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Glossary
Accounting exposure:Increases or decreases in assets and liabilities resulting from
exchange rate movements, which may not be associated with either current or
prospective cash inf lows or outf lows. Accounting exposure is distinguished from
economic exposure where cash inf lows and outf lows are expected to be associated
with exchange rate movements.
Accrual accounting:An accounting method that recognizes revenues as they are
earned and expenses as they are incurred. The timing of revenue and expense
recognition is not tied to the timing of the inf low and outf low of cash. Accrual ac-
counting is seen as essential in order to develop reliable measures of periodic finan-
cial performance.
Acquisition:The purchase—not necessarily for cash—of a controlling interest in a
firm.
Activity-based costing:A process of identifying the different activities that gener-
ate costs.
Adapter:Typically, a small circuit board inside a computer that lets the computer
work with hardware external to the computer. Examples: A network adapter allows a
computer to be hooked into a network; a display adapter allows a computer to drive
(display text, graphics) a computer monitor.
AICPA: The American Institute of Certified Public Accountants. This is the na-
tional professional association of certified public accountants (CPAs).
All-current method:A method of translating foreign-currency financial state-
ments whereby all assets and liabilities are translated at the current (balance sheet
date) exchange rate, contributed capital accounts are translated at historical ex-
change rates (rates in existence when the account balances first arose), and all rev-
enues and expenses are translated at the average exchange rate in existence during
the reporting period. Translation adjustments resulting from f luctuating exchange
rates are accumulated and reported with accumulated other comprehensive income
in shareholders’ equity.
Amortization:the periodic, noncash charge used to reduce an intangible asset.
Application Service Providers (ASP):Companies that rent out applications and
process data for other companies, similar to service bureaus in the 1960s and 1970s.