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Файл:Стандарты финансовой отчетности в корпоративном бизнесе. Учебное пособие на английском языке
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Authorized share capital – the maximum amount of a particular type of
share in a particular company that may be issued. It may be interesting information to shareholders as it puts a limit on the number of co-owners.
Average cost (AVCO) – in the context of inventory valuation, a method
of determining the historical cost of a particular type of inventory. As its name
suggests, the cost of any unit of inventory or material used is deemed to be the
average of the unit costs at which the inventory was bought. The average can
be worked out at set intervals or each time there is a further purchase.
Balance sheet – a snapshot of the accounting records of assets, liabilities
and equity of a business at a particular moment, most obviously the accounting
year end. The balance sheet is the longest established of the main financial
statements produced by a business. As its name suggests, it is a sheet of the
balances from the doubleentry system at a particular time. It is important to
note that it is probably neither a snapshot of what the business is worth nor of
what the separate assets are worth. This is because not all the business’s items
of value are recognized by accountants as assets, and because the asset valuation methods used are normally based on past costs rather than on present market values. As part of an attempt to give the balance sheet more meaning, the
IASB proposes to adopt the term ‘statement of financial position’ instead.
Big Four (formerly Big Eight, then the Big Six, then Big Five) – an
expression used to describe the world’s largest accounting firms, which have
offices virtually throughout the world. In alphabetical order these are:
– Deloitte Touche Tohmatsu
– Ernst & Young
– KPMG (Klynveld Peat Marwick Goerdeler)
– PricewaterhouseCoopers
Business combinations – acquisitions or mergers involving two or more
business entities.
Capital employed – the aggregate finance used by a business. Sometimes
the expression is used to refer to the total of all liabilities and capital; sometimes
it means ‘net capital employed’; that is, it excludes current liabilities.
Capital lease – US term for finance lease.
Capitalization – the inclusion of an item in a balance sheet. See, also,
recognition.
Cash flow – sometimes used to refer very loosely to the amount of cash
coming into or out of a business in a particular period.
Cash flow statements – financial statements that concentrate on the
movement of cash in the year, rather than using the accruals basis.
Closing rate method – UK term for the method of foreign currency
translation, whereby the balance sheet items of a subsidiary are translated at
the balance sheet rate, and the income statement items translated at that rate or
at the average for the period.
Common stock – US term for the ordinary shares in a corporation. Normally a majority of the ownership capital will comprise issues of common
stock, though preference / preferred shares are also issued.
Comprehensive income – all the gains and losses recorded for a period,
not just those realized.
Conservatism – the fundamental and ancient accounting concept that accountants should, when in doubt, show the worse picture rather than the better.
Conservatism requires that assets should be shown at the lowest of all reasonable values; that all foreseeable losses should be accounted for immediately, but
that profits should never be recorded until they become realized. The IASB
uses the word ‘prudence’ and does not give the concept a high status.
Consistency – the concept that a company should use the same rules of
measurement and valuation from item to item and from year to year in its financial statements. A company may be allowed to change in special circumstances, such as an alteration in accounting standards, but the change should
always be disclosed in the annual report.
Consolidated financial statements – a means of presenting the position
and results of a parent and its subsidiary companies as if they were a single
entity. Consolidation ignores the separation of parents and subsidiaries due to
legal and geographical factors; it accounts for the group of companies as if
they were a single entity. Approximately, the financial statements of all the
companies in a group are added together, with adjustments to extract intragroup trading and indebtedness.
Contingent liabilities – possible future obligations or present obligations
that are remote or unquantifiable. They are not accounted for, in the sense of
adjusting the financial statements, but are explained in the notes to the balance
sheet.
Creditor – a ‘truster’, i.e. someone to whom a business owes money. The
US expression is accounts payable. Creditors are generally created by purchas-
es ‘on credit’ but would include tax bills. Short-term creditors are included
under ‘current liabilities’ on a balance sheet; they are expected to be paid with-
in the year. ‘Long-term’ creditors are those who are not expected to be paid
within the year.
Current asset – an asset on a balance sheet that is not intended for continuing use in the business, or that is expected to turn into cash within one
year. Such assets include inventories, accounts receivable (US) / debtors (UK),
and cash. Also, a balance sheet may include current asset investments.
Current cost accounting (CCA) – one of many possible systems designed to adjust accounting for changing prices. It is often included under the
generic heading inflation accounting, although its normal form does not involve adjustments for inflation but for specific price changes relating to the
business’s assets.
Current liabilities – generally, those amounts on a balance sheet that are
expected to be paid by the business within a year. Thus they will include trade
creditors (UK)/accounts payable (US), certain tax liabilities, and declared dividends.
Current purchasing power accounting (CPP) – a UK term for the
method of adjusting historical cost accounting financial statements to take account of inflation. The US equivalent is general price level adjusted or constant
dollar.
Current rate method – the US term for a method of foreign currency
translation. The UK term is closing rate method, although this implies some
greater flexibility in the choice of rates.
Current ratio – the current assets divided by the current liabilities of an
entity at a particular date.
Debtors – in a balance sheet, debtors are usually mostly trade debtors,
i.e. customers who have not yet paid cash. The US terminology is accounts
receivable. Such amounts are shown as current assets because they are generally expected to be paid within a year. In a balance sheet, debtors are valued at
what they are expected to pay to the business, bearing in mind the principle of
conservatism.
Deferred tax – the tax related to temporary differences between the financial reporting value of an asset or liability and its tax basis.
Depreciation – a charge against the revenues of a period to represent the
wearing out, usage or consumption of non-current (fixed) assets in that period.
So, machinery and equipment, vehicles and buildings are generally depreciated, although land normally is not. The technique of depreciation means that
accountants do not charge the whole cost of a fixed asset against the revenues
of the year of purchase, but they charge it gradually over the years of the use
and wearing out of the asset.
Discounted cash flow (DCF) – future cash flows, adjusted to take ac-
count of their timing. Such ‘discounted’ cash flows are used when making
investment choices between competing projects. The most reliable method of
deciding which project is best and whether any particular one is worth doing is
to work out each project’s net present value (NPV) by adding up all the dis-
counted expected net cash flows. The NPV calculation will include the outflow
of the initial investment. A project with a positive NPV is worth doing; the
project with the highest NPV is the best.
Dividend – a payment by a company to its shareholders out of the profits
made by the company.
Earnings – a technical accounting term, meaning the amount of profit
(normally for a year) available to the ordinary shareholders (UK)/common
stockholders (US). That is, it is the profit after all operating expenses, interest
charges, taxes and dividends on preferred/preference stock.
Earnings per share (EPS) – the most recent year’s total earnings divid-
ed by the average number of ordinary/common shares outstanding in the year.
Efficient market hypothesis – an elegant and important theory, usually
applied to the price of shares on large stock exchanges, that all publicly available information is immediately taken into account in the price of shares. In
markets such as the New York or London stock exchanges there are many
buyers and sellers of shares, the prices are well known, and much other information is freely available. In such cases, one would expect that new relevant
information about a company would very rapidly affect its share price.
Equity – an element of the balance sheet showing the owners’ interests.
It is equal to the total assets minus the total liabilities.
Equity method – a method used, particularly as part of the preparation of
consolidated financial statements, for the inclusion of associates (those com-
panies over which a group has ‘significant influence’ but not a controlling in-
terest) and for some joint ventures.
Exceptional items – a UK expression for those items in a profit and loss
account that are within the ordinary activities of the business but are of unusual
size. The treatment for these is to disclose them separately in the account or the
notes to it. Such items are to be distinguished from extraordinary items.
Extraordinary items – gains or losses that are outside the ordinary activities of the business, are of material size, and are not expected to recur. The
narrowness of interpretation of this expression differs greatly internationally.
Under IASB rules, such a category is no longer shown.
Fair value – the amount that willing buyers and sellers would exchange
something for in a market at arm’s length. For example, assets and liabilities of
new subsidiaries are brought into consolidated accounts at fair values rather
than book values. This is designed to be an estimate of their cost to the group
at the date of acquisition of a subsidiary.
FEE – the Fédération des Experts Comptables Européens, a Brusselsbased body of European professional accountancy institutes.
FIFO (first-in, first-out) – a common assumption for accounting purposes about the flow of items of raw materials or other inventories. It need not
be expected to correspond with physical reality but may be used for accounting
purposes. The assumption is that the first units to be received as part of inventories are the first ones to be used up or sold. This means that the most recent
units are deemed to be those left at the period end. When prices are rising, and
assuming a reasonably constant purchasing of materials, FIFO leads to a fairly
up-to-date closing inventory value figure.
Finance lease – a contract that transfers the majority of risks and rewards
of an asset to the lessee.
Financial instrument – a contract involving the creation of a financial asset of one entity and a financial liability or equity instrument of another entity.
Fiscal year – US expression for the period for which companies prepare
their annual financial statements. The majority of US companies use 31 December as the fiscal year end, which corresponds with the year end for tax purposes. In the United Kingdom, the expression ‘fiscal year’ means tax year.
Fixed assets – the assets that are to continue to be used in the business,
such as land, buildings and machines, and certain intangible assets and investments. The complement is current assets. An equivalent IASB or US expression is ‘non-current assets’.
Gearing – a measurement of the degree to which a business is funded by
loans rather than shareholders’ equity. The US expression is leverage.
Generally accepted accounting principles (GAAP) – a technical term,
particularly used in the United States, to include the accounting standards of
the Financial Accounting Standards Board, and extant rules of predecessor
bodies. Also included are the rules of the securities and exchange commission
(SEC).
General price level adjusted accounting (GPLA) – a US term for a system of adjusting historical cost accounting by price indices to take account of
inflation. It is also called constant dollar accounting or, in the United Kingdom, current purchasing power accounting.
Going concern – an important underlying concept in accounting practice.
The assumption for most businesses is that they will continue for the foreseeable future. This means that, for most purposes, the break-up or forced-sale value of the assets is not relevant.
Goodwill – the amount paid for a company in excess of the fair value of
its net assets at the date of acquisition. Goodwill exists because a going concern business is usually worth more than the sum of the accounting values of
its identifiable net assets. This may be looked upon as its ability to earn future
profits above those of a similar newly formed company, or it may be seen as
the ‘goodwill’ of customers, the established network of contacts, loyal staff,
skilled management, and so on.
Group accounts – UK expression for consolidated financial statements.
Historical cost accounting – the conventional system of accounting,
widely established throughout the world except in some countries where inflation is endemic and high. Even in the latter countries, the general price level
adjusted system is a set of simple adjustments carried out annually from historical cost records.
Holding company – a company that owns or controls others. In the narrow use of the expression, it implies that the company does not actively trade
but operates through various subsidiaries.
IFRS – when used collectively, all the extant accounting standards and
interpretations issued by the IASB and its predecessor.
Impairment – the loss of value of an asset below its book value (i.e.
generally its depreciated cost). Under IAS 36 this is measured by comparing
the book value with the recoverable amount (usually the discounted cash flows
expected from the asset).
Income statement – the statement of revenues and expenses of a particular period, leading to the calculation of net income or net profit. The format of
the income statement is either ‘vertical’/‘statement’ form or ‘horizontal’/‘twosided’/‘account’ form. The equivalent UK statement is the profit and loss ac-
count.
Inflation accounting – usually interpreted as encompassing all sorts of
systems that might adjust or replace historical cost accounting to take account
of changing prices.
Intangible assets – assets, such as goodwill or patents, that are not physical or tangible.
Interim dividend – dividend payment based on the profits of less than a
full accounting period.
Interim report – a half-yearly or more frequent report generally from
companies listed on a stock exchange.
International Accounting Standards Board (IASB) – the standard setting body set up in 2001 by the International Accounting Standards Committee
Foundation, a private sector trust.
International Accounting Standards Committee (lASC) – an organization whose purpose was to devise and promulgate international standards in
order to reduce the variation of practices in financial reporting throughout the
world. It was founded in 1973 by accountancy bodies and replaced in 2001 by
the IASB.
International Federation of Accountants (IFAC) – a body comprising
representatives from the accountancy professions of many nations. It was
formed in 1977, and is based in New York. Its largest task is the organization
of the four-yearly World Congresses of Accountants. It also has committees
that promote international harmonization of auditing and management accounting. However, it leaves the area of accounting standards to the IASB.
International Financial Reporting Interpretations Committee
(IFRIC) – a subsidary committee of the IASB that issues interpretations of
standards.
Inventories – raw materials, work-in-progress and goods ready for sale.
In the United Kingdom, the word ‘stocks’ is generally used instead.
Investment properties – properties held by a business for investment or
rental income, rather than for owner-occupation or as inventory.
Lease – a contract whereby one party (the lessor) agrees to give the use
of an asset to another party (the lessee) in exchange for a rental payment.
Leverage – US term for the degree to which a business is funded by
loans rather than by shareholders’ equity. The equivalent UK expression is
gearing.
Liabilities – present obligations of an entity, arising from past events, the
settlement of which is expected to result in an outflow of resources (usually
cash). Most liabilities are of known amount and date. They include long-term
loans, bank overdrafts and amounts owed to suppliers. There are current and
non-current liabilities. The former are expected to be paid within a year from
the date of the balance sheet on which they appear. Most measures of liquidity
include knowing the total of current liabilities; net current assets is the difference between the current assets and the current liabilities. Liabilities are valued
at the amounts expected to be paid at the expected maturity date. In some cases, amounts that are not quite certain will be included as liabilities (provisions); they will be valued at the best estimate available.
LIFO (last-in, first-out) – one of the methods available under US rules
(but not under IAS 2) for the calculation of the cost of inventories, in those
frequent cases where it is difficult or impossible to determine exactly which
items remain or have been used. When prices are rising, LIFO will lead to
more up-to-date values for the use of inventory in cost of sales and, thus, lower
profits. Therefore, it is popular with many companies in Germany, Italy and
the United States, where it is allowed for tax purposes. However, an inventory
value shown in a balance sheet may be seriously misleading as it can be based
on very old prices.
Materiality – a concept in IASB accounting that rules need not be strictly applied to unimportant amounts and that financial statements should not be
swamped by unimportant items. For example, some companies may have very
small amounts of a particular revenue, expense, asset or liability; if such an
account would normally be shown in the financial statements, it nevertheless
need not be if it is immaterial in size. This will help to make the statements
clearer, by omission of trivial amounts. Materiality is also to be seen at work in
the extensive rounding of numbers in financial statements. Similarly, a strictly
correct measurement or valuation method may be ignored for immaterial
items. There is no precise definition of what is material. However, an item is
immaterial if omission or mistreatment of it would not alter a reader’s assess-
ment of the financial statements. As a rule of thumb, this might be expressed
as a few per cent of sales or profit.
Measurement – the calculation of the value of an item to be recorded in
a financial statement.
Merger accounting – a method of accounting for a business combination. In the United States it was (until 2001) in fairly common use, under the
name of pooling of interests, under which heading more details may be found.
Minority interests – the capital provided by group shareholders who are
not parent company shareholders. Many subsidiary companies are not fully
owned by the parent company. This means that they are partly owned by ‘minority’ shareholders outside the group. In the preparation of consolidated fi-
nancial statements, accountants bring in 100 per cent of all assets, liabilities,
expenses and revenues of subsidiaries. This is because the group fully controls
the subsidiary, even if it does not fully own it. In such financial statements, the
subsidiary is subsumed into the rest of the group, and the capital provided by
the minority shareholders is separately recognized as part of the capital of the
group under the heading ‘minority interests’. This amount grows each time the
relevant subsidiary makes a profit that is not distributed. In the consolidated
income statement, the share of the group profit owned by minorities is also
shown separately. In IFRS, these items are now referred to as non-controlling
interests.
Net assets – the total of all the recorded assets less the liabilities that are
ever, in reality, a business is nearly always worth more than its net assets, because accountants will generally have been using historical cost accounting as
a measurement basis, and because important assets such as the goodwill of
customers will have been excluded due to the conservatism and money measurement conventions. Thus, the market capitalization of a company will nearly
always be greater than its accounting ‘net assets’.
Net current assets – the net current assets or working capital of a business is the excess of the current assets (such as cash, inventories and debtors/accounts receivable) over the current liabilities (such as trade creditors and
overdrafts). This is a measure of the extent to which a business is safe from
liquidity problems. See also current ratio.
Net income US = Net profit UK expression for the excess of all the revenues over all the expenses of a business for a period. The profit and loss account of a business will show the net profit before tax and the net profit after
tax. The profit is then available for distribution as dividends or for transfer to
various reserves. After any dividends on preference shares have been deducted, the figure may be called earnings.
Net realizable value (NRV) – the amount that could be raised by selling
an asset, less the costs of the sale. Normally, NRV implies a sale in the normal
course of trade; thus, there would also be a deduction for any costs to bring the
asset into a saleable state.
Nominal value – most shares have a nominal or par value. This is little
more than a label to distinguish a share from any of a different value issued by
the same company. Normally, the shares will be currently exchanged at above
the nominal value, and the company will consequently issue any new shares at
approximately the market rate. dividends may be expressed as a percentage of
nominal value; and share capital is recorded at nominal value, any excess being recorded as share premium.
Non-controlling interests – see minority interests.
Non-current assets – see fixed assets.
Off-balance sheet finance – an entity’s obligations that are not recorded
on its balance sheet.
Ordinary shares – the normal type of shares, called common stock in
the United States. They can be distinguished from preference shares.
Own shares – shares in a company bought back by the company from its
shareholders. In the United States, own shares are called treasury stock.
Paid-in surplus – US expression for share premium.
Par value – the normal US expression for nominal value.
Parent – an entity that controls another (the subsidiary).
Pay-back method – a popular technique for appraising the likely success
of projects, or for choosing between projects. It involves the analysis of their
expected future net cash inflows, followed by a calculation of how many years
it will take for the original capital investment to be recovered.
Pooling of interests – a method of accounting for business combinations.
The UK equivalent term is ‘merger accounting’. The ‘acquisition’ or ‘purchase’ method of preparing consolidated financial statements is now used for
all combinations under IFRS or US rules.
Preferred stock (US) / preference shares (UK) – shares normally having preference over ordinary shares/common stock for dividend payments and
for the return of capital if a company is wound up. That is, ordinary/common
dividends cannot be paid in a particular year until the preference/preferred
dividend (generally including arrears), which is usually a fixed percentage, has
been paid.
Present value – the value(s) of something reduced by a discount rate to
allow for the time value of money.
Private limited company – a company that is not allowed to create a
market in its securities. Such companies have special letters after their names,
such as Ltd, GmbH, Sarl, BV, Srl. They are to be distinguished from public
limited companies. In most countries where this distinction exists, private
companies are much more numerous than public companies. Rules of disclosure, audit, profit distribution, etc. may be less onerous for private companies.
Profit and loss account – the UK expression for the financial statement
that summarizes the difference between the revenues and expenses of a period.
Such statements may be drawn up frequently for the managers of a business,
but a full audited statement is normally only published for each accounting
year. The equivalent US expression is income statement.
Proportional (or proportionate) consolidation – a technique, used as
part of the preparation of consolidated financial statements for a group of
companies, that brings into the consolidated financial statements the group’s
share of all the assets, liabilities, revenues and expenses of the partly owned
company.
Provision – a liability of uncertain timing or amount. However, the word
is also used in the UK to mean an allowance against the value of an asset.
A reserve, on the other hand, is an amount voluntarily or compulsorily set
aside out of profit (after it has been calculated), often in order to demonstrate
that the amount is not to be distributed as dividends. US usage of the words is
also loose.
Prudence – a concept found in the accounting practices of nearly all
countries. It implies being cautious in the valuation of assets or the measurement of profit. It means taking the lowest reasonable estimate of the value of
assets, anticipating losses but not profits. In the United States, ‘conservatism’
is the word generally used for this concept.
Public limited company – a company whose securities (shares and loan
stock) may legally be publicly traded. In the United States the nearest equivalent is a corporation that is registered with the securities and exchange commission. Often, the expression ‘public company’ is used loosely to mean companies that actually have traded shares.
Quarterly reporting – abbreviated financial statements.
Realization convention – a well-established principle of conventional
accounting, that gains or profits should only be recognized when they have
been objectively realized by some transaction or event. This is consistent with
the concept of conservatism, which anticipates losses but never profits.
Receivables – the IASB and US expression for amounts of money due to
a business; often known as accounts receivable. The UK term is debtors.
Recognition – the process of incorporating an item in a financial statement.
Reducing balance depreciation – a technique of calculating the depreciation charge, usually for machines, whereby the annual charge reduces over
the years of an asset’s life. A fixed percentage depreciation is charged each
year on the cost (first year) or the undepreciated cost (subsequent years).
Replacement cost accounting – a system of preparing financial statements in which all assets (and expenses relating to them, such as depreciation)
are valued at current replacement costs.
Reserves – UK term for undistributed gains. These include accumulated
profits and revaluations. There is no equivalent US term. Reserves should be
distinguished from provisions, which are charged in the calculation of profit,
and represent liabilities. Of course, neither reserves nor provisions are amounts
of cash. Reserves belong to shareholders and are part of a total of shareholders’ equity, which also includes share capital.
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