Section A Flashcards
(25 cards)
Define Integrated Reporting
A methodology to disclose financial results along with measures of non-financial performance that support long-term value in a way that shows the interrealation among the two
Primary Purpose of Integrated Reporting
To improve corporate reporting by demonstrating an understanding of the relationship between financial and non-financial performance measures
Six types of Capital
Natural, Human, Financial, Physical, Intellectual, and Social
Define Gains
Increase in equity (net assets)
Define Losses
Decrease in equity (net assets)
Where are gains and losses reported?
Gains and Losses are usually reported in the income statement at net amount and added or subtracted from operating income
Define Comprehensive Income
The change in equity of a business enterprise during a period of transactions and other events and circumstances from non-owner sources
Define Budgetary Slack
The practice of underestimating budgeted revenue and /or overestimating costs to easily achieve targeted amounts
Budgetary Slack and Goal Congruence
Budgetary slack leads to sub-optimal decisions and is detrimental to the goals of the company as a whole
Define multiple regression equation
An equation that is affected by more than one independent variable
Benefits of Regression Analysis
The use of of regression analysis is quantitative and objective
Regression analysis is a useful tool in separating mixed costs into variable and fixed costs for budgeting purposes
Shortcomings of Regression Analysis
Regression analysis cannot be used if historical data is not available.
Even if historical data is available, the use of regression analysis will be obsolete if the data are not relevant to the company’s current situation
Six types of budgeting methodologies
Annual or Master Budgets Project Budgeting Activity-Based Budgeting Zero-Based Budgeting Continuous (Rolling) Budgets Flexible Budgets
Define Pro-forma Income Statement
Financial statement that presents the company’s expected profit for the period
Define Pro-forma Balance Sheet
Statement of company’s representation of the company’s expected financial position for the upcoming year.
Define Pro-forma Statement of Cash Flows
Statement of cash flows identifies the future sources and uses of cash
Define standard cost system
A system for applying standard cost into the accounting system
Reasons to Adopt Standard Cost System
The standard cost system is useful in planning such as budgeting and developing project bids
For control purposes the implementation of a standard cost system results in the comparison of actual and standard costs enabling variance analysis
Standard costs provide immediately available cost information, which is useful in pricing decisions
Define transfer pricing
The setting of transfer price for a transfer within an organization
Define Return on Investment
The fundamental performance measure of an investment center
Define ResIsidual Income
Is the excess of income over the desired return
Define Key Performance Indicators
The leading performance metrics that are the most relevant to an organization’s strategy
Define Balanced Scorecard
The concept of incorporating the mission and strategy of an organization into performance measures
Four perspectives of Balanced Scorecard
Financial Perspective
Customer Perspective
Internal Business Process Perspective
Learning and Growth Perspective
