Glossary of Defined Terms This Glossary contains all terms defined in the 24 accrual basis International Public Sector Accounting Standards (IPSASs) on issue as at December 31, 2006. A list of these IPSASs is located on the inside back cover of the Glossary. This Glossary does not include terms defined in the Cash Basis IPSAS, “Financial Reporting under the Cash Basis of Accounting.” Users should refer to that Cash Basis IPSAS for these terms. Where multiple definitions of the same term exist, this Glossary indicates all IPSASs in which the term appears and the definition that applies to that particular IPSAS. Definitions References to accrual basis IPSASs are by Standard number and paragraph number. For example, ‘1.7’ refers users to International Public Sector Accounting Standard IPSAS 1, “Presentation of Financial Statements,” paragraph 7. References set out in GLOSSARY brackets indicate a minor variation in wording. Term Definition Location accounting basis The accrual or cash basis of accounting as 24.7 defined in the accrual basis International Public Sector Accounting Standards and the Cash Basis International Public Sector Accounting Standard. accounting policies The specific principles, bases, 3.7, 6.718.8 conventions, rules and practices applied by an entity in preparing and presenting financial statements. accrual basis A basis of accounting under which 1.7, 3.7, transactions and other events are 4.10, 5.5, recognized when they occur (and not only 6.78.6(2.8) when cash or its equivalent is received or paid). Therefore, the transactions and events are recorded in the accounting records and recognized in the financial statements of the periods to which they relate. The elements recognized under accrual accounting are assets, liabilities, net assets/equity, revenue and expenses. 906 GLOSSARY GLOSSARY Term Definition Location active market A market in which all the following 21.14 conditions exist: (a) The items traded within the market are homogeneous; (b) Willing buyers and sellers can normally be found at any time; and (c) Prices are available to the public. annual budget An approved budget for one year. It does 24.7 not include published forward estimates or projections for periods beyond the budget GLOSSARY period. appropriation An authorization granted by a legislative 24.7 body to allocate funds for purposes specified by the legislature or similar authority approved budget The expenditure authority derived from 24.7 laws, appropriation bills, government ordinances and other decisions related to the anticipated revenue or receipts for the budgetary period. 1 assets Resources controlled by an entity as a 1.7, 2.8, result of past events and from which future 5.56.78.6 economic benefits or service potential are expected to flow to the entity. associate An entity, including an unincorporated 6.77.78.6 entity such as a partnership, over which the investor has significant influence and that is neither a controlled entity nor an interest in a joint venture. 1 Commentary: Assets provide a means for entities to achieve their objectives. Assets that are used to deliver goods and services in accordance with an entity’s objectives but which do not directly generate net cash inflows are often described as embodying “service potential”. Assets that are used to generate net cash inflows are often described as embodying “future economic benefits”. To encompass all the purposes to which assets may be put, this series of Standards uses the term “future economic benefits or service potential” to describe the essential characteristic of assets. 907 GLOSSARY GLOSSARY Term Definition Location borrowing costs Interest and other expenses incurred by an 5.5 entity in connection with the borrowing of funds. budgetary basis The accrual, cash or other basis of 24.7 accounting adopted in the budget that has been approved by the legislative body. carrying amount The amount at which an asset is 16.7 (of investment recognized in the statement of financial property) position. carrying amount The amount at which an asset is 17.7 (of property, plant recognized after deducting any and equipment) accumulated depreciation and accumulated impairment losses. carrying amount of The amount at which an asset is 10.7, 21.14 an asset recognized in the statement of financial position after deducting any accumulated depreciation and accumulated impairment losses thereon. carrying amount of The amount at which a liability is 10.7 a liability recognized in the statement of financial position. cash Comprises cash on hand and demand 2.8, 5.5, deposits. 6.78.610.7 cash equivalents Short-term, highly liquid investments that 2.8, are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. cash flows Inflows and outflows of cash and cash 2.8, 8.6 equivalents. cash-generating Assets held to generate a commercial 21.14 assets return. class of property, A grouping of assets of a similar nature or 17.13 plant and function in an entity’s operations that is equipment shown as a single item for the purpose of disclosure in the financial statements. GLOSSARY 908 GLOSSARY Term Definition Location close members of Close relatives of the individual or 20.4 the family of an members of the individual’s immediate individual family who can be expected to influence, or be influenced by, that individual in their dealings with the entity. closing rate The spot exchange rate at the reporting 4.10 date. commencement of The date from which the lessee is entitled 13.8 the lease term to exercise its right to use the leased asset. It is the date of initial recognition of the lease (i.e. the recognition of the assets, liabilities, revenue or expenses resulting GLOSSARY from the lease, as appropriate). comparable basis The actual amounts presented on the same 24.7 accounting basis, same classification basis, for the same entities and for the same period as the approved budget. conditions on Stipulations that specify that the future 23.7 transferred assets economic benefits or service potential embodied in the asset is required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor. consolidated The financial statements of an economic 6.76.7, 7.7, financial entity presented as those of a single entity. 8.6 statements construction A contract, or a similar binding 11.4 contract arrangement, specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. constructive An obligation that derives from an entity’s 19.18 obligation actions where: (a) by an established pattern of past 909 GLOSSARY GLOSSARY Term Definition Location practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and (b) as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities. contingent asset A possible asset that arises from past 19.18 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. contingent liability (a) a possible obligation that arises from 19.18 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 (b) a present obligation that arises from past events but is not recognized because: (i) it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; or (ii) the amount of the obligation cannot be measured with sufficient reliability. contingent rent That portion of the lease payments that is 13.8 not fixed in amount but is based on the future amount of a factor that changes other than with the passage of time (e.g., percentage of future sales, amount of future usage, future price indices, future GLOSSARY 910 GLOSSARY Term Definition Location market rates of interest). contractor An entity that performs construction work 11.4 pursuant to a construction contract. contributions from Future economic benefits or service 1.7, 2.8, owners potential that has been contributed to the 5.56.78.6 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: (a) conveys entitlement both to GLOSSARY distributions of future economic benefits or service potential by the entity during its life, such distributions being at the discretion of the owners or their representatives, and to distributions of any excess of assets over liabilities in the event of the entity being wound up; and/or (b) can be sold, exchanged, transferred or redeemed. control The power to govern the financial and 6.7, 7.7, 8.6 operating policies of another entity so as to benefit from its activities. control of an asset Arises when the entity can use or 23.7 otherwise benefit from the asset in pursuit of its objectives and can exclude or otherwise regulate the access of others to that benefit. controlled entity An entity, including an unincorporated 6.7, 8.6, entity such as a partnership, that is under (7.7) the control of another entity (known as the controlling entity). controlling entity An entity that has one or more controlled , 6.7, 7.7, entities. 8.6 911 GLOSSARY GLOSSARY Term Definition Location cost The amount of cash or cash equivalents 16.7, 17.13 paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction.