finacc

Liability

‘a present obligation of the entity to transfer an economic resource as a result of past events’

Provision

a liability of uncertain timing or amount

Contingent liability

• A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or

• A present obligation that arises from past events but is not recognised as the obligation's amount cannot be reliably measured due to the unlikely need for an economic benefit outflow or the inability to accurately measure it.

carrying amount

the amount at which an asset is recognised after deducting accumulated depreciation.

reducing balance method

Formula:  Carrying amount x % rate = depreciation amount

Depreciable amount

the cost of an asset, or other amount substituted for its cost, less its residual value.

Residual value

the estimated amount that an entity would currently obtain from disposal of the asset…at the end of its useful life.

Useful life

the period over which an asset is expected to be available for use by an entity.

Depreciation

the systematic allocation of the depreciable amount of an asset over its useful life.

Assets

‘a present economic resource controlled by the entity as a result of past event that has the potential to produce economic benefits’

Net realisable value (NVR)

‘what is left once you consider proceeds (selling price) minus any costs involved in finishing and selling the inventory’.

Inventories

assets: 

• held for sale in the ordinary course of business; 

• in the process of production for such sale; or 

• in the form of materials or supplies to be consumed in the production process or in the rendering of services.      

equity

• ‘the residual interest in the assets of the entity after deducting all its liabilities.’

• This simply means what is left after taking liabilities away from assets: Equity= assets - liabilities

Income 

• ‘increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims.’

  • It includes revenues and gains.

  • Owners contributing capital can never be considered income.

Expense 

• ‘decreases in assets, or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims’

  • Includes a wide range of expenses as well as losses 

  • Payments to owners can never be considered expenses.