Consolidated financial statements combine the financial records of a group of companies, providing a comprehensive view of the entire group's financial situation.
Understanding the difference between the fair value of the consideration given by an acquiring company when acquiring a business and the aggregate of the fair values of the separable net assets acquired, commonly referred to as consolidated goodwill.
A consolidated income and expenditure account amalgamates the financial information from individual income and expenditure accounts of a group of organizations into a single, comprehensive financial document, adjusted for any necessary consolidation adjustments.
The process of combining and adjusting financial information from the individual financial statements of a parent undertaking and its subsidiaries to prepare consolidated financial statements, which present financial information for the group as a single economic entity.
Constant Purchasing Power Accounting (CPPA) involves adjusting financial statements to account for changes in the purchasing power of money over time due to inflation or deflation. This method adjusts for the distortions caused by inflation, ensuring that financial information remains accurate and comparable.
The Consultative Committee of Accountancy Bodies (CCAB) is a collaborative umbrella group set up in 1970 by the six main accountancy bodies in the UK and Ireland to foster cooperation and address financial accounting and reporting issues.
Contingencies in accounting refer to potential gains and losses that are known to exist at the balance-sheet date. These outcomes will only be known after one or more future events occur or do not occur. The way these contingencies are handled in financial statements depends on their nature, and specific accounting standards provide the required guidance.
A possible asset that arises from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events, beyond the control of the accounting entity.
A contingent gain is an economic benefit that may be realized when a favorable event occurs, though it is not guaranteed and depends on future uncertainties.
Either a possible obligation arising from past events that will be confirmed by one or more uncertain future events not wholly within an entity's control, or a present obligation from past events that cannot be measured reliably or is not probable to require settlement.
A contingent loss is an economic loss that may occur in the future depending on the outcome of a specific event, typically related to a contingent liability.
A continuous audit is an in-depth examination of financial records conducted on a recurring basis throughout the accounting period, aimed at detecting and correcting mistakes and improper accounting practices before the reporting year-end.
Continuously Contemporary Accounting (CoCoA) is an accounting methodology that values assets and liabilities based on their current market conditions rather than historical costs.
A contra-asset account is used in accounting to accumulate amounts that reduce the value of a related asset account, such as accumulated depreciation being subtracted from the property, plant, and equipment asset account.
A control account is a general ledger account that summarizes the total balances of subsidiary ledgers, ensuring accuracy and efficiency in financial reporting.
Control refers to the ability of one entity to direct the financial and operating policies of another entity or to obtain the economic benefits from an asset. This term is central to the consolidation of financial statements and the conceptual framework for financial reporting.
In the USA, the chief accounting executive of an organization responsible for financial reporting, taxation, and auditing but typically leaving the planning and control of finances to the treasurer.
Corporate reports are comprehensive packages of information that describe the economic activities of an organization. For limited companies, these typically take the form of annual reports and accounts, aimed at providing stakeholders with a detailed view of the company's financial health.
Cost apportionment, a vital concept in accounting, involves the distribution of costs across various departments, products, or periods based on specific criteria. This ensures that expenses are accurately allocated, enabling precise financial tracking and reporting.
Cost control accounts, also known as cost ledger control accounts, are essential for capturing and managing all costs associated with a company's production processes.
A cost item refers to a category of costs incurred by an organization that are similar in nature. These costs are collected together both for reporting purposes and because they can be subjected to similar treatment by the costing system. Examples include rent, consumable materials, and sundry selling expenses.
The traditional method of measuring fixed assets where they are valued at their historical cost less accumulated depreciation, with an alternative being the revaluation model.
Cost of Sales Adjustment (COSA) refers to modifications made to the cost of goods sold (COGS) to reflect changes in inventory levels, obsolescence, shrinkage, or other factors that may affect the reported cost of sales.
A costing method is a practice that organizations use to value and allocate costs associated with producing goods or services. The choice of costing method can significantly impact the financial reporting and management decision-making processes of a business.
In continuously contemporary accounting, Current Cash Equivalent (CCE) refers to the measure of assets and liabilities in terms of their current cash value.
Current Purchasing Power (CPP) Accounting is a method of accounting that adjusts financial statements to reflect the effects of changes in the purchasing power of money. It aims to provide more accurate and relevant information during periods of inflation.
Current Value Accounting (CVA) is a method aimed at providing an income statement and balance sheet in terms of current dollars, enhancing the quality of financial information during times of inflation.
Current-Cost Accounting (CCA) adjusts the value of assets and profits to account for changes in prices over time, providing a more accurate reflection of a company’s financial position.
A specialized book of prime entry recording specific transactions, serving as a foundation for accurate bookkeeping and financial reporting.
Debtors refer to individuals or entities that owe money to an organization, often due to sales of goods or services. This concept is significant in accounting as it affects the balance sheet and requires careful management to ensure accurate financial reporting.
A method of accelerated depreciation where a percentage rate of depreciation is applied to the undepreciated balance, rather than the original cost. It is commonly used to depreciate assets that lose value quickly early in their useful lives.
Decommissioning costs represent the expenditures associated with ending an operation or activity, which might include dismantling infrastructure such as an oil rig and restoring the affected environment.
Defective Accounts refer to financial records that do not comply with legislative or accounting standards, necessitating revision as per the Companies Act.
A deferred asset, also known as a deferred debit, represents an expenditure that has been made and recognized but not yet expensed according to the matching principle of accounting.
A defined-benefit (DB) pension scheme is an occupational pension plan where the retirement benefits are predetermined by a specific formula, typically incorporating years of service and salary levels. The pension is funded accordingly, and accounting for pension costs presents specific challenges governed by Section 28 of the Financial Reporting Standard in the UK and IAS 19.
The process of systematically reducing the recorded cost of a tangible fixed asset over its useful life.
Depreciated cost, also known as depreciated value or net book value, is the value of an asset after accounting for depreciation. This concept is vital for businesses to manage asset values accurately over time.
Depreciation refers to the reduction in the value of an asset over time, often due to wear and tear. This accounting process allows businesses to allocate the cost of a tangible asset over its useful life.
Depreciation refers to the methodical reduction in the recorded cost of a tangible fixed asset, allocated over its useful life. It is a key accounting concept employed to denote the impairment of value of assets over time due to wear and tear, age, or obsolescence.
Depreciation methods are accounting techniques used to allocate the cost of a tangible asset over its useful life systematically. These methods are essential for properly matching expenses with revenues.
Deprival value is an accounting concept reflecting the loss that a company would experience if an asset were deprived or removed, often aligned with current-cost accounting.
A development stage enterprise is an enterprise devoting substantially all of its efforts to establishing itself. Either the planned principal operations have not started, or there has been no significant revenue even though principal operations are underway.
The direct charge-off method is an accounting technique used to write off specific bad debts when they are deemed uncollectible.
The direct write-off method is a process where bad debts are written off as they occur instead of creating a provision for them. While this method is unacceptable for financial reporting purposes under GAAP, it is the only method allowed for tax purposes in the United States.
Discontinued operations refer to the sale, disposal, or planned sale in the near future of a business segment, such as a product line or class of customers. The financial results of these operations are reported separately in the income statement.
Discontinued operations refer to components of a business that have been sold or permanently closed down, and their financial results are separated from continuing operations for reporting purposes.
In the USA, a Discussion Memorandum is a preliminary document published by the Financial Accounting Standards Board (FASB) before issuing a Statement of Financial Accounting Standards (SFAS). It specifies the topic under consideration, describes the alternative accounting treatments, and explains the perceived advantages and disadvantages of each treatment.
Donated surplus, also known as donated capital, refers to the contributions of cash, property, or the firm's own stock freely given to the company. It is a component of shareholders' equity that arises when such contributions are made by stakeholders without the expectation of anything in return.
The double-declining-balance method of depreciation involves applying twice the straight-line rate to the depreciable balance of an asset.
Doubtful debt refers to an amount owed to an organization by a debtor that is unlikely to be received. Organizations often create a provision for doubtful debts based on specific debts or general assumptions about debtor reliability.
Earnings, also referred to as net income or profit, is a crucial metric in financial reporting which forms the basis for calculating earnings per share. A key aspect of corporate finance, earnings definition and reporting have evolved to curb creative accounting and ensure transparency.
EFRAG is an acronym for the European Financial Reporting Advisory Group, an organization dedicated to the development and objectives of financial reporting standards in the European Union.
EDGAR is an automated system employed by the U.S. Securities and Exchange Commission (SEC) for the collection, validation, indexing, acceptance, and forwarding of submissions required by law to be filed by companies and other entities.
An employee report is a simplified version of the statutory annual report and accounts of a company, designed specifically for its employees. Although voluntary, this practice should comply with provisions of the Companies Act relating to non-statutory accounts.
Ending Inventory refers to the stock held by a business at the end of a financial period. It plays a crucial role in calculating the Cost of Goods Sold (COGS) on the Profit and Loss statement, as well as appearing on the Balance Sheet.
Enterprise Performance Management (EPM) refers to the process-based framework and software modules that help businesses manage and improve performance through analysis, planning, monitoring, and control mechanisms. Specifically, EPM encompasses budgeting, forecasting, financial reporting, and scorecarding techniques.
The current replacement cost of an asset, often used in current-value accounting, and compared to exit value.
Equal-Instalment Depreciation, also known as the straight-line method, is a simple and commonly used depreciation method where an asset's cost is evenly spread over its useful life.
Equity accounting refers to a method of accounting whereby a company reports a proportionate share of the undistributed profits and net assets of another company in which it holds a share of the equity.
The equity method is an accounting technique used to record investments in associated undertakings, reflecting the investor's share of the investee's net assets and performance.
EU-adopted IFRS (International Financial Reporting Standards) are the IFRS standards as issued by the International Accounting Standards Board and adopted for use within the European Union. These standards may differ in details from the global IFRS.
The European Financial Reporting Advisory Group (EFRAG) was established in 2001 to advise the European Commission on the use of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) within the EU. It coordinates the views of preparers and users of financial statements as well as accounting professionals and represents these to both the Commission and the International Accounting Standards Board (IASB).
EuroSOX refers to European initiatives, particularly regulatory frameworks, aimed at enhancing and harmonizing financial reporting and disclosure standards across the EU to improve transparency and confidence in financial markets.
Events accounting is a method of accounting wherein data is stored and reported based on specific events, rather than being organized chronologically or by other methods.
This concept outlines the specific circumstances under which a subsidiary may be excluded from consolidation in a parent company's financial statements under the Financial Reporting Standard Applicable in the UK and Republic of Ireland. This ensures the financial statements provide a true and fair view.
Under specific regulations such as the Companies Act and applicable financial reporting standards in the UK and the Republic of Ireland, certain parent companies may be exempt from preparing consolidated financial statements.
The net realizable value of an asset, representing its market price at the balance sheet date, less the selling expenses.
An expenditure code is a unique identifier used in accounting to categorize and record expenses based on their nature and function within an organization, allowing for efficient budgeting and financial reporting.
A draft document issued for public comment and discussion before the final release of a financial reporting standard by a regulatory or standard-setting body like the Financial Reporting Council.
A nonrecurring occurrence that must be explained to shareholders in an annual or quarterly report.
The requirement that financial statements should not be misleading. 'Fair presentation' ensures that financial reports provide a true and fair view of the company's financial position in accordance with accounting standards.
Fair Value Accounting (FVA) refers to the method of valuing assets and liabilities at prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Faithful representation means that financial information accurately reflects the real-world economic events or conditions it represents. This concept is central to the credibility of financial reports and ensures that information is complete, free from bias, and free from error.
The Financial Accounting Standards Advisory Council (FASAC) serves as an advisory body to the Financial Accounting Standards Board (FASB) on matters related to accounting standards, offering broad perspectives from diverse financial communities, ensuring comprehensive and sustainable financial reporting standards.
FIFO, or First In, First Out, is an inventory valuation method where the oldest inventory items are recorded as sold first. This method is commonly used in accounting and finance to manage inventory costs.
A finance lease transfers substantially all the risks and rewards of ownership of an asset to the lessee. In accounting, it is akin to the lessee owning the asset. This entry describes the implications and guidelines involved in finance leases.
The Financial Accounting Foundation (FAF) in the USA oversees and provides funding for the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). It appoints members and supervises the standard-setting process to ensure the integrity and reliability of accounting principles.
In the USA, a council that advises the Financial Accounting Standards Board (FASB) on agenda-setting and accounting standards to ensure the relevance and quality of financial reporting.
The Financial Accounting Standards Board (FASB) is an independent organization that establishes and improves standards of financial accounting and reporting for companies and non-profit organizations in the United States.
The Financial Accounting Standards Board (FASB) is a private, non-governmental organization established in 1973 to develop and issue standards for financial accounting and reporting. These standards are commonly referred to as Generally Accepted Accounting Principles (GAAP).
A financial period, also known as an accounting period, is a specific timeframe within which financial performance is measured and reported for both businesses and individuals. This span is essential for preparing periodic financial statements and evaluating profitability, financial position, and cash flows.
The Financial Reporting Council (FRC) is a UK body set up in 1990 to promote high-quality corporate governance and financial reporting.
Financial Reporting Exposure Draft (FRED) is a document issued by the Financial Reporting Council (FRC) for discussion and debate prior to the issuance of a Financial Reporting Standard (FRS).
A Financial Reporting Exposure Draft (FRED) is a draft published by standard-setting authorities containing proposed changes to financial reporting standards before they are finalized.
A Financial Reporting Release (FRR) is a pronouncement made by the Securities and Exchange Commission (SEC) in the United States on matters of financial reporting policy.
Financial Reporting Releases (FRRs) are official communications issued by the SEC providing guidance on various accounting and auditing matters to ensure transparency and accuracy in financial reporting.
The Financial Reporting Review Panel (FRRP) monitors the accounting practices of public and large private companies in certain jurisdictions to ensure compliance with legal and regulatory financial reporting requirements.
The Financial Reporting Review Panel (FRRP) is an essential entity tasked with upholding the integrity and quality of financial reporting by examining and ensuring compliance with reporting standards.
A detailed overview of FRS 102, an accounting standard issued by the Financial Reporting Council in 2013 to supersede previous UK GAAP, bringing it in line with international standards.
The Financial Reporting Standard for Smaller Entities (FRSSE) was a former accounting standard by the Accounting Standards Board (ASB). It provided simplified financial reporting requirements for small entities.
The Financial Reporting Standard for Smaller Entities (FRSSE) offers a simplified and less burdensome framework tailored to smaller companies, ensuring compliance with financial reporting requirements while reducing complexity and administrative effort.
Financial statements are annual statements summarizing a company's activities over the last financial year, providing a comprehensive overview of its financial health and performance.
Finished goods inventory represents the value of products that have completed the manufacturing process and are ready for sale to customers. This inventory is crucial for accurate financial reporting and operational planning.
A fiscal tax year is a 12-month period used by businesses and organizations for accounting and taxation purposes. Unlike the calendar year, it does not necessarily end on December 31.
Fixed assets are long-term assets used in the operations of a business, such as land, buildings, machinery, and equipment. These assets are essential for production and business operations and are classified in various ways on the balance sheet.
A fixed assets register is a detailed record that keeps track of all the fixed assets owned by an individual or organization. It includes important information such as asset location, purchase details, useful life, and depreciation values, aiding in accurate financial reporting and asset management.
A flash report is a management tool used in the USA to quickly highlight key data points that require corrective action.
Form 20-F is the required Securities and Exchange Commission (SEC) form for non-US companies to file annual results, ensuring transparency and compliance with US regulations.
The method of presenting financial statements chosen by an organization. Incorporated bodies must use the formats prescribed by relevant legislative and regulatory frameworks, such as the Companies Act, for their balance sheet and profit and loss account.
The Fourth Company Law Directive, also known as the Fourth Accounting Directive, was an EU directive established in 1978 to harmonize company law and accounting practices among EU member states.
