198 Accounting: Business Reporting for Decision Making
Financial asset Cash, a contractual right to receive cash or another financial asset, a contractual
right to exchange financial instruments with another entity under conditions that are potentially
favourable, or an equity instrument of another entity calculated as the excess of the consideration
paid for a business over the fair value of the net assets at acquisition date.Financial liability Liability that is a contractual obligation to deliver cash or another financial asset
to another entity or a contractual obligation to exchange financial assets or financial liabilities with
another entity under conditions that are potentially unfavourable to the entity.Financing decisions Decisions involving the mix of debt and equity financing chosen by the entity.
Fulfilment value Present value of the cash flows that an entity expects to incur to satisfy
a liability.
General purpose financial statements Financial statements prepared to meet the information needs
common to external users who are unable to command the preparation of statements tailored to their
needs.Generally accepted accounting principles (GAAP) A set of rules and practices, having substantial
authoritative support, that guide financial reporting.
Goodwill An unidentifiable intangible asset (e.g. an established client base or reputation).
Group (economic entity) Parent entity and all its subsidiaries.
Historical cost Original amount paid or expected to be received for an item.
Identifiable intangible assets Intangible assets that can be identified (e.g. trademarks, brand names,
patents, rights, agreements, development expenditure, mastheads, licences).
Impairment When an asset’s carrying amount exceeds its recoverable amount.
Intangible assets Non-current, non-monetary assets that do not have physical substance.
Inventories Supplies of raw materials to be used in the production process, work-in-progress and/or
the finished goods the entity has available for sale.
Investing decisions Decisions involving (a) the acquisition and sale of investments and productive
non-current assets using cash, and (b) lending money and collecting on those loans.
Investments accounted for using the equity method Carrying value of investments in another
entity where the investing entity has the capacity to significantly influence (not control) the
investee entity.Liability Present obligation of the entity arising from past events, the settlement of which is expected
to result in an outflow from the entity of resources embodying economic benefits.
Liquidity Ability of an entity to meet its short-term financial commitments.
Monetary concept Use of money as the basis of quantifying items in financial statements.
Net realisable value Expected selling price less the expected costs associated with getting the
inventory to a saleable state, plus the costs of marketing, selling and distribution.
Non-controlling interests Claim on the net assets of the entity that belongs to the shareholders of an
entity other than parent entity shareholders.
Non-current assets Assets not expected to be consumed or sold within one year or one operating
cycle.
Non-current liabilities Obligations expected to be paid after one year or outside one normal operating
cycle.
Operating cycle Length of time it takes for an entity to acquire and sell goods and collect the cash
from the sale.
Paid-up share capital Total amount paid by shareholders for shares issued in the company.
Parent entity Entity that controls another entity.
Property, plant and equipment Long-term assets that have physical substance, are used in the
operations of the entity and are not intended for sale to customers.
Provisions Liability class involving more uncertainty regarding the monetary value to be assigned to
the future sacrifice of economic benefits.