Definitions of Terms

Elements of Financial Statements

Comprehensive income

The change in equity of an entity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners.

Expenses

Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants. The term expenses is broad enough to include losses as well as normal categories of expenses; thus, the international standard differs from its US counterpart, which deems losses to be a separate and distinct element to be accounted for, denoting decreases in equity from peripheral or incidental transactions.

Income

Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets that result in increases in equity, other than those relating to contributions from equity participants. The IASC's Framework clarifies that this definition of income encompasses both revenue and gains. Again, the corresponding US accounting standard holds that revenues and gains constitute two separate elements of financial reporting, with gains denoting increases in equity from peripheral or incidental transactions.

Statement of changes in equity

As prescribed by IAS 1, an enterprise should present, as a separate component of financial statements, along with the traditional financial statements, a statement showing

1. The net profit or loss for the period;

2. Items of income (including gain) and expense (including loss) that are recognized in equity, as required by this standard, and the total of these items;

3. The cumulative effect of changes in accounting policy and the correction of fundamental errors (when the benchmark treatment, retrospective application and adjustment of beginning retained earnings, respectively, is elected under IAS 8);

4. Capital transactions and distributions with/to owners of the enterprise;

5. The balance of accumulated profit or loss at the beginning of the period and at the balance sheet date, and the movements for the period; and

6. A reconciliation between the carrying amounts of each class of equity capital, share premium and each reserve at the beginning and the end of the period, separately disclosing each movement.

Statement of recognized gains and losses

As an alternative to a statement of changes in equity (above), as prescribed by IAS 1, an enterprise may present, along with the traditional financial statements, a statement of recognized gains and losses. This statement highlights items of income and expense that are not recognized in the income statement, and it reports all changes in equity, including net income, other than those resulting from investments by and distributions to owners (items 1-3 shown under the foregoing should be presented in this statement). When an enterprise chooses to present the statement of recognized gains and losses, it should, additionally, present in footnotes to the financial statements, items 4 to 6 shown under the discussion of the statement of changes in equity, above.

Other Terminology

Discontinuing operations. IAS 35 defines a "discontinuing operation" as a component of an enterprise

1. That the enterprise, pursuant to a single plan, is disposing of substantially in its entirety, such as by selling the component in a single transaction, by demerger or spin-off of ownership of the component to the enterprise's shareholders; is disposing of piecemeal, such as by selling off the component's assets and settling its liabilities individually; or is terminating through abandonment;

2. That represents a separate major line of business or geographical area of operations; and

3. That can be distinguished operationally and for financial reporting purposes.

Extraordinary item. Events and transactions that are clearly distinct from the ordinary activities of the enterprise and are distinguished by the infrequency of their occurrence.

Initial disclosure event. For the purposes of IAS 35, with respect to discontinuing operations, the "initial disclosure event" is the occurrence of one of the following, whichever occurs earlier:

1. The enterprise has entered into a binding sale agreement for substantially all of the assets attributable to the discontinuing operation; or

2. The enterprise's board of directors or similar governing body has both approved a detailed formal plan for the discontinuance and made an announcement of the plan.

Major line of business. In the context of discontinued operations, IAS 8 defines a major line of business as a separate line of business of an enterprise that is "distinguishable from other business activities," such as a segment, as determined in accordance with IAS 14.

Ordinary activities. Activities that are undertaken by the enterprise as part of its normal business and include related activities that are incidental to or are pursued in furtherance of regular business.

Realization. The process of converting noncash resources and rights into money or, more precisely, the sale of an asset for cash or claims to cash.

Recognition. The process of formally recording or incorporating in the financial statements of an entity items that meet the definition of an element and satisfy the criteria for recognition.

Segment of a business. A distinguishable component of an enterprise which is engaged in providing products or services that are subject to risks and returns different from other "business segments" or "geographical segments." A segment may be in the form of a subsidiary, a division, a department, a joint venture, or other nonsubsidiary investee. Its assets, results of operations, and activities can be clearly distinguished (physically and operationally, and for financial reporting purposes) from the other assets, results of operations, and activities of the entity. Business segments are distinguishable components of an enterprise engaged in providing different products or services, or a different group of related products or services, primarily to customers outside an enterprise. Geographical segments are distinguishable components of an enterprise engaged in operations in different countries or group of countries within particular geographical areas as may be determined to be appropriate in an enterprise's particular circumstances.