Financial Glossary

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F ( 76 DEFINITIONS )

Face value
The face value is the amount of principal owed on a debt instrument. top

Facility-level activities
Facility-level activities are activities that relate to overall production and therefore can't be traced to specific products. Costs associated with these activities pertain to a plant's general manufacturing process. An example might be plant maintenance. top

Factoring
Factoring is the sale, at a discount, of a corporation's accounts receivable. top

Fair market value (FMV)
Fair market value (FMV) is the value established between a buyer and a seller in an arm's length business transaction. Sometimes, FMV has to be estimated, which means that one has to estimate what a person would agree to pay to an unrelated third party. top

Fair value accounting
Fair market value (FMV) is the value established between a buyer and a seller in an arm's length business transaction. Sometimes, FMV has to be estimated, which means that one has to estimate what a person would agree to pay to an unrelated third party. top

Fair value accounting
Fair value accounting is accounting for transactions at the amount at which parties would be willing to buy or sell an asset or liability in an arm's-length transaction. top

Federal tax abatement
The federal tax abatement is a deduction from a corporation's tax otherwise payable, equal to 10 percent of its taxable income earned in a province. Any corporation (private or public) is entitled to this deduction provided it has income earned in a province. top

Feedback
Feedback involves accounting and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed. top

Feedback value
Feedback value is the capacity of information to assist decision-makers to confirm and/or correct prior decisions or assumptions. top

Fidelity bond
A fidelity bond is an insurance policy that covers most kinds of cash embezzlement losses. top

Fiduciary duty
Fiduciary duty means that a CGA is required under law to act in the best interest of the client by avoiding conflicts of interests, disclosing any material information, avoiding personal gain, acting in good faith, observing the client's instructions, and not breaching confidentiality. top

FIFO method
The FIFO method of accounting for cost flows in a processing costing system is a method in which equivalent units and unit costs relate only to work done during the current period. The FIFO method of costing inventory is one in which the first cost paid is the one assigned to cost of goods sold first. First in, first out. top

Final pay plans
Final pay plans are pension plans whereby the employee is entitled to benefits based on salary earned in the final year of service. top

Financial accounting
Financial accounting is the method used to report an organization's financial condition and result of operations to internal and external parties. top

Financial assets
Financial assets are paper assets as opposed to real assets (buildings, machinery, etc.). Cash or contractual rights to receive cash or another financial asset, or an exchange contract involving financial instruments. top

Financial forecast
A financial forecast is a forecast that presents, to the best of the preparer's knowledge and belief, an entity's expected financial position, results of operations, and changes in financial position; based on assumptions about expected conditions and expected courses of action. top

Financial futures contract
A financial futures contract is a futures contract where the underlying asset is a financial asset, such as a foreign currency or a bond. top

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

Financial leverage
Financial leverage arises from the partial use of debt or other fixed-income securities to finance investments. Fixed-financing charges have the effect of magnifying the potential variations of returns on the equity portion of the investment. The degree of financial leverage is sometimes defined as the percentage change in earnings per share caused by a given percentage change in earnings before interest and taxes. top

Financial liability
A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another party, or to exchange financial instruments with another party under conditions that are potentially unfavourable. top

Financial projection
A financial projection is similar to a financial forecast, with the important exception that a projection depends on one or more hypothetical assumptions. top

Financial re-organization
Financial re-organization is a form of financial restructuring involving a substantial realignment in the equity and debt claims on the assets of an entity; lenders may become shareholders and existing shareholders may lose some or all of their claims. top

Financial reporting
Financial reporting is the broad-based process of providing statements of financial position (balance sheets), statements of results of operations (income statements), statements of changes in financial position (cash flow statements), and accompanying disclosure notes (footnotes) to outside decision makers who have no internal source of information like the management of the company. top

Financial reporting releases (FRR)
Financial reporting releases (FRR) are Securities and Exchange Commission (SEC) publications of rules and policies about accounting and disclosures. top

Financial restructuring
Financial restructuring is to reconfigure a company's debt and equity or the terms of debt and/or equity financing; usually undertaken when a company is in financial difficulty in order to allow the company to remain in operation and avoid bankruptcy. top

Financial statements
Financial statements are the reports containing all financial transactions and events over a specific period of time. Financial statements include the income statement, the balance sheet, the statement of retained earnings and the cash flow statement. top

Financing activities
Financing activities is one of the sections of the cash flow statement. It reflects cash from and for transactions that affect long-term assets. The section deals with transactions with the owners of a business or transactions with its creditors to borrow money or to repay the principal amounts of loans. top

Financing expenses
Financing expenses are those incurred in the course of financing the issuance of shares or bonds, obtaining a bank loan, and so on, but do not include service fees. Examples of financing fees are legal and accounting fees to prepare prospectuses, printing of prospectuses, and commissions paid. top

Finer information
Finer information, in an accounting context, adds more detail to the existing historical cost-based statements. Examples would be expanded footnote disclosure or additional line items on the financial statements. top

Finished goods inventory
Finished goods inventory is the fully processed items held for sale, usually by a manufacturer. top

Finitely corrected
Finitely corrected is a sample size calculation that incorporates the population size in such a way that sample sizes larger than the population size cannot be produced. top

First-best contract
The first-best contract gives the owner the maximum obtainable utility and gives the agent the reservation utility. top

First-in first-out (FIFO)
First-in first-out, also known as FIFO, refers to a method of inventory costing that assigns the oldest cost value of purchases to the first unit sold. top

Fiscal period
A fiscal period of a business means the period for which the accounts in respect of the business are made up for purposes of an assessment by CCRA under the ITA. For an individual the fiscal period is the calendar year, December 31, provided the business is carried on in Canada. For corporations the fiscal period is its taxation year and it may end at any time in the calendar year. However, the taxation year may not end more than 53 weeks after the period began. top

Fiscal year
A fiscal year is any 12 consecutive months used by a business as its annual accounting period. top

Fixed assets
Fixed assets are tangible capital assets that benefit operations over multiple periods, usually represented by property, plant, and equipment. top

Fixed costs
Fixed costs do not vary in response to changes in activity. Such costs are fixed in total, but as activity changes they will be distributed over different numbers of units and will appear to vary on a per-unit basis. top

Fixed interest rate
A fixed interest rate is an interest rate that will not change over the term of the loan. top

Fixed manufacturing overhead cost released from inventory
Fixed manufacturing overhead cost released from inventory refers to the portion of the fixed manufacturing overhead cost of a prior period that becomes an expense of the current period under the absorption costing method as a result of sales exceeding production. top

Fixed overhead cost deferred in inventory
Fixed overhead cost deferred in inventory involves the portion of the fixed manufacturing overhead cost of a period that goes into inventory under the absorption costing method as a result of production exceeding sales. top

Fixed support
Fixed support is when the possible set of payoffs is fixed regardless of the agent's choice. top

Flexible budget
A flexible budget is a budget that is designed to cover a range of activity rather than a single point. It can be used to develop budgeted revenues and/or costs anywhere within that range to compare against actual results. top

Flexible manufacturing systems
Flexible manufacturing systems involve a production flow line in which cells are linked together with an automated material-handling system and that is controlled by a central computer. top

Floating interest rate
A floating interest rate is an interest rate that will vary in relation to some specified base rate such as the Canadian or U.S. prime rate or the London Inter-Bank Offering Rate (LIBOR). top

Flow line
A flow line is the physical path taken by a product as it moves through the manufacturing process from receipt of raw materials to shipment of completed units. top

Flow statement
A flow statement is a statement related to a specific period of time. Flow statements may take several different forms. Examples of flow statements include the cash flow statement and the statement of operations. top

Flow through method of inter-period tax allocation
The flow through method of inter-period tax allocation recognizes the amount of taxes payable assessed in each year as the income tax expense: current income tax payable = income tax expense. top

FOB
FOB is the abbreviation for "free on board." This is the designated point at which ownership of goods passes to the buyer. FOB shipping point (or factory) means that the buyer pays the shipping costs and FOB destination means that the seller pays the shipping cost. top

Focused factory
A focused factory is a single work centre that contains all of the machines needed to make a particular product. A focused factory is also known as a "factory within a factory." top

FOFI
FOFI is future-oriented financial information as described in section 4250 of the CICA Handbook. Note that FOFI is not required. The Handbook merely provides standards for those who wish to provide FOFI. top

Forced (induced) conversion
A forced or induced conversion is one whereby the issuer (the corporation) calls in the senior security for conversion to common shares when the cash value is less than the share value. This ensures that shares will be issued. If the security has a fixed maturity date, conversion will occur when the debt has matured and must be submitted for redemption. top

Foreign accrual property income (FAPI)
Foreign accrual property income (FAPI) includes income from property, income from businesses other than active businesses, and taxable capital gains from disposition of property that were not used principally to earn active business income. FAPI may be reduced by corresponding losses. Further determination of what constitutes FAPI in subsections 95(1) and 95(2). top

Foreign affiliate
A foreign affiliate of a taxpayer is a foreign corporation in which, at that time, the taxpayer's equity percentage was not less than 10 percent. Generally, a resident will have an equity percentage of 10 percent or more if the taxpayer holds, either directly or indirectly, 10 percent or more of the shares of any class of the capital stock of the foreign corporation. The shares may be non-voting and non-participating. top

Foreign exchange rate
A foreign exchange rate is the price of one currency stated in terms of another currency. top

Forensic accounting
Forensic accounting is the application of accounting and auditing skills to legal problems, both civil and criminal. top

Foreseeable beneficiaries
Foreseeable beneficiaries are creditors, investors, or potential investors who rely on an accountant's work. top

Forgivable loans
Forgivable loans are loans that are forgiven (do not need to be repaid) when certain conditions have been met, usually granted by a government unit. top

Forward contract
A forward contract is a contract specifying the price at which a future transaction is to take place. Unlike a futures contract, a forward contract is individually negotiated, not tradable, and not marked to market. top

Fraud
Fraud is an action of knowingly making material misrepresentations of fact with the intent of inducing someone to believe the falsehood and act upon it and thus suffer a loss or damage. top

Fraud auditing
Fraud auditing is a pro-active approach to detecting financial fraud using accounting records and information, analytical relationships, and an awareness of fraud perpetration and concealment efforts. top

Fraud examiners
Fraud examiners are people engaged specifically for fraud investigation work. top

Fraudulent financial reporting
Fraudulent financial reporting is also known as management fraud. This is intentional or reckless conduct, whether by act or omission, which results in materially misleading financial statements. top

Free-riding
Free-riding is the receipt by a firm or individual of a benefit from an externality. top

Freedom from bias (neutrality)
Freedom from bias is when information is not reflective of a particular viewpoint, a predetermined result, or a particular person's opinion. top

Freight-in
Freight-in refers to the freight costs associated with the purchase and receipt of inventory as distinct from freight-out, or delivery expenses related to sales to customers. top

Full cost
Full cost is the sum of all direct costs and a fair share of the applicable indirect costs of a cost object. Full cost approach in oil and gas accounting The full cost approach in oil and gas accounting capitalizes all costs of discovering reserves, including the cost of unsuccessful drilling. top

Full cost method
Full cost method, also known as absorption costing, is a method of costing that includes all manufacturing costs - direct materials, direct labour and both variable and fixed manufacturing overhead - in the cost of a unit of product. top

Full disclosure
Full disclosure is financial statement disclosure of all relevant information about the economic affairs of the corporation. top

Fully diluted earnings per share
Fully diluted earnings per share is a calculation of EPS based on the effect of exercising all potential conversions and options to acquire shares. It measures the long run impact that likely conversions will have on EPS. It excludes conversions and options that increase the ratio (anti-dilutive) and thus is meant to be a worst-case scenario. top

Fund concept
Fund concept is the assumption that the purpose of accounting is to trace the flow of funds in the corporation (versus proprietary concept or entity concept). top

Funding of pension plan
The funding of a pension plan is the manner (pattern) in which the employer remits the necessary contributions to the pension trustee. top

Future income tax asset
A future income tax asset is when the tax values of assets and liabilities exceed the carrying values, thereby resulting in a debit balance in the temporary differences account. The expectation is of less income tax payable in the future. top

Future income tax liability
A future income tax liability occurs when the carrying values of assets and liabilities exceed the tax values thereby resulting in a credit balance in the temporary differences account. The expectation is that of income taxes to be payable in the future. top

Future value
Future value is the projected future amount of money based on today's amount plus whatever interest, including compounded interest, is accumulated over a specific period of time. top

Futures contract
A futures contract is a contract specifying the price at which a future transaction is to take place. A futures contract, unlike a forward contract, is standardized, tradable, and marked to market. top

Futures option
A futures option is an option to enter a futures contract. top