IFRS Jargon

Last update 20/11/2019 Credit derivatives allow a lender or borrower to transfer the default risk of a loan to a third party. Though the terms differ from one credit derivative to another, the general procedure is for a lending party to enter into an agreement with a counterparty (usually another lender), who agrees, for a fee, to cover any losses incurred in the event … Read more

Last update 29/12/2019 Cost of Property plant and equipment – The cost of an item of property, plant and equipment comprises: Cost of Property plant and equipment its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. Cost of Property plant and equipment any costs directly attributable to bringing … Read more

Last update 29/12/2019 Corporate asset-backed security – backed by the cash flows from receivables such as leases on aircraft or other corporate equipment, small and medium enterprise (SME) loans, trade receivables. Also includes ‘whole business’ securities (WBS) based on the cash flows of an entire business unit, such as franchise or brand royalties. An asset-backed … Read more

Last update 20/11/2019 Convertible notes are a form of long-term debt that converts into equity, typically in conjunction with a future financing round; in effect, the investor would be loaning money to a startup and instead of a return in the form of principal plus interest, the investor would receive equity in the company rather … Read more

Last update 31/12/2019 Convertible debt option reserve – A convertible instrument is dealt with by an issuer as having two ‘components’, being a liability host contract plus a separate conversion feature which may or may not qualify for classification as an equity instrument. When the conversion feature qualifies as an equity instrument it is recorded … Read more

Last update 10/11/2019 Control of an investee starts with a definition: An investor controls an investee when it 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. (IFRS 10 6) CONTROL Power over the investee Control … Read more

Last update 05/08/2019 Future economic benefits or service potential that has been contributed to the entity by parties external to the entity, other than those that result in liabilities of the entity, that establish a financial interest in the net assets/equity of the entity, which: Conveys entitlement both to distributions of future economic benefits or … Read more

Last update 09/12/2019 Contractually linked instruments – IFRS 9 provides specific guidance for circumstances in which an entity prioritises payments to the holders of multiple contractually linked instruments that create concentrations of credit risk – i.e. tranches. The right to payments on more junior tranches depends on the issuer generating sufficient cash flows to pay … Read more

Last update 07/01/2020 Contract assets are defined as an entity’s right to consideration in exchange for goods or services  (i.e. conditional) 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). An entity shall assess a contract asset … Read more

Last update 20/11/2019 Continuous assessment of control is part of documenting your consolidation routines. IFRS 10 clarifies that control over another entity is reassessed if facts and circumstances indicate that there are changes to one or more of the three elements control discussed in the definition of Control of an investee. The principle of continuous … Read more