Financial Glossary

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T ( 79 DEFINITIONS )

T-accounts
A T-account is an accounting form in the shape of a T used to demonstrate transactions. The left side of the T is used for debits and the right side for credits. top

Tailored accounting policies (TAP)
Tailored accounting policies (TAP) are those accounting policies used by an organization to reflect individual or unique needs different than GAAP. A disclosed basis of accounting. top

Tainting percentage
The tainting percentage is the ratio of misstatement in a sampling unit to the recorded amount of the sampling unit. top

Takeover market
The takeover market is the market for the entire firm. If a manager does not maximize firm value, the firm may be subject to a takeover bid that, if successful, frequently results in the replacement of the manager. top

Taking a bath
Taking a bath is an earnings management technique that involves further lowering already too low report earnings so as to increase the probability of receiving a bonus the following year by increasing profitability. The firm will write off assets, provide for future costs, and otherwise take all costs now to avoid taking them in the future. top

Tangible capital asset
Tangible capital assets are those capital assets of an enterprise such as property, plant, and equipment, that have physical characteristics or presence. top

Target costing
Target costing is a cost-planning method used during the research, development, and engineering cycle that focuses on products requiring discrete manufacturing processes and reasonable short life cycles. It can also be defined as the production cost of a proposed product such that when the product is sold it generates the desired profit margin. With target costing, more consideration is given in the early stages of product development to what the customer wants and needs and what they are willing to pay. The product is then designed around a cost objective. top

Target reduction rate
A target reduction rate is a mechanism used by kaizen that is a ratio of the target reduction amount and the cost base. top

Tax avoidance
Tax avoidance is viewed as acceptable tax planning, generally with the thought that if the ITA does not disallow something categorically, it is acceptable. Alleged loopholes or grey areas in the legislation are used to achieve tax planning objectives. CCRA has in place the General Anti-avoidance Rule (GAAR) to provide guidance as to what is an avoidance transaction or not. top

Tax conventions
Tax conventions or treaties are legal and binding agreements signed with various foreign countries. They take precedence over the ITA and their goal is to avoid double taxation where persons transact in both countries, prevent tax evasion, facilitate and encourage business transactions between the countries, determine the distribution of tax revenues to the governments of the contracting countries, and exchange tax-related information. top

Tax deductions at source
When an individual is an employee, the ITA requires that the employer deduct tax at source from wages and salaries, including the amount of taxable benefits received by employees, and then remit that tax to CCRA on the employee's behalf. top

Tax deferral
Tax deferral is a fundamental type of tax planning that allows a person to legally defer taxes on certain types of income to a later date due to specifications in the ITA that allow that income to be recognized in a subsequent year or by allowing certain deductions in the current taxation year. top

Tax evasion
Tax evasion is a deliberate violation of the ITA, such as the making of a false or deceptive statement on a return or supporting schedule; destroying records; making false entries or omitting entries in the accounting books; or willfully attempting to evade compliance with the ITA or the payment of tax. It generally results in criminal charges. top

Tax loss
Tax loss is the gross taxable loss of the company. It is accounting income adjusted for temporary and permanent differences as required by the Income Tax Act resulting in a net loss for tax purposes. This may be used as a carryback (for refund) or a carryforward (to avoid taxes otherwise payable in the future). top

Tax shield
A tax shield is the savings in tax payments that result from being allowed to claim an expense, thereby reducing taxable income. top

Taxable amount of the dividend
The taxable amount of the dividend is the grossed-up amount of the taxable dividend (1.25 taxable dividend) that an individual must include in its income. For corporate shareholders the taxable amount of the dividend is the same as the taxable dividend. top

Taxable benefits
Taxable benefits are non-cash benefits provided to employees by their employer. Taxable benefits arise only when the employee receives an economic advantage, and it is conferred in respect of, in the course of, or by virtue of the employment. The ITA brings into employment income the value of the benefits of any kind received by employees, subject to a few exceptions. Taxable benefits include automobile standby charges, gifts in cash or in kind, group term life insurance, holiday trips, housing, board and lodging, interest free and low-interest loans, provincial hospitalization and medical insurance plans, stock options, recreational facilities, and moving expenses. top

Taxable Canadian corporation
A taxable Canadian corporation means a corporation that is a Canadian corporation and is not exempt from Part I tax due to a statutory provision. top

Taxable capital gain
A taxpayer's taxable capital gain for a taxation year from the disposition of any property is 50 percent of the taxpayer's capital gain for the year from the disposition of that property. top

Taxable dividend
A taxable dividend means a dividend other than a capital dividend or a qualifying dividend. A taxable dividend must be received from a resident corporation. Any dividends received from non-resident corporations are just ordinary dividends. Note that the taxable dividend is the actual amount received by a shareholder. top

Technical analysis
Technical analysis is the use of patterns in past and present stock prices to predict future stock price changes. top

Technical notes
Technical notes accompany motions, draft legislation, and bills and their purpose is to help taxpayers gain a better understanding of the proposed changes to the ITA. They are explanatory only and do not have the force of law. top

Temporal method of translation
Under the temporal method of translation, non-monetary items on the balance sheet of a foreign subsidiary are translated into the currency of the parent company at the exchange rate in effect when those assets were acquired. Monetary items are translated at the rate in effect as of the date of the financial statements. top

Temporary accounts
Temporary accounts are also known as nominal accounts. These are general ledger accounts that are closed to retained earnings at the end of an accounting period. They are usually income statement accounts. top

Temporary differences
Temporary differences are differences wherein an item of revenue, expense, gain, or loss arises in determining accounting income in one period and for taxable income in another period. It is determined by comparing accounting balance sheet carry values with tax values (a balance sheet approach). top

Temporary investment
A temporary investment is an investment in debt or equity securities that can be liquidated quickly and is intended by management as a short-term use of cash. top

Ten percent corridor method of amortizing actuarial gains and losses
The 10% corridor method of amortizing actuarial gains and losses is a method of amortizing actuarial gains and losses only to the extent that the accumulated amount of actuarial gains and losses exceeds 10% of the greater of 1) the accrued obligation, and 2) the value of the plan assets at the beginning of the period. top

Tender offer
A tender offer is a general offer to all shareholders of a corporation to purchase some or all outstanding shares at a stated price. top

Term (of a loan)
The term of a loan is the period or duration during which the creditor is committed to extending a loan. The term of the loan may be shorter than the amortization period of the loan. top

Term loans
Term loans are debt financial instruments with a usual term of 1.5 to 5 years. Term loans may be secured by charges on specified assets including land, buildings, and other capital assets. top

Term preferred shares
Term preferred shares are preferred shares that allow investors to force repayment or repurchase of the securities by the company at an established redemption price at a specific point in time prior to maturity. top

Term structure of interest rates
The term structure of interest rates, also called the yield curve, is the relationship between the effective market yields on debt and their maturities. top

Terminal loss
A terminal loss occurs if, at the end of a fiscal year, all assets have been disposed of but a UCC balance still remains in the pool. This balance, called a terminal loss, is written off in full against business or property income. top

Test data
Test data is auditor-produced transactions used to audit programmed control procedures with simulated data. top

Test deck
A test deck is a sample of one of each possible combination of data fields that may be processed through the client's actual computer system. top

Tests of controls
Tests of controls are ordinary and extended procedures designed to produce evidence about the effectiveness of client controls that should be in operation. top

Theory of constraints
The theory of constraints is a management approach that emphasizes the importance of managing constraints. top

Thin capitalization rules
Thin capitalization rules restrict the deduction for loan interest paid or payable to specified non-residents where the capitalization is insufficient. This means that if the debts to specified non-residents exceed the shareholders' equity of the corporation by a ratio of more than three to one, the thin capitalization rules would apply. top

Throughput
Throughput is the total volume of production through a facility during a period. top

Throughput time (cycle time)
Throughput time, also known as cycle time, is the time required to make a completed unit of product starting with raw materials. top

Time and material pricing
Time and material pricing is a pricing method, often used in service firms, in which two pricing rates are established - one based on direct labour time and the other based on direct materials used. top

Time period assumption
The time period assumption is that the activities of a corporation can be divided into artificial time periods that by definition are shorter than the life span of the corporation. top

Time ticket
A time ticket is a detailed source document used to record an employee's hour-by-hour activities during a day. top

Time value of money
The time value of money is the rate at which the value of money is traded off as a function of time. Because money can be invested to earn a return, economic values of the same dollar amount received at different times are not equivalent. top

Timekeeping
Timekeeping is the payroll function of producing time cards or timesheets that provide a basis for payment to hourly workers. top

Timeliness
Timeliness is information delivered within an appropriately short time period so that it has usefulness (relevance) to influence decision-makers. top

Times debt service earned
Times debt service earned is a measure of solvency that looks at the ratio of interest and principal repayments to a measure of earnings. This measure looks at the ability of a company to service its debt load, including the repayment of principal. top

Times interest earned
Times interest earned is a solvency ratio that measures the ratio of interest expense to earnings before interest and taxes. It is a measure of the relative amount by which earning can decrease before there will be insufficient net income to pay interest. top

Timing (of audit procedures)
The timing of audit procedures refers to when procedures are performed: at interim before the balance sheet date, or at year-end shortly before and after the balance sheet date. top

Timing differences
Timing differences happen when an item of revenue, expense, gain, or loss arises in determining accounting income in one period and for taxable income in another period. It is determined by examining the current year differences between accounting and taxable income (an income statement approach). top

Tolerable deviation rate
The tolerable deviation rate is the amount of dollar misstatement that can exist undetected in an account and not cause financial statements to be considered materially misleading. top

Tort
A tort is a legal action covering civil complaints other than breach of contract; normally initiated by users of financial statements. top

Total asset turnover
Total asset turnover is a measure of how efficiently a company uses its assets to generate sales. It is calculated by dividing net sales by average total assets. top

Total quality management
Total quality management is an approach to continuous improvement that focuses on customers, and uses teams of front-line workers to systematically identify and solve problems. top

Tournament
A tournament is a part of the internal labour market. A tournament winner would be a winner of a promotion from a pool of candidates. A tournament, therefore, is a relative performance evaluation system. top

Tracing
Tracing is when an auditor selects sample items from basic source documents and proceeds forward through the accounting and control system to find the final recording of the accounting transaction. top

Trade accounts payable
Trade accounts payable are amounts owed to suppliers for goods and services purchased on credit. top

Trade accounts receivable
Trade accounts receivable are amounts due to a corporation due to sales of goods and services on credit. top

Trade credit
Tax credit is financing extended by a supplier to customers allowing for payment of goods or services to be made some time after the delivery date. top

Trade discount
A trade discount is a reduction below a list or catalogue price that is negotiated in setting the selling price of goods. top

Trade name
A trade name is a unique name used by a company in marketing its products or services. top

Trademark
A trademark is a unique symbol used by a company in marketing its products or services. top

Traditional approach
The traditional approach is an income statement format in which costs are organized and presented according to the functions of production, administration, and sales. top

Transaction
A transaction is an event requiring a journal entry. top

Transaction approach
The transaction approach is a method of assessing financial performance and position based on completed transactions rather than events. top

Transaction costs
Transaction costs are a type of agency cost. They include costs of negotiating and writing agreements; costs of enforcing contracts and monitoring; and costs of resolving disputes. top

Transaction driven
Transaction driven, also known as event driven, is computer data processing systems that start with each transaction event, individual transactions trigger the processing activity and all relevant files are updated. top

Transfer agent
A transfer agent is a fiduciary who handles the exchange of shares, cancelling the shares surrendered by sellers and issuing new certificates to buyers. top

Transfer price
Transfer price means an amount paid or payable or an amount received or receivable, as the case may be, by a participant in a transaction as a price, rental royalty, premium, or other payment for, or for the use, production, or reproduction of property, or as consideration for services as part of the transaction. top

Transfer pricing adjustment
If certain conditions are met, transfer pricing adjustments may apply to permit amendments to the amount and the nature of the transaction with the intent of the adjustments being establishing amounts that would have been determined if the transaction had been one that was entered into by persons dealing at arm's length with each other. top

Transfer pricing methods
The transfer pricing methods recommended by the CCRA are traditional transaction methods of which there are three. top

Transferred-in costs
Transferred-in costs are the amount of cost attached to units of product that have been received from a prior processing department. top

Trap doors
Trap doors are unauthorized computer program modules used solely for fraudulent purposes. top

Treasury bill
A treasury bill is an interest-bearing promissory note issued by governments with a maturity of less than one year. The return on treasury bills issued by the federal government is essentially risk free, as there is no risk of default and, because of the short maturities, interest-rate risk is minimal. top

Trial balance
A trial balance is a listing of all general ledger accounts, done to identify all accounts in the ledger and ensure that they balance. top

Troubled debt restructure
Trouble debt restructure is a form of financial restructuring wherein lenders accept lower amounts of cash or other assets but will not become shareholders, as in the case of a financial reorganization. top

Trust deed
A trust deed is also called an indenture. The contract drawn between a corporation that issues debt and a trust company acting as trustee for the creditors. The trust deed covers the various conditions and provisions under which the debt is issued. top

Trustee
A trustee is an independent administrator of assets (usually a financial institution) that maintains records of accounts and disburses appropriate payments. top

Trusteed pension plan
A trusteed pension plan is a pension plan in which an independent trustee receives plan contributions from the employer, invests in funds, and pays benefits as appropriate to the pensioners. top