CPA Rwanda flashcards

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

Fundamental qualitative characteristics

Relevance and faithful representation. Information is relevant if it can influence decisions and is material; faithful representation means complete, neutral and free from material error.

IFRS 15 five-step model

Identify the contract, identify performance obligations, determine the transaction price, allocate the price to obligations, and recognise revenue when each obligation is satisfied.

Recoverable amount

The higher of an asset's fair value less costs of disposal and its value in use. An impairment loss arises when carrying amount exceeds recoverable amount.

Goodwill on acquisition

Consideration transferred plus non-controlling interest plus previously held interest, less the fair value of identifiable net assets acquired.

Break-even point

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

Margin of safety

The excess of budgeted sales over break-even sales, expressed as a percentage of budgeted sales. It measures the fall in sales before a loss arises.

High-low method

A technique separating fixed and variable costs: variable cost per unit equals the change in total cost divided by the change in activity between the highest and lowest levels.

Limiting factor ranking

When a resource is scarce, products are ranked by contribution per unit of the scarce resource, not by contribution per unit of product.

Audit risk model

Audit risk equals inherent risk times control risk times detection risk. Detection risk is managed by the auditor through the nature, timing and extent of audit procedures.

Performance materiality

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

Modified audit opinion types

A qualified opinion (material but not pervasive misstatement), an adverse opinion (material and pervasive misstatement) and a disclaimer of opinion (inability to obtain sufficient evidence).

Going concern material uncertainty

Where a material uncertainty exists but disclosures are adequate, the auditor issues an unmodified opinion and includes an Emphasis of Matter paragraph drawing attention to the disclosure.

Rwanda VAT standard rate

The standard value added tax rate in Rwanda is 18 percent. VAT-registered taxpayers charge output VAT and may recover input VAT on taxable supplies.

Rwanda corporate income tax rate

The standard corporate income tax rate in Rwanda is 30 percent of taxable profit, with preferential rates available for certain qualifying investors and small businesses.

Taxable profit adjustment

Accounting profit adjusted for disallowable expenses, non-taxable income, capital allowances and brought-forward trading losses, giving the amount on which corporate tax is charged.

Deferred tax

Tax arising on temporary differences between the carrying amount of an asset or liability and its tax base, measured at the rates expected to apply on reversal.

Contract essentials

Offer, acceptance, consideration, intention to create legal relations and capacity. Without these elements an agreement is generally not enforceable as a contract.

Separate legal personality

A company is a legal person distinct from its shareholders and directors, with perpetual succession and limited liability for members.

Directors' fiduciary duties

Directors must act in good faith in the company's interests, avoid conflicts of interest, exercise care and skill, and not misuse company assets or information.

Audit committee composition

A board committee of independent non-executive directors that oversees financial reporting, external audit, internal control and the relationship with the external auditor.

Net present value rule

Discount all project cash flows at the cost of capital and subtract the initial investment. Accept independent projects with a positive NPV.

Weighted average cost of capital

The weighted average of the after-tax cost of debt and the cost of equity, weighted by the market values of debt and equity in the capital structure.

CAPM cost of equity

Cost of equity equals the risk-free rate plus beta multiplied by the market risk premium (market return minus risk-free rate).

Operating gearing

The proportion of fixed costs within total costs. High operating gearing makes profit more sensitive to changes in sales volume.

Porter's Five Forces

An industry attractiveness framework covering rivalry among existing competitors, threat of new entrants, threat of substitutes, bargaining power of buyers and bargaining power of suppliers.

Ansoff matrix

A growth framework combining existing and new products with existing and new markets, giving market penetration, product development, market development and diversification.

BCG matrix

Classifies business units as stars, cash cows, question marks or dogs using market growth rate and relative market share to guide portfolio investment decisions.

Value chain analysis

Separates primary activities such as inbound logistics, operations, outbound logistics, marketing and service from support activities to identify sources of competitive advantage.

COSO internal control components

Control environment, risk assessment, control activities, information and communication, and monitoring activities. These five components form the basis of internal control assessment.

Segregation of duties

No single person should authorise, record and have custody of the same transaction, because combining these functions allows errors or fraud to occur undetected.

Benford's law

In naturally occurring data sets the leading digit 1 appears about 30.1 percent of the time, with frequency decreasing for higher digits. Deviations may signal manipulation.

Descriptive versus predictive analytics

Descriptive analytics explains what happened using historical data; predictive analytics uses models and historical patterns to estimate what is likely to happen.

Five fundamental ethical principles

Integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. These apply to all professional accountants and auditors.

Self-review threat

A threat arising when a professional evaluates their own previous work or the work of the same firm, reducing objectivity, for example preparing records then auditing them.

Familiarity threat

A threat arising from long association or close relationships with a client, causing excessive sympathy with the client's interests and impairing objectivity.

Intimidation threat

A threat arising when a professional is deterred from acting objectively by actual or perceived pressures, such as threats of dismissal, litigation or replacement.