12-month expected credit losses

12-month expected credit losses – The portion of lifetime expected credit losses that represent the expected credit losses that result from default events on a financial instrument that are possible within the 12 months after the reporting date.

 

 

 

 

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Accounting policies

Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

 

 

 

 

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Acquiree

The business or businesses that the acquirer obtains control of in a business combination.

 

 

 

 

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Active market

A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

 

 

 

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Actuarial gains and losses

Definitions relating to defined benefit cost

Actuarial gains and losses are changes in the present value of the defined benefit obligation resulting from:
(a) experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and
(b) the effects of changes in actuarial assumptions.

 

 

 

 

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Agricultural activity

Agricultural activity is the management by an entity of the biological transformation and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets.

 

 

 

 

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Amortisation

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life¹.

1 In the case of an intangible asset, the term ‘amortisation’ is generally used instead of ‘depreciation’. The two terms have the same meaning.

OR

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

 

 

 

 

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Amortised cost of a financial asset or financial liability

The amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.

 

 

 

 

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Antidilution

Antidilution is an increase in earnings per share or a reduction in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions.

 

 

 

 

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Asset

An asset is a resource:

  1. controlled by an entity as a result of past events; and
  2. from which future economic benefits are expected to flow to the entity.

 

 

 

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Asset ceiling

Definitions relating to the net defined benefit liability (asset)

The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

 

 

 

 

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Assets held by a long-term employee benefit fund

Definitions relating to the net defined benefit liability (asset)

Assets held by a long-term employee benefit fund are assets (other than non-transferable financial instruments issued by the reporting entity) that:

  1. are held by an entity (a fund) that is legally separate from the reporting entity and exists solely to pay or fund employee benefits; and
  2. are available to be used only to pay or fund employee benefits, are not available to the reporting entity’s own creditors (even in bankruptcy), and cannot be returned to the reporting entity, unless either:
    1. the remaining assets of the fund are sufficient to meet all the related employee benefit obligations of the plan or the reporting entity; or
    2. the assets are returned to the reporting
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Associate

An associate is an entity over which the investor has significant influence.

 

 

 

 

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Bearer plant

A bearer plant is a living plant that:

  1. is used in the production or supply of agricultural produce;
  2. is expected to bear produce for more than one period; and
  3. has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.

(Paragraphs 5A–5B of IAS 41 elaborate on this definition of a bearer plant.)

 

 

 

 

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Biological transformation

Biological transformation comprises the processes of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset.

 

 

 

 

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Borrowing costs

Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.

 

 

 

 

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Business

An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities.

 

 

 

 

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Business combination

A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as ‘true mergers’ or ‘mergers of equals’ are also business combinations as that term is used in this IFRS (editor: IFRS 3).

 

 

 

 

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Call option

An option contract that gives the holder the right (but not the obligation) to purchase a specified amount of the underlying asset at the given strike price, on or before the expiration date of the contract.

 

 

 

 

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Carrying amount

Carrying amount is the amount at which an asset is recognised after deducting any accumulated depreciation (amortisation) and accumulated impairment losses. (IAS 40 5, IAS 41 8)

OR

Carrying amount is the amount at which an asset is recognised after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon. (IAS 16 8, IAS 36 6, IAS 38 8)

 

 

 

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Cash

Cash comprises cash on hand and demand deposits.

 

 

 

 

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Cash equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

 

 

 

 

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Cash flows

Cash flows are inflows and outflows of cash and cash equivalents.

 

 

 

 

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Cash-generating unit

A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

 

 

 

 

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Cash-settled share-based payment transaction

A share-based payment transaction in which the entity acquires goods or services by incurring a liability to transfer cash or other assets to the supplier of those goods or services for amounts that are based on the price (or value) of equity instruments (including shares or share options) of the entity or another group entity.

 

 

 

 

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Change in accounting estimate

A change in accounting estimate is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors.

 

 

 

 

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Close members of the family

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

  1. that person’s children and spouse or domestic partner;
  2. children of that person’s spouse or domestic partner; and
  3. dependants of that person or that person’s spouse or domestic partner.

 

 

 

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Closing rate

Closing rate is the spot exchange rate at the end of the reporting period.

 

 

 

 

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Compensation

Compensation includes all employee benefits (as defined in IAS 19 Employee Benefits) including employee benefits to which IFRS 2 Share-based Payment applies. Employee benefits are all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of the entity. Compensation includes:

  1. short-term employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profit-sharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for
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Component of an entity

Operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.

 

 

 

 

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Consolidated financial statements

Consolidated financial statements are the financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.

 

 

 

 

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Constructive obligation

A constructive obligation is an obligation that derives from an entity’s actions where:

  1. by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and
  2. as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.

 

 

 

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Contingent asset

A contingent asset is a possible asset 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.

 

 

 

 

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Contingent consideration

Usually, an obligation of the acquirer to transfer additional assets or equity interests to the former owners of an acquiree as part of the exchange for control of the acquiree if specified future events occur or conditions are met. However, contingent consideration also may give the acquirer the right to the return of previously transferred consideration if specified conditions are met.

 

 

 

 

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Contingent liability

A contingent liability is:

  1. 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
  2. a present obligation that arises from past events but is not recognised because:
    1. it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
    2. the amount of the obligation cannot be measured with sufficient reliability.

 

 

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Contingently issuable ordinary shares

Contingently issuable ordinary shares are ordinary shares issuable for little or no cash or other consideration upon the satisfaction of specified conditions in a contingent share agreement.

 

 

 

 

 

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Contract

An agreement between two or more parties that creates enforceable rights and obligations.

 

 

 

 

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Contract asset

An entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time (for example, the entity’s future performance).

 

 

 

 

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Contract assets

Those rights that IFRS 15 Revenue from Contracts with Customers specifies are accounted for in accordance with this Standard for the purposes of recognising and measuring impairment gains or losses.

 

 

 

 

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Contract liability

An entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.

 

 

 

 

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Contractual service margin

A component of the carrying amount of the asset or liability for a group of insurance contracts representing the unearned profit the entity will recognise as it provides services under the insurance contracts in the group.

 

 

 

 

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Control of an investee

An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

 

 

 

 

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Corporate assets

Corporate assets are assets other than goodwill that contribute to the future cash flows of both the cash-generating unit under review and other cash-generating units.

 

 

 

 

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Cost

Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the specific requirements of other IFRSs, eg IFRS 2 Share-based Payment.

 

 

 

 

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Cost approach

A valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost).

 

 

 

 

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Costs of disposal

Costs of disposal are incremental costs directly attributable to the disposal of an asset or cash-generating unit, excluding finance costs and income tax expense.

 

 

 

 

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Costs to sell

Costs to sell are the incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs and income taxes.

 

 

 

 

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Coverage period

The period during which the entity provides coverage for insured events. This period includes the coverage that relates to all premiums within the boundary of the insurance contract.

 

 

 

 

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Credit loss

The difference between all contractual cash flows that are due to an entity in accordance with the contract and all the cash flows that the entity expects to receive (ie all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). An entity shall estimate cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument. The cash flows that are considered shall include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. There is a presumption that the expected life of a … Read more

Credit risk

The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

 

 

 

 

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Credit-adjusted effective interest rate

The rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial asset to the amortised cost of a financial asset that is a purchased or originated credit-impaired financial asset. When calculating the credit-adjusted effective interest rate, an entity shall estimate the expected cash flows by considering all contractual terms of the financial asset (for example, prepayment, extension, call and similar options) and expected credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate (see paragraphs B5.4.1‒B5.4.3), transaction costs, and all other premiums or discounts. There is a presumption that the cash flows and the expected … Read more

Credit-impaired financial asset

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:

  1. significant financial difficulty of the issuer or the borrower;
  2. a breach of contract, such as a default or past due event;
  3. the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
  4. it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
  5. the disappearance of an active market for that financial asset because of financial difficulties;
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Currency risk

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

 

 

 

 

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Current tax

Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period.

 

 

 

 

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Customer

A party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration.

 

 

 

 

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Date of transition to IFRSs

Date of transition to IFRSs – The beginning of the earliest period for which an entity presents full comparative information under IFRSs in its first IFRS financial statements.

 

 

 

 

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Decision maker

An entity with decision-making rights that is either a principal or an agent for other parties.

 

 

 

 

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Deductible temporary difference

Temporary differences between the carrying amount of an asset or liability in the statement of financial position and its tax base that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.

 

 

 

 

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Deemed cost

Deemed cost – An amount used as a surrogate for cost or depreciated cost at a given date. Subsequent depreciation or amortisation assumes that the entity had initially recognised the asset or liability at the given date and that its cost was equal to the deemed cost.

 

 

 

 

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Deferred tax assets

Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of:

  1. deductible temporary differences;
  2. the carry forward of unused tax losses; and
  3. the carry forward of unused tax credits.

 

 

 

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Deferred tax liabilities

Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.

 

 

 

 

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Deficit or surplus

Deficit or surplus of defined benefit liability (asset) – Definitions relating to the net defined benefit liability (asset)

The deficit or surplus is:
(a) the present value of the defined benefit obligation less
(b) the fair value of plan assets (if any).

 

 

 

 

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Defined benefit plans

Defined benefit plans are post-employment benefit plans other than defined contribution plans. (IAS 19 8)

OR

Retirement benefit plans under which amounts to be paid as retirement benefits are determined by reference to a formula usually based on employees’ earnings and/or years of service. (IAS 26 8)

 

 

 

 

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Defined contribution plans

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

 

 

 

 

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Depreciable amount

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

 

 

 

 

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Depreciation

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life¹.

1 In the case of an intangible asset, the term ‘amortisation’ is generally used instead of ‘depreciation’. The two terms have the same meaning.

OR

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

 

 

 

 

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Derecognition

The removal of a previously recognised financial asset or financial liability from an entity’s statement of financial position.

 

 

 

 

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Derivative

A financial instrument or other contract within the scope of this Standard (editor: IFRS 9) with all three of the following characteristics.

  1. its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract (sometimes called the ‘underlying’).
  2. it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors.
  3. it is settled
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Development

Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production or use.

 

 

 

 

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Dilution

Dilution is a reduction in earnings per share or an increase in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions.

 

 

 

 

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Discontinued operation

A component of an entity that either has been disposed of or is classified as held for sale and:

  1. represents a separate major line of business or geographical area of operations,
  2. is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
  3. is a subsidiary acquired exclusively with a view to resale.

 

 

 

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Disposal group

A group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. The group includes goodwill acquired in a business combination if the group is a cash-generating unit to which goodwill has been allocated in accordance with the requirements of paragraphs 80–87 of IAS 36 Impairment of Assets (as revised in 2004) or if it is an operation within such a cash-generating unit.

 

 

 

 

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Dividend blocker

A financial instrument containing a clause that prohibits the issuer from making any distributions unless a dividend is declared in relation to another instrument.

 

 

 

 

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Dividends

Distributions of profits to holders of equity instruments in proportion to their holdings of a particular class of capital.

 

 

 

 

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Economic life

Either the period over which an asset is expected to be economically usable by one or more users or the number of production or similar units expected to be obtained from an asset by one or more users.

 

 

 

 

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Effective interest method

The method that is used in the calculation of the amortised cost of a financial asset or a financial liability and in the allocation and recognition of the interest revenue or interest expense in profit or loss over the relevant period.

 

 

 

 

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Effective interest rate

The rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, an entity shall estimate the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but shall not consider the expected credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate (see paragraphs B5.4.1–B5.4.3), transaction costs, and all other premiums or discounts. There is a presumption … Read more

Embedded derivative

An embedded derivative is a component of a hybrid (combined) instrument that also includes a non-derivative host contract-with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract.

 

 

 

 

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Employee benefits

Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment.

 

 

 

 

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Employees and others providing similar services

Individuals who render personal services to the entity and either (a) the individuals are regarded as employees for legal or tax purposes, (b) the individuals work for the entity under its direction in the same way as individuals who are regarded as employees for legal or tax purposes, or (c) the services rendered are similar to those rendered by employees. For example, the term encompasses all management personnel, ie those persons having authority and responsibility for planning, directing and controlling the activities of the entity, including non-executive directors.

 

 

 

 

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Entity-specific value

Entity-specific value is the present value of the cash flows an entity expects to arise from the continuing use of an asset and from its disposal at the end of its useful life or expects to incur when settling a liability.

 

 

 

 

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Entry price

The price paid to acquire an asset or received to assume a liability in an exchange transaction.

 

 

 

 

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Equity

Equity is the residual interest in the assets of the entity after deducting all its liabilities.

 

 

 

 

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Equity instrument

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

 

 

 

 

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Equity instrument granted

The right (conditional or unconditional) to an equity instrument of the entity conferred by the entity on another party, under a share-based payment arrangement.

 

 

 

 

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Equity interests

For the purposes of this IFRS (editor: IFRS 3), equity interests is used broadly to mean ownership interests of investor‑owned entities and owner, member or participant interests of mutual entities.

 

 

 

 

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Equity method

The equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets. The investor’s profit or loss includes its share of the investee’s profit or loss and the investor’s other comprehensive income includes its share of the investee’s other comprehensive income.

 

 

 

 

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Equity-settled share-based payment transaction

A share-based payment transaction in which the entity

  1. receives goods or services as consideration for its own equity instruments (including shares or share options), or
  2. receives goods or services but has no obligation to settle the transaction with the supplier.

 

 

 

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Events after the reporting period

Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. Two types of events can be identified:

  1. those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period); and
  2. those that are indicative of conditions that arose after the reporting period (non-adjusting events after the reporting period).

 

 

 

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Exchange difference

Exchange difference is the difference resulting from translating a given number of units of one currency into another currency at different exchange rates.

 

 

 

 

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Exit price

The price that would be received to sell an asset or paid to transfer a liability.

 

 

 

 

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Expected cash flow

The probability‑weighted average (ie mean of the distribution) of possible future cash flows.

 

 

 

 

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Expenses

Expenses are decreases in assets, or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims.

 

 

 

 

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Experience adjustment

A difference between:

  1. for premium receipts (and any related cash flows such as insurance acquisition cash flows and insurance premium taxes)—the estimate at the beginning of the period of the amounts expected in the period and the actual cash flows in the period; or
  2. for insurance service expenses (excluding insurance acquisition expenses)—the estimate at the beginning of the period of the amounts expected to be incurred in the period and the actual amounts incurred in the period.

 

 

 

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Exploration and evaluation expenditures

Expenditures incurred by an entity in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.

 

 

 

 

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Exploration for and evaluation of mineral resources

The search for mineral resources, including minerals, oil, natural gas and similar non-regenerative resources after the entity has obtained legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource.

 

 

 

 

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Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See IFRS 13 Fair Value Measurement.)

OR

The amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm’s length transaction. (IFRS 2 Share-based payment)

OR

For the purpose of applying the lessor accounting requirements in IFRS 16, the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. (IFRS 16 Leases)

 

 

 

 

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Fair value less costs to sell

The amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

 

 

 

 

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Finance lease

A lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset.

 

 

 

 

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Financial asset

A financial asset is any asset that is:

  1. cash;
  2. an equity instrument of another entity;
  3. a contractual right:
    1. to receive cash or another financial asset from another entity; or
    2. to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity; or
  4. a contract that will or may be settled in the entity’s own equity instruments and is:
    1. a non-derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or
    2. a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity
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Financial guarantee contract

A contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

 

 

 

 

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Financial instrument

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

 

 

 

 

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Financial liability

A financial liability is any liability that is:

  1. a contractual obligation:
    1. to deliver cash or another financial asset to another entity; or
    2. to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; or
  2. a contract that will or may be settled in the entity’s own equity instruments and is:
    1. a non-derivative for which the entity is or may be obliged to deliver a variable number of the entity’s own equity instruments; or
    2. a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose, rights, options or
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Financial liability at fair value through profit or loss

A financial liability that meets one of the following conditions:

  1. it meets the definition of held for trading.
  2. upon initial recognition it is designated by the entity as at fair value through profit or loss in accordance with paragraph 4.2.2 or 4.3.5.
  3. it is designated either upon initial recognition or subsequently as at fair value through profit or loss in accordance with paragraph 6.7.1.

IFRS 9 Definition

 

 

 

 

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Financial risk

The risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, currency exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract.

 

 

 

 

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Financing activities

Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.

 

 

 

 

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Firm commitment

A firm commitment is a binding agreement for the exchange of a specified quantity of resources at a specified price on a specified future date or dates.

 

 

 

 

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Firm purchase commitment

An agreement with an unrelated party, binding on both parties and usually legally enforceable, that (a) specifies all significant terms, including the price and timing of the transactions, and (b) includes a disincentive for non-performance that is sufficiently large to make performance highly probable.

 

 

 

 

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First IFRS financial statements

The first annual financial statements in which an entity adopts International Financial Reporting Standards (IFRSs), by an explicit and unreserved statement of compliance with IFRSs.

 

 

 

 

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Fixed payments

Payments made by a lessee to a lessor for the right to use an underlying asset during the lease term, excluding variable lease payments.

 

 

 

 

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Foreign operation

Foreign operation is an entity that is a subsidiary, associate, joint arrangement or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

 

 

 

 

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Forgivable loans

Forgivable loans are loans which the lender undertakes to waive repayment of under certain prescribed conditions.

 

 

 

 

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Fulfilment cash flows

An explicit, unbiased and probability-weighted estimate (ie expected value) of the present value of the future cash outflows minus the present value of the future cash inflows that will arise as the entity fulfils insurance contracts, including a risk adjustment for non-financial risk.

 

 

 

 

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Functional currency

Functional currency is the currency of the primary economic environment in which the entity operates.

 

 

 

 

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Funding

Funding of retirement benefits

Funding is the transfer of assets to an entity (the fund) separate from the employer’s entity to meet future obligations for the payment of retirement benefits.

 

 

 

 

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General purpose financial statements

General purpose financial statements (referred to as ‘financial statements’) are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs.

 

 

 

 

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Goodwill

An asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised.

 

 

 

 

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Government

Government refers to government, government agencies and similar bodies whether local, national or international.

 

 

 

 

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Government assistance

Government assistance is action by government designed to provide an economic benefit specific to an entity or range of entities qualifying under certain criteria. Government assistance for the purpose of this Standard does not include benefits provided only indirectly through action affecting general trading conditions, such as the provision of infrastructure in development areas or the imposition of trading constraints on competitors.

 

 

 

 

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Government grants

Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal trading transactions of the entity.

 

 

 

 

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Government-related entity

A government-related entity is an entity that is controlled, jointly controlled or significantly influenced by a government.

 

 

 

 

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Grant date

The date at which the entity and another party (including an employee) agree to a share-based payment arrangement, being when the entity and the counterparty have a shared understanding of the terms and conditions of the arrangement. At grant date the entity confers on the counterparty the right to cash, other assets, or equity instruments of the entity, provided the specified vesting conditions, if any, are met. If that agreement is subject to an approval process (for example, by shareholders), grant date is the date when that approval is obtained.

 

 

 

 

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Grants related to assets

Grants related to assets are government grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. Subsidiary conditions may also be attached restricting the type or location of the assets or the periods during which they are to be acquired or held.

 

 

 

 

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Gross-settled contracts

A contract that will be settled by only delivery of a fixed amount of an asset in exchange for the payment of a fixed price on its expiration.

 

 

 

 

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Group

A group is a parent and all its subsidiaries. (IAS 21 8)

OR

A parent and its subsidiaries. (IFRS 10 Appendix A)

 

 

 

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Group of insurance contracts

A set of insurance contracts resulting from the division of a portfolio of insurance contracts into, at a minimum, contracts written within a period of no longer than one year and that, at initial recognition:

  1. are onerous, if any;
  2. have no significant possibility of becoming onerous subsequently, if any; or
  3. do not fall into either (a) or (b), if any.

 

 

 

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Harvest

Harvest is the detachment of produce from a biological asset or the cessation of a biological asset’s life processes.

 

 

 

 

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Hedge effectiveness

Hedge effectiveness is the degree to which changes in the fair value or cash flows of the hedged item that are attributable to a hedged risk are offset by changes in the fair value or cash flows of the hedging instrument (see Appendix A paragraphs AG105–AG113A).

Definition IAS 39

 

 

 

 

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Hedge ratio

The relationship between the quantity of the hedging instrument and the quantity of the hedged item in terms of their relative weighting.

 

 

 

 

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Hedged item

A hedged item is an asset, liability, firm commitment, highly probable forecast transaction or net investment in a foreign operation that (a) exposes the entity to risk of changes in fair value or future cash flows and (b) is designated as being hedged (paragraphs 78–84 and Appendix A paragraphs AG98–AG101 elaborate on the definition of hedged items).

IAS 39 Definition

 

 

 

 

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Hedging instrument

A hedging instrument is a designated derivative or (for a hedge of the risk  of changes in foreign currency exchange rates only) a designated non-derivative financial asset or non-derivative financial liability whose fair value or cash flows are expected to offset changes in the fair value or cash flows of a designated hedged item (paragraphs 72–77 and Appendix A paragraphs AG94–AG97 elaborate on the definition of a hedging instrument).

IAS 39 Definition

 

 

 

 

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Held for trading

A financial asset or financial liability that:

  1. is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
  2. on initial recognition is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or
  3. is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

 

 

 

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Highest and best use

The use of a non‑financial asset by market participants that would maximise the value of the asset or the group of assets and liabilities (eg a business) within which the asset would be used.

 

 

 

 

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Hybrid instrument

A financial instrument which does not contain an equity component but which contains a host contract and an embedded derivative.

 

 

 

 

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Hyperinflation

Money loses purchasing power at such a rate that comparison of amounts from transactions and other events that have occurred at different times, even within the same accounting period, is misleading.

Hyperinflation is indicated by characteristics of the economic environment of a country which include, but are not limited to, the following:

  1. the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power;
  2. the general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency;
  3. sales and purchases on credit take place at prices
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Identifiable

An asset is identifiable if it either:

  1. is separable, ie capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so; or
  2. arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

 

 

 

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Impairment gain or loss

Gains or losses that are recognised in profit or loss in accordance with paragraph 5.5.8 and that arise from applying the impairment requirements in Section 5.5.

IFRS 9 Definition

 

 

 

 

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Impairment loss

An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount.

 

 

 

 

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Impracticable

Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.

OR

Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. For a particular prior period, it is impracticable to apply a change in an accounting policy retrospectively or to make a retrospective restatement to correct an error if:

  1. the effects of the retrospective application or retrospective restatement are not determinable;
  2. the retrospective application or retrospective restatement requires assumptions about what management’s intent would have been in that period; or
  3. the retrospective application or retrospective restatement requires significant estimates of amounts and it is impossible to distinguish objectively information about those estimates
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Inception date of the lease

The earlier of the date of a lease agreement and the date of commitment by the parties to the principal terms and conditions of the lease.

 

 

 

 

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Income

Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in an increase in equity, other than those relating to contributions from equity participants.

 

 

 

 

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Income approach

Valuation techniques that convert future amounts (eg cash flows or income and expenses) to a single current (ie discounted) amount. The fair value measurement is determined on the basis of the value indicated by current market expectations about those future amounts.

 

 

 

 

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Income from a structured entity

For the purpose of this IFRS (editor IFRS 12), income from a structured entity includes, but is not limited to, recurring and non-recurring fees, interest, dividends, gains or losses on the remeasurement or derecognition of interests in structured entities and gains or losses from the transfer of assets and liabilities to the structured entity.

 

 

 

 

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Initial direct costs

Incremental costs of obtaining a lease that would not have been incurred if the lease had not been obtained, except for such costs incurred by a manufacturer or dealer lessor in connection with a finance lease.

 

 

 

 

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Inputs

The assumptions that market participants would use when pricing the asset or liability, including assumptions about risk, such as the following:

  1. the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model); and
  2. the risk inherent in the inputs to the valuation technique.

Inputs may be observable or unobservable.

 

 

 

 

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Insurance acquisition cash flows

Cash flows arising from the costs of selling, underwriting and starting a group of insurance contracts that are directly attributable to the portfolio of insurance contracts to which the group belongs. Such cash flows include cash flows that are not directly attributable to individual contracts or groups of insurance contracts within the portfolio.

 

 

 

 

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Insurance contract

A contract under which one party (the issuer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future
event (the insured event) adversely affects the policyholder.

 

 

 

 

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Insurance contract with direct participation features

An insurance contract for which, at inception:

  1. the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
  2. the entity expects to pay to the policyholder an amount equal to a substantial share of the fair value returns on the underlying items; and
  3. the entity expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in fair value of the underlying items.

 

 

 

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Insurance risk

Risk, other than financial risk, transferred from the holder of a contract to the issuer.

 

 

 

 

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Insured event

An uncertain future event covered by an insurance contract that creates insurance risk.

 

 

 

 

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Intangible asset

An intangible asset is an identifiable non-monetary asset without physical substance.

 

 

 

 

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Interest in another entity

For the purpose of this IFRS, an interest in another entity refers to contractual and non-contractual involvement that exposes an entity to variability of returns from the performance of the other entity. An interest in another entity can be evidenced by, but is not limited to, the holding of equity or debt instruments as well as other forms of involvement such as the provision of funding, liquidity support, credit enhancement and guarantees. It includes the means by which an entity has control or joint control of, or significant influence over, another entity. An entity does not necessarily have an interest in another entity solely because of a typical customer supplier relationship.

Paragraphs B7–B9 provide further information about interests in other … Read more

Interest rate implicit in the lease

The rate of interest that causes the present value of (a) the lease payments and (b) the unguaranteed residual value to equal the sum of (i) the fair value of the underlying asset and (ii) any initial direct costs of the lessor.

 

 

 

 

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Interest rate risk

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

 

 

 

 

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Interim financial report

Interim financial report means a financial report containing either a complete set of financial statements (as described in IAS 1 Presentation of Financial Statements (as revised in 2007)) or a set of condensed financial statements (as described in this Standard) for an interim period.

 

 

 

 

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Interim period

Interim period is a financial reporting period shorter than a full financial year.

 

 

 

 

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Intrinsic value

The difference between the fair value of the shares to which the counterparty has the (conditional or unconditional) right to subscribe or which it has the right to receive, and the price (if any) the counterparty is (or will be) required to pay for those shares. For example, a share option with an exercise price of CU15, on a share with a fair value of CU20, has an intrinsic value of CU5.

 

 

 

 

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Inventories

Inventories are assets: (a) held for sale in the ordinary course of business; (b) in the process of production for such sale; or (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.

 

 

 

 

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Investing activities

Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

 

 

 

 

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Investment component

The amounts that an insurance contract requires the entity to repay to a policyholder even if an insured event does not occur.

 

 

 

 

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Investment contract with discretionary participation features

A financial instrument that provides a particular investor with the contractual right to receive, as a supplement to an amount not subject to the discretion of the issuer, additional amounts:

  1. that are expected to be a significant portion of the total contractual benefits;
  2. the timing or amount of which are contractually at the discretion of the issuer; and
  3. that are contractually based on:
    1. the returns on a specified pool of contracts or a specified type of contract;
    2. realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or
    3. the profit or loss of the entity or fund that issues the contract.

 

 

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Investment entity

An entity that:

  1. obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;
  2. commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
  3. measures and evaluates the performance of

 

 

 

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Investment property

Investment property is held to earn rentals or for capital appreciation or both. Therefore, an investment property generates cash flows largely independently of  the other assets held by an entity. This distinguishes investment property from owner-occupied property. The production or supply of goods or services (or the  use of property for administrative purposes) generates cash flows that are attributable not only to property, but also to other assets used in the production or supply process. IAS 16 applies to owned owner-occupied property and IFRS 16 applies to owner-occupied property held by a lessee as a right-of-use asset.

For example, if an entity owns and manages a hotel, services provided to guests are significant to the arrangement as a whole. Therefore, … Read more

Issuer

The issuer is the entity which issues the instrument (not the holder). In the context of borrowings, the issuer will be the borrower.

 

 

 

 

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Joint control

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

 

 

 

 

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Joint operation

A joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

 

 

 

 

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Joint venture

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

 

 

 

 

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Joint venturer

A joint venturer is a party to a joint venture that has joint control of that joint venture.

 

 

 

 

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Key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.

 

 

 

 

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Lease

A contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.

 

 

 

 

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Lease incentives

Payments made by a lessor to a lessee associated with a lease, or the reimbursement or assumption by a lessor of costs of a lessee.

 

 

 

 

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Lease modification

A change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term).

 

 

 

 

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Lease payments

Payments made by a lessee to a lessor relating to the right to use an underlying asset during the lease term, comprising the following:
(a) fixed payments (including in-substance fixed payments), less any lease incentives;
(b) variable lease payments that depend on an index or a rate;
(c) the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
(d) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

For the lessee, lease payments also include amounts expected to be payable by the lessee under residual value guarantees. Lease payments do not include payments allocated to non-lease components of a contract, … Read more

Lease term

The non-cancellable period for which a lessee has the right to use an underlying asset, together with both:

  1. periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and
  2. periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.

 

 

 

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Legal obligation

A legal obligation is an obligation that derives from:

  1. a contract (through its explicit or implicit terms);
  2. legislation; or
  3. other operation of law.

 

 

 

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Lessee

An entity that obtains the right to use an underlying asset for a period of time in exchange for consideration.

 

 

 

 

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Lessee’s incremental borrowing rate

The rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

 

 

 

 

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Lessor

An entity that provides the right to use an underlying asset for a period of time in exchange for consideration.

 

 

 

 

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Level 1 inputs

Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

 

 

 

 

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Level 2 inputs

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

 

 

 

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Liability

A liability is a 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.

 

 

 

 

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Liability for incurred claims

An entity’s obligation to investigate and pay valid claims for insured events that have already occurred, including events that have occurred but for which claims have not been reported, and other incurred insurance expenses.

 

 

 

 

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Liquidity risk

The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

 

 

 

 

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Loans payable

Loans payable are financial liabilities, other than short-term trade payables on normal credit terms.

 

 

 

 

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Loss allowance

The allowance for expected credit losses on financial assets measured in accordance with paragraph 4.1.2, lease receivables and contract assets, the accumulated impairment amount for financial assets measured in accordance with paragraph 4.1.2A and the provision for expected credit losses on loan commitments and financial guarantee contracts.

IFRS 9 Definition

 

 

 

 

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Market approach

A valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (ie similar) assets, liabilities or a group of assets and liabilities, such as a business.

 

 

 

 

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Market condition

A performance condition upon which the exercise price, vesting or exercisability of an equity instrument depends that is related to the market price (or value) of the entity’s equity instruments (or the equity instruments of another entity in the same group), such as:

  1. attaining a specified share price or a specified amount of intrinsic value of a share option; or
  2. achieving a specified target that is based on the market price (or value) of the entity’s equity instruments (or the equity instruments of another entity in the same group) relative to an index of market prices of equity instruments of other entities.

A market condition requires the counterparty to complete a specified period of service (ie a service condition); the … Read more

Market participant

Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics:

  1. They are independent of each other, ie they are not related parties as defined in IAS 24, although the price in a related party transaction may be used as an input to a fair value measurement if the entity has evidence that the transaction was entered into at market terms.
  2. They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary.
  3. They are able to enter into a transaction for the asset or liability.
  4. They
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Market risk

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

 

 

 

 

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Material Omissions

Material Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.

 

 

 

 

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Measurement

The process of determining the monetary amounts at which the elements of the financial statements are to be recognised and carried in the balance sheet (statement of financial position) and income statement (statement or comprehensive income).

 

 

 

 

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Measurement date

The date at which the fair value of the equity instruments granted is measured for the purposes of this IFRS (editor: IFRS 2). For transactions with employees and others providing similar services, the measurement date is grant date. For transactions with parties other than employees (and those providing similar services), the measurement date is the date the entity obtains the goods or the counterparty renders service.

 

 

 

 

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Modification gain or loss

The amount arising from adjusting the gross carrying amount of a financial asset to reflect the renegotiated or modified contractual cash flows. The entity recalculates the gross carrying amount of a financial asset as the present value of the estimated future cash payments or receipts through the expected life of the renegotiated or modified financial asset that are discounted at the financial asset’s original effective interest rate (or the original credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets) or, when applicable, the revised effective interest rate calculated in accordance with paragraph 6.5.10. When estimating the expected cash flows of a financial asset, an entity shall consider all contractual terms of the financial asset (for example, prepayment, call … Read more

Monetary assets

Monetary assets are money held and assets to be received in fixed or determinable amounts of money.

 

 

 

 

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Monetary items

Monetary items are units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.

 

 

 

 

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Most advantageous market

The market that maximises the amount that would be received to sell the asset or minimises the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs.

 

 

 

 

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Multi-employer plans

Multi-employer plans are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) that:

  1. pool the assets contributed by various entities that are not under common control; and
  2. use those assets to provide benefits to employees of more than one entity, on the basis that contribution and benefit levels are determined without regard to the identity of the entity that employs the employees.

 

 

 

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Mutual entity

An entity, other than an investor‑owned entity, that provides dividends, lower costs or other economic benefits directly to its owners, members or participants. For example, a mutual insurance company, a credit union and a co‑operative entity are all mutual entities.

 

 

 

 

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Net cash settlement

Where one party’s net gain or loss is settled in cash rather than the asset subject to the contract being exchanged at its expiration.

 … Read more

Net defined benefit liability (asset)

Definitions relating to the net defined benefit liability (asset)

The net defined benefit liability (asset) is the deficit or surplus, adjusted for any effect of limiting a net defined benefit asset to the asset ceiling.… Read more

Net realisable value

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

 

 

 

 

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Non-performance risk

The risk that an entity will not fulfil an obligation. Non‑performance risk includes, but may not be limited to, the entity’s own credit risk.

 

 

 

 

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Notes

Notes contain information in addition to that presented in the statement of financial position, statement(s) of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows. Notes provide narrative descriptions or disaggregations of items presented in those statements and information about items that do not qualify for recognition in those statements.

 

 

 

 

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Obligating event

An obligating event is an event that creates a legal or constructive obligation that results in an entity having no realistic alternative to settling that obligation.

 

 

 

 

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Observable inputs

Inputs that are developed using market data, such as publicly available information about actual events or transactions, and that reflect the assumptions that market participants would use when pricing the asset or liability.

 

 

 

 

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Onerous contract

An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

 

 

 

 

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Operating activities

Operating activities are the principal revenue-producing activities of the entity and other activities that are not investing or financing activities.

 

 

 

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Operating lease

A lease that does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset.

 

 

 

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Operating segment

An operating segment is a component of an entity:

  1. that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity),
  2. whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and
  3. for which discrete financial information is available.

 

 

 

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Optional lease payments

Payments to be made by a lessee to a lessor for the right to use an underlying asset during periods covered by an option to extend or terminate a lease that are not included in the lease term.

 

 

 

 

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Orderly transaction

A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (eg a forced liquidation or distress sale).

 

 

 

 

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Ordinary share

An ordinary share is an equity instrument that is subordinate to all other classes of equity instruments.

 

 

 

 

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Other comprehensive income

Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other IFRSs.

 

 

 

 

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Other price risk

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market.

 

 

 

 

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Owner-occupied property

Property held (by the owner or by the lessee under a lease contract) for use in the production or supply of goods or services or for administrative services.

 

 

 

 

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Owners

Owners are holders of instruments classified as equity. (IAS 1 7)

OR

In IFRS 3 owners is used broadly to include holders of equity interests of investor‑owned entities and owners or members of, or participants in, mutual entities. (IFRS 3 Appendix A)

 

 

 

 

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Parent

An entity that controls one or more entities.

 

 

 

 

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Participants

Participants are the members of a retirement benefit plan and others who are entitled to benefits under the plan.

 

 

 

 

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Past due

A financial asset is past due when a counterparty has failed to make a payment when that payment was contractually due.

 

 

 

 

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Past service cost

The change in the present value of the defined benefit obligation for employee service in prior periods, resulting from a plan amendment (the introduction or withdrawal of, or changes to, a defined benefit plan) or a curtailment (a significant reduction by the entity in the number of employees covered by a plan).

 

 

 

 

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Performance condition

A vesting condition that requires:

  1. the counterparty to complete a specified period of service (ie a service condition); the service requirement can be explicit or implicit; and
  2. specified performance target(s) to be met while the counterparty is rendering the service required in (a).

The period of achieving the performance target(s):

  1. shall not extend beyond the end of the service period; and
  2. may start before the service period on the condition that the commencement date of the performance target is not substantially before the commencement of the service period.

A performance target is defined by reference to:

  1. the entity’s own operations (or activities) or the operations or activities of another entity in the same group (ie a non-market condition); or
  2. the
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Performance obligation

A promise in a contract with a customer to transfer to the customer either:

  1. a good or service (or a bundle of goods or services) that is  distinct; or
  2. a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.

 

 

 

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Period of use

The total period of time that an asset is used to fulfil a contract with a customer (including any non-consecutive periods of time).

 

 

 

 

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Plan assets

Plan assets of an employee benefit plan – Definitions relating to the net defined benefit liability (asset)

Plan assets comprise:

  1. assets held by a long-term employee benefit fund; and
  2. qualifying insurance policies.

 

 

 

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Policyholder

A party that has a right to compensation under an insurance contract if an insured event occurs.

 

 

 

 

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Post-employment benefit plans

Post-employment benefit plans are formal or informal arrangements under which an entity provides post-employment benefits for one or more employees.

 

 

 

 

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Post-employment benefits

Post-employment benefits are employee benefits (other than termination benefits and short-term employee benefits) that are payable after the completion of employment.

 

 

 

 

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Potential ordinary share

A potential ordinary share is a financial instrument or other contract that may entitle its holder to ordinary shares.

 

 

 

 

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Power

Existing rights that give the current ability to direct the relevant activities.

 

 

 

 

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Present value of a defined benefit obligation

Definitions relating to the net defined benefit liability (asset)

The present value of a defined benefit obligation is the present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods.

 

 

 

 

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Previous GAAP

The basis of accounting that a first-time adopter used immediately before adopting IFRSs.

 

 

 

 

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Principal market

The market with the greatest volume and level of activity for the asset or liability.

 

 

 

 

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Prior period errors

Prior period errors are omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:
(a) was available when financial statements for those periods were authorised for issue; and
(b) could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.

Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud.

 

 

 

 

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Profit or loss

Profit or loss is the total of income less expenses, excluding the components of other comprehensive income.

 

 

 

 

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Property, plant and equipment

Property, plant and equipment are tangible items that:

  1. are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and
  2. are expected to be used during more than one period.

 

 

 

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Prospective application

Prospective application of a change in accounting policy and of recognising the effect of a change in an accounting estimate, respectively, are:

  1. applying the new accounting policy to transactions, other events and conditions occurring after the date as at which the policy is changed; and
  2. recognising the effect of the change in the accounting estimate in the current and future periods affected by the change.

 

 

 

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Protective rights

Rights designed to protect the interest of the party holding those rights without giving that party power over the entity to which those rights relate.

 

 

 

 

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Provision

A provision is a liability of uncertain timing or amount.

 

 

 

 

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Put options

Put options on ordinary shares are contracts that give the holder the right to sell ordinary shares at a specified price for a given period.

 

 

 

 

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Puttable instrument

A puttable instrument is a financial instrument that gives the holder the right to put the instrument back to the issuer for cash or another financial asset or is automatically put back to the issuer on the occurrence of an uncertain future event or the death or retirement of the instrument holder.

or

A puttable instrument is a financial instrument which includes a contractual obligation for the issuer to repurchase or redeem that instrument for cash or another financial asset on exercise of the put.

 

 

 

 

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Qualifying asset

A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

 

 

 

 

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Qualifying insurance policy

Definitions relating to the net defined benefit liability (asset)

A qualifying insurance policy is an insurance policy issued by an insurer that is not a related party (as defined in IAS 24 Related Party Disclosures) of the reporting entity, if the proceeds of the policy:

  1. can be used only to pay or fund employee benefits under a defined benefit plan; and
  2. are not available to the reporting entity’s own creditors (even in bankruptcy) and cannot be paid to the reporting entity, unless either:
    1. the proceeds represent surplus assets that are not needed for the policy to meet all the related employee benefit obligations; or
    2. the proceeds are returned to the reporting entity to reimburse it for employee benefits already paid.
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Reclassification adjustments

Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods.

 

 

 

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Reclassification date

The first day of the first reporting period following the change in business model that results in an entity reclassifying financial assets.

 

 

 

 

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Recognition

Recognition is the process of capturing for inclusion in the statement of financial position or the statement(s) of financial performance an item that meets the definition of one of the elements of financial statements—an asset, a liability, equity, income or expenses.

 

 

 

 

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Recoverable amount

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use. (IAS 16 6, IAS 36 6, IFRS 5 Appendix A Definitions)

 

 

 

 

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Regular way purchase or sale

A purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

 

 

 

 

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Reinsurance contract

An insurance contract issued by one entity (the reinsurer) to compensate another entity for claims arising from one or more insurance contracts issued by that other entity (underlying contracts).

 

 

 

 

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Related party

A related party is a person or entity that is related to the entity that is preparing its financial statements (in this Standard (IAS 24) referred to as the ‘reporting entity’).

  1. A person or a close member of that person’s family is related to a reporting entity if that person:
    1. has control or joint control of the reporting entity;
    2. has significant influence over the reporting entity; or
    3. is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
  2. An entity is related to a reporting entity if any of the following conditions applies:
    1. The entity and the reporting entity are members of the same group (which means that each parent, subsidiary
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Related party transaction

A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

 

 

 

 

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Relevant activities

For the purpose of this IFRS (editor: IFRS 10), relevant activities are activities of the investee that significantly affect the investee’s returns.

 

 

 

 

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Reload feature

A feature that provides for an automatic grant of additional share options whenever the option holder exercises previously granted options using the entity’s shares, rather than cash, to satisfy the exercise price.

 

 

 

 

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Reload option

A new share option granted when a share is used to satisfy the exercise price of a previous share option.

 

 

 

 

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Remeasurements of the net defined benefit liability (asset)

Definitions relating to defined benefit cost

Remeasurements of the net defined benefit liability (asset) comprise:

  1. actuarial gains and losses;
  2. the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset); and
  3. any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset).

 

 

 

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Research

Research is original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding.

 

 

 

 

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Residual value

The residual value of an asset is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.

 

 

 

 

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Residual value guarantee

A guarantee made to a lessor by a party unrelated to the lessor that the value (or part of the value) of an underlying asset at the end of a lease will be at least a specified amount.

 

 

 

 

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Restructuring

A restructuring is a programme that is planned and controlled by management, and materially changes either:

  1. the scope of a business undertaken by an entity; or
  2. the manner in which that business is conducted.

 

 

 

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Retirement benefit plans

Retirement benefit plans are arrangements whereby an entity provides benefits for employees on or after termination of service (either in the form of an annual income or as a lump sum) when such benefits, or the contributions towards them, can be determined or estimated in advance of retirement from the provisions of a document or from the entity’s practices.

 

 

 

 

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Retrospective application

Retrospective application is applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied.

 

 

 

 

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Retrospective restatement

Retrospective restatement is correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred.

 

 

 

 

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Return on plan assets

Return on plan assets of an employee benefit plan – Definitions relating to defined benefit cost

The return on plan assets is interest, dividends and other income derived from the plan assets, together with realised and unrealised gains or losses on the plan assets, less:

  1. any costs of managing plan assets; and
  2. any tax payable by the plan itself, other than tax included in the actuarial assumptions used to measure the present value of the defined benefit obligation.

 

 

 

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Revenue

Income arising in the course of an entity’s ordinary activities.

 

 

 

 

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Risk adjustment for non-financial risk

The compensation an entity requires for bearing the uncertainty about the amount and timing of the cash flows that arises from non-financial risk as the entity fulfils insurance contracts.

 

 

 

 

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Risk premium

Compensation sought by risk‑averse market participants for bearing the uncertainty inherent in the cash flows of an asset or a liability. Also referred to as a ‘risk adjustment’.

 

 

 

 

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Separate financial statements

Separate financial statements are those presented by an entity in which the entity could elect, subject to the requirements in this Standard, to account for its investments in subsidiaries, joint ventures and associates either at cost, in accordance with IFRS 9 Financial Instruments, or using the equity method as described in IAS 28 Investments in Associates and Joint Ventures.

 

 

 

 

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Separate vehicle

A separately identifiable financial structure, including separate legal entities or entities recognised by statute, regardless of whether those entities have a legal personality.

 

 

 

 

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Service condition

A vesting condition that requires the counterparty to complete a specified period of service during which services are provided to the entity. If the counterparty, regardless of the reason, ceases to provide service during the vesting period, it has failed to satisfy the condition. A service condition does not require a performance target to be met.

 

 

 

 

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Service cost

Definitions relating to defined benefit cost

Service cost comprises:

  1. current service cost, which is the increase in the present value of the defined benefit obligation resulting from employee service in the current period;
  2. past service cost, which is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting from a plan amendment (the introduction or withdrawal of, or changes to, a defined benefit plan) or a curtailment (a significant reduction by the entity in the number of employees covered by a plan); and
  3. any gain or loss on settlement.

 

 

 

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Settlement

Settlement of the employee benefit obligations – Definitions relating to defined benefit cost

A settlement is a transaction that eliminates all further legal or constructive obligations for part or all of the benefits provided under a defined benefit plan, other than a payment of benefits to, or on behalf of, employees that is set out in the terms of the plan and included in the actuarial assumptions.

 

 

 

 

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Share option

A contract that gives the holder the right, but not the obligation, to subscribe to the entity’s shares at a fixed or determinable price for a specified period of time.

 

 

 

 

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Share-based payment arrangement

An agreement between the entity (or another group entity or any shareholder of any group entity) and another party (including an employee) that entitles the other party to receive

  1. cash or other assets of the entity for amounts that are based on the price (or value) of equity instruments (including shares or share options) of the entity or another group entity, or
  2. equity instruments (including shares or share options) of the entity or another group entity,

provided the specified vesting conditions, if any, are met.

 

 

 

 

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Share-based payment transaction

A transaction in which the entity

  1. receives goods or services from the supplier of those goods or services (including an employee) in a share-based payment arrangement, or
  2. incurs an obligation to settle the transaction with the supplier in a share-based payment arrangement when another group entity receives those goods or services.

 

 

 

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Short-term employee benefits

Short-term employee benefits are employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service.

 

 

 

 

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Short-term lease

A lease that, at the commencement date, has a lease term of 12 months or less. A lease that contains a purchase option is not a short-term lease.

 

 

 

 

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Significant influence

Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies.

 

 

 

 

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Stand-alone selling price

Stand-alone selling price (of a good or service) – The price at which an entity would sell a promised good or service separately to a customer.

 

 

 

 

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Step-up clause

A dividend clause on a financial instrument that would increase the dividend payable on the instrument at a pre- determined date in the future unless the instrument is called beforehand by the issuer.

 

 

 

 

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Structured entity

An entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.

Paragraphs B22–B24 provide further information about structured entities.

IFRS 12 Definition

 

 

 

 

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Sublease

A transaction for which an underlying asset is re-leased by a lessee (‘intermediate lessor’) to a third party, and the lease (‘head lease’) between the head lessor and lessee remains in effect.

 

 

 

 

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Subordinated instrument

A financial instrument which ranks lower in priority than other financial instruments when there is a claim upon the company which issued it.

 

 

 

 

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Tax base

The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

 

 

 

 

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Tax expense (tax income)

Tax expense (tax income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

 

 

 

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Taxable profit (tax loss)

Taxable profit (tax loss) is the profit (loss) for a period, determined in accordance with the rules established by the taxation authorities, upon which income taxes are payable (recoverable).

 

 

 

 

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Taxable temporary differences

Temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.

 

 

 

 

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Temporary differences

Temporary differences are differences between the carrying amount of an asset or liability in the statement of financial position and its tax base.

Temporary differences may be either:

  1. taxable temporary differences, which are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled; or
  2. deductible temporary differences, which are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.

 

 

 

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Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment as a result of either:

  1. an entity’s decision to terminate an employee’s employment before the normal retirement date; or
  2. an employee’s decision to accept an offer of benefits in exchange for the termination of employment.

 

 

 

 

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Total comprehensive income

Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners.

 

 

 

 

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Transaction costs

Transaction costs (financial instruments) – Incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability (see paragraph B5.4.8). An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument. (IFRS 9 Definition)

Transaction costs – The costs to sell an asset or transfer a liability in the principal (or most advantageous) market for the asset or liability that are directly attributable to the disposal of the asset or the transfer of the liability and meet both of the following criteria:

  1. They result directly from and are essential to that transaction.
  2. They would not have been incurred by
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Transaction price

Transaction price (for a contract with a customer) – The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

 

 

 

 

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Transport costs

The costs that would be incurred to transport an asset from its current location to its principal (or most advantageous) market.

 

 

 

 

 

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Underlying asset

An asset that is the subject of a lease, for which the right to use that asset has been provided by a lessor to a lessee.

 

 

 

 

 

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Underlying items

Items that determine some of the amounts payable to a policyholder. Underlying items can comprise any items; for example, a reference portfolio of assets, the net assets of the entity, or a specified subset of the net assets of the entity.

 

 

 

 

 

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Unguaranteed residual value

That portion of the residual value of the underlying asset, the realisation of which by a lessor is not assured or is guaranteed solely by a party related to the lessor.

 

 

 

 

 

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Unit of account

The level at which an asset or a liability is aggregated or disaggregated in an IFRS for recognition purposes.

 

 

 

 

 

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Unobservable inputs

Inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability.

 

 

 

 

 

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Useful life

IAS 16 6, IAS 36 6 and IAS 38 8:

Useful life is:
(a) the period over which an asset is expected to be available for use by an entity; or
(b) the number of production or similar units expected to be obtained from the asset by an entity.

OR

IFRS 5 Appendix A Definitions:

The estimated remaining period, from the commencement of the lease term, without limitation by the lease term, over which the economic benefits embodied in the asset are expected to be consumed by the entity.

 

 

 

 

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Value in use

Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. (IAS 36 6)

OR

The present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. (IFRS 5 Appendix A Definitions)

 

 

 

 

 

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Variable Interest Entity

US GAAP – A variable interest entity (VIE) refers to a legal business structure in which an investor has a controlling interest despite not having a majority of voting rights. Variable interest entities are often established as special purpose vehicles (SPVs) to passively hold financial assets, or to actively conduct research and development. Under the Federal securities laws, public companies have to disclose their relationships to VIEs when they file their 10-K forms

 

 

 

 

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Variable lease payments

The portion of payments made by a lessee to a lessor for the right to use an underlying asset during the lease term that varies because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

 

 

 

 

 

 

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Vest

To become an entitlement. Under a share-based payment arrangement, a counterparty’s right to receive cash, other assets or equity instruments of the entity vests when the counterparty’s entitlement is no longer conditional on the satisfaction of any vesting conditions.

 

 

 

 

 

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Vested benefits

Vested benefits are benefits, the rights to which, under the conditions of a retirement benefit plan, are not conditional on continued employment.

 

 

 

 

 

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Vesting condition

A condition that determines whether the entity receives the services that entitle the counterparty to receive cash, other assets or equity instruments of the entity, under a share-based payment arrangement. A vesting condition is either a service condition or a performance condition.

 

 

 

 

 

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Vesting period

The period during which all the specified vesting conditions of a share-based payment arrangement are to be satisfied.

 

 

 

 

 

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Warrant

A financial instrument that gives the holder the right to purchase ordinary shares.

 

 

 

 

 

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Written option

A ‘written option’ is where the entity is the option seller, ie it has the obligation to sell the asset (if a call) or to buy the asset (if a put) on which the option is written if the option buyer exercises the option.

 

 

 

 

 

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