632 Glossary
Foreign Corrupt Practices Act of 1997:The law that explicitly prohibits the
bribery of foreign governments or political officials and requires firms to keep accu-
rate and detailed records of company financial activities and maintain an adequate
system of internal controls.
Foreign currency transaction:Any transaction (e.g., the sale or purchase of in-
ventory, the lending or borrowing of money) that creates a balance-sheet account that
is denominated in foreign currency. Examples include foreign-currency denominated
receivables and loans, and foreign-currency denominated payables and long-term
debt.
For m S-1: The standard form which is to be completed by a registrant and filed
with the Securities and Exchange Commission in connection with an IPO (and with
many other public offerings).
Forms 10-K, 10-Q, 8-K: Principal periodic reports filed by most companies regis-
tered under the Securities Acts.
Forms SB-1 and SB-2:Forms for filing an IPO or other public offering with the Se-
curities and Exchange Commission for certain small business issuers.
Forward:A contract in which two parties agree to a deferred transaction. One party
is obligated to deliver an underlying asset or commodity; the other party is obligated
to take delivery and pay for it. The terms of the deferred transaction are fully speci-
fied in the for ward contract.
Forward exchange contract: A privately negotiated agreement to purchase for-
eign currency for future receipt or to sell foreign currency for future delivery. The
amount of foreign currency, the rate of exchange, and the future date of settlement
are established at the time the contract is made.
Forward exchange rate:Rate at which currencies are to be exchanged at future
dates.
Functional currency:The currency of the primary economic environment in
which the entity operates. Typically, this is the currency of the environment in which
it generates and expends cash. The functional currency may be the U.S. dollar and not
the local currency of the foreign country.
Futures contract:An exchange-traded instrument with a preestablished expiration
date, whose market value is linked to the relative exchange rates between two cur-
rencies. A futures contract can be purchased (a long position), resulting in a gain if
the foreign currency appreciates and a loss if it depreciates. A contract can also be
sold (a short position), resulting in a gain if the foreign currency depreciates or a loss
if it appreciates.
GAAP:See generally accepted accounting principles.
Generally accepted accounting principles: The body of standards, rules, proce-
dures, and practices that guide the preparation of financial statements. For commer-
cial firms, the primary bodies involved with adding to or modifying existing GAAP
are the Financial Accounting Standards Board, the American Institute of Certified
Public Accountants, and the Securities and Exchange Commission.
Geographical information system:A computer application that uses a mapping
system display on a terminal or a printer. Data, such as sales data or census data, is
overlaid over the geographical information for decision-making purposes.