Definitions - Chapter 1

Frage	Antworten
PAE	Publicly Accountable Enterprise; a company that either: 1. has securities (debt, equity, both) issued to the public (or in the process of issuing) 2.a for-profit, private enterprise holding assets in a fiduciary capacity as a primary business
Fiduciary Enterprise	Any org that acts in a trusteeship capacity for members of the public. Ex. investment funds, mutual funds, privately-owned banks
Functional Currency	Currency in which most of a company's transactions are conducted
Presentation Currency	Currency in which financial statements are presented
Private Enterprise	Neither issues debt or equity securities to the public, nor is in the process of doing so. Also does not hold assets in a fiduciary capacity as a primary business.
SME	Small and Medium-sized Enterprises. A way a private company is often referred to.
Private Placements	A way for private enterprises to obtain substantial capital. Arranged via direct negotiation with one or more suppliers of capital (pension funds, investment funds, major banks)
DBA	Disclosed Basis of Accounting is when non-GAAP accounting policies are used. Use is normally included in an accounting policy note.
Covenant	Loan requirement. Also called maintenance tests.
General Purpose Financial Reporting	Financial reporting for the general public; potential interest group is large and diverse
Control Block	Group of voting shares that gives control to a small group of shareholders
Restricted Shares	Shares with limited voting power
External Users	All non-management users of financial statements including: investors, creditors, employees
Preparers	Managers who make decisions in the three judgemental aspects of applying accounting standards. Manager = preparer.
High-Quality Earnings	When there is a high correlation between the operating cash flow per share and the earnings per share
Low-Quality Earnings	When operating cash flow per share and earnings per share differ significantly
Income Tax Deferral	A common objective of private companies
Shareholder's Agreements	In private companies they contain provisions that affect the valuation of shares if a shareholder decides to sell.
Stewardship Reporting	Focuses on showing the financial statement reader how the resources entrusted to management's care were managed.
Big Bath	If there will be an operating loss anyway, a company may load as many other losses into the year as possible. Maximizing loss to in a single year as part of a long-run strategy to maximize earnings.
Minimum Compliance	Motivation of managers to reveal as little as possible while still complying with GAAP.
Expanded Disclosure	Opposite of minimum compliance. Disclosing a great deal of info not required by GAAP.
Convergence Project	A project to eliminate the differences between FASB and ISAB.

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Definitions - Chapter 1

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