reversal.

Current ratio formula

Current assets divided by current liabilities; it indicates short-term liquidity and the margin of cover for obligations falling due within twelve months.

Quick ratio formula

Current assets excluding inventory, divided by current liabilities; a stricter liquidity test because inventory may take time to convert into cash.

Cash conversion cycle

Inventory days plus receivable days minus payable days; it measures how long cash is tied up in working capital before collection from customers.

Interest cover ratio

Earnings before interest and tax divided by finance cost; it shows how many times operating profit covers interest charges, indicating financial risk.

IAS 7 operating activities

Cash flows from principal revenue-producing activities, presented by the direct method (gross receipts and payments) or the indirect method (profit adjusted for non-cash items).

Fund accounting

Public sector resources are segregated into separate funds by purpose or legal restriction, each with its own assets, liabilities and fund balance and its own accountability.

Modified accrual basis

Governmental funds recognise revenue when measurable and available and expenditure when incurred, while long-term debt principal and interest are recorded when due.

Appropriation

A legal authorisation by the legislature permitting an entity to incur expenditure up to a stated limit for specified purposes during a defined period.

Zero-based budgeting

A budgeting method where every activity must be justified from a zero base each period rather than by reference to the previous year's allocation.

Budget variance

The difference between actual and budgeted amounts; expenditure above appropriation is adverse, while revenue above estimate is favourable, and material variances require explanation.

Commitment control

A control that records orders and contracts as commitments against an appropriation, preventing expenditure from exceeding the authorised limit before invoices are received.

Segregation of duties

Internal control principle separating authorisation, custody of assets and record keeping so that no single officer can initiate, process and conceal a transaction.

Value for money audit

An examination of economy, efficiency and effectiveness in the use of public resources, distinct from the regularity and propriety of transactions.

Regularity audit

An audit confirming that expenditure and revenue comply with the legal and administrative authorities that govern the entity, including appropriations and financial regulations.

Accounting officer

The official accountable to the legislature for the proper financial management of an appropriation, including regularity, probity and the preparation of financial statements.

Outputs and outcomes

Outputs are goods or services delivered by a public entity; outcomes are the resulting effects or benefits for citizens, measured against predetermined performance targets.

Fiscal deficit ratio

The fiscal deficit expressed as a percentage of gross domestic product; a key indicator of borrowing needs and compliance with fiscal rules.

Public debt to GDP

Total government debt divided by gross domestic product; it measures debt sustainability and the burden relative to the size of the economy.

Open tender threshold

A procurement value above which competition by public advertisement is mandatory; below it simplified methods may apply, and single-source awards need justified approval.

Interfund transfer

A movement of resources between separate funds in a public entity, disclosed separately because it does not represent external revenue or expenditure.

Consolidated financial statements

Statements presenting the parent and its controlled entities as a single economic entity, eliminating intragroup balances and transactions in full.