Appendix C — Glossary of Selected Terms
This appendix contains selected glossary terms from ASC 820 and the
ASC master glossary.
ASC 820-10 Glossary and ASC Master
Glossary
Accretion Expense
An amount recognized as an expense classified as an operating
item in the statement of income resulting from the increase
in the carrying amount of the liability associated with the
asset retirement obligation.
Acquiree
The business or businesses that the acquirer obtains control
of in a business combination. This term also includes a
nonprofit activity or business that a not-for-profit
acquirer obtains control of in an acquisition by a
not-for-profit entity.
Acquirer
The entity that obtains control of the acquiree. However, in
a business combination in which a variable interest entity
(VIE) is acquired, the primary beneficiary of that entity
always is the acquirer.
Acquisition by a Not-for-Profit Entity
A transaction or other event in which a not-for-profit
acquirer obtains control of one or more nonprofit activities
or businesses and initially recognizes their assets and
liabilities in the acquirer’s financial statements. When
applicable guidance in Topic 805 is applied by a
not-for-profit entity, the term business combination has the
same meaning as this term has for a for-profit entity.
Likewise, a reference to business combinations in guidance
that links to Topic 805 has the same meaning as a reference
to acquisitions by not-for-profit entities.
Acquisition Date
The date on which the acquirer obtains control of the
acquiree.
Active Market
A market in which transactions for the asset or liability
take place with sufficient frequency and volume to provide
pricing information on an ongoing basis.
Actuarial Present Value
The value, as of a specified date, of an amount or series of
amounts payable or receivable thereafter, with each amount
adjusted to reflect the time value of money (through
discounts for interest) and the probability of payment (by
means of decrements for events such as death, disability,
withdrawal, or retirement) between the specified date and
the expected date of payment.
Adequate Compensation
The amount of benefits of servicing that would fairly
compensate a substitute servicer should one be required,
which includes the profit that would be demanded in the
marketplace. It is the amount demanded by the marketplace to
perform the specific type of servicing. Adequate
compensation is determined by the marketplace; it does not
vary according to the specific servicing costs of the
servicer.
Affiliate
A party that, directly or indirectly through
one or more intermediaries, controls, is controlled by, or
is under common control with an entity. See Control.
Affiliated Entity
An entity that directly or indirectly controls, is controlled
by, or is under common control with another entity; also, a
party with which the entity may deal if one party has the
ability to exercise significant influence over the other’s
operating and financial policies as discussed in Section
323-10-15.
Agency Transaction
A type of exchange transaction in which the reporting entity
acts as an agent, trustee, or intermediary for another party
that may be a donor or donee.
Agent
Definition 1
A party that acts for and on behalf of another party. For
example, a third-party intermediary is an agent of the
transferor if it acts on behalf of the transferor.
Definition 2
An entity that acts for and on behalf of another. Although
the term agency has a legal definition, the term is used
broadly to encompass not only legal agency, but also the
relationships described in Topic 958. A recipient entity
acts as an agent for and on behalf of a donor if it receives
assets from the donor and agrees to use those assets on
behalf of or transfer those assets, the return on investment
of those assets, or both to a specified beneficiary. A
recipient entity acts as an agent for and on behalf of a
beneficiary if it agrees to solicit assets from potential
donors specifically for the beneficiary’s use and to
distribute those assets to the beneficiary. A recipient
entity also acts as an agent if a beneficiary can compel the
recipient entity to make distributions to it or on its
behalf.
Allocated Contract
A contract with an insurance entity under
which payments to the insurance entity are currently used to
purchase immediate or deferred annuities for individual
participants. See Annuity
Contract.
Amortized Cost Basis
The amortized cost basis is the amount at
which a financing receivable or investment is originated or
acquired, adjusted for applicable accrued interest,
accretion, or amortization of premium, discount, and net
deferred fees or costs, collection of cash, writeoffs,
foreign exchange, and fair value hedge accounting
adjustments.
Annuity Contract
A contract in which an insurance entity unconditionally
undertakes a legal obligation to provide specified pension
benefits to specific individuals in return for a fixed
consideration or premium. An annuity contract is irrevocable
and involves the transfer of significant risk from the
employer to the insurance entity. Annuity contracts are also
called allocated contracts.
Asset Group
An asset group is the unit of accounting for a long-lived
asset or assets to be held and used, which represents the
lowest level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and
liabilities.
Asset Retirement Obligation
An obligation associated with the retirement of a tangible
long-lived asset.
Available-for-Sale Securities
Investments not classified as either trading securities or as
held-to-maturity securities.
Bankruptcy Court
The United States Bankruptcy Court is an adjunct of the
United States District Courts. Under the jurisdiction of the
District Court, the Bankruptcy Court is generally
responsible for cases filed under Chapters 7, 11, 12, and 13
of the Bankruptcy Code.
Benchmark Interest Rate
A widely recognized and quoted rate in an active financial
market that is broadly indicative of the overall level of
interest rates attributable to high-credit-quality obligors
in that market. It is a rate that is widely used in a given
financial market as an underlying basis for determining the
interest rates of individual financial instruments and
commonly referenced in interest-rate-related
transactions.
In theory, the benchmark interest rate should be a risk-free
rate (that is, has no risk of default). In some markets,
government borrowing rates may serve as a benchmark. In
other markets, the benchmark interest rate may be an
interbank offered rate.
Beneficial Interests
Rights to receive all or portions of specified cash inflows
received by a trust or other entity, including, but not
limited to, all of the following:
- Senior and subordinated shares of interest, principal, or other cash inflows to be passed-through or paid-through
- Premiums due to guarantors
- Commercial paper obligations
- Residual interests, whether in the form of debt or equity.
Benefits
The monetary or in-kind benefits or benefit coverage to which
participants may be entitled under a pension plan or a
health and welfare plan (which can include active,
terminated, and retired employees or their dependents or
beneficiaries). Examples of benefits may include, but are
not limited to, health care benefits, life insurance, legal,
educational, and advisory services, pension benefits,
disability benefits, death benefits, and benefits due to
termination of employment.
Benefits of Servicing
Revenues from contractually specified servicing fees, late
charges, and other ancillary sources, including float.
Brokered Market
A market in which brokers attempt to match buyers with
sellers but do not stand ready to trade for their own
account. In other words, brokers do not use their own
capital to hold an inventory of the items for which they
make a market. The broker knows the prices bid and asked by
the respective parties, but each party is typically unaware
of another party’s price requirements. Prices of completed
transactions are sometimes available. Brokered markets
include electronic communication networks, in which buy and
sell orders are matched, and commercial and residential real
estate markets.
Business
Paragraphs 805-10-55-3A through 55-6 and 805-10-55-8 through
55-9 define what is considered a business.
Business Combination
A transaction or other event in which an
acquirer obtains control of one or more businesses.
Transactions sometimes referred to as true mergers or
mergers of equals also are business combinations. See also
Acquisition by a
Not-for-Profit Entity.
Call Option
A contract that allows the holder to buy a
specified quantity of stock from the writer of the contract
at a fixed price for a given period. See Option and Purchased Call Option.
Carrying Amount
Definition 1
For a receivable, the face amount increased or decreased by
applicable accrued interest and applicable unamortized
premium, discount, finance charges, or issue costs and also
an allowance for uncollectible amounts and other valuation
accounts.
For a payable, the face amount increased or
decreased by applicable accrued interest and applicable
unamortized premium, discount, finance charges, or issue
costs.
Definition 2
The amount of an item as displayed in the financial
statements.
Cash
Consistent with common usage, cash includes not only currency
on hand but demand deposits with banks or other financial
institutions. Cash also includes other kinds of accounts
that have the general characteristics of demand deposits in
that the customer may deposit additional funds at any time
and also effectively may withdraw funds at any time without
prior notice or penalty. All charges and credits to those
accounts are cash receipts or payments to both the entity
owning the account and the bank holding it. For example, a
bank’s granting of a loan by crediting the proceeds to a
customer’s demand deposit account is a cash payment by the
bank and a cash receipt of the customer when the entry is
made.
Cash Equivalents
Cash equivalents are short-term, highly liquid investments
that have both of the following characteristics:
- Readily convertible to known amounts of cash
- So near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
Generally, only investments with original maturities of three
months or less qualify under that definition. Original
maturity means original maturity to the entity holding the
investment. For example, both a three-month U.S. Treasury
bill and a three-year U.S. Treasury note purchased three
months from maturity qualify as cash equivalents. However, a
Treasury note purchased three years ago does not become a
cash equivalent when its remaining maturity is three months.
Examples of items commonly considered to be cash equivalents
are Treasury bills, commercial paper, money market funds,
and federal funds sold (for an entity with banking
operations).
Cash Flow Hedge
A hedge of the exposure to variability in the cash flows of a
recognized asset or liability, or of a forecasted
transaction, that is attributable to a particular risk.
Cease-Use Date
The date the entity ceases using the right conveyed by the
contract, for example, to receive future goods or
services.
Charitable Gift Annuity
A transfer of assets to a not-for-profit entity (NFP) in
connection with a split-interest agreement that is in part a
contribution and in part an exchange transaction. The NFP
accepts the contribution and is obligated to make periodic
stipulated payments to the donor or a third-party
beneficiary for a specified period of time, usually either a
specified number of years or until the death of the donor or
third-party beneficiary.
Charitable Lead Trust
A trust established in connection with a split-interest
agreement, in which a not-for-profit entity (NFP) receives
distributions during the agreement’s term. Upon termination
of the trust, the remainder of the trust assets is paid to
the donor or to third-party beneficiaries designated by the
donor.
Charitable Remainder Trust
A trust established in connection with a split-interest
agreement, in which the donor or a third-party beneficiary
receives specified distributions during the agreement’s
term. Upon termination of the trust, a not-for-profit entity
(NFP) receives the assets remaining in the trust.
Collateral
Personal or real property in which a security interest has
been given.
Collateralized Financing Entity
A variable interest entity that holds financial assets,
issues beneficial interests in those financial assets, and
has no more than nominal equity. The beneficial interests
have contractual recourse only to the related assets of the
collateralized financing entity and are classified as
financial liabilities. A collateralized financing entity may
hold nonfinancial assets temporarily as a result of default
by the debtor on the underlying debt instruments held as
assets by the collateralized financing entity or in an
effort to restructure the debt instruments held as assets by
the collateralized financing entity. A collateralized
financing entity also may hold other financial assets and
financial liabilities that are incidental to the operations
of the collateralized financing entity and have carrying
values that approximate fair value (for example, cash,
broker receivables, or broker payables).
Committed-to-Be-Released Shares
Committed-to-be-released shares are shares that, although not
legally released, will be released by a future scheduled and
committed debt service payment and will be allocated to
employees for service rendered in the current accounting
period. The period of employee service to which shares
relate is generally defined in the employee stock ownership
plan documents. Shares are legally released from suspense
and from serving as collateral for employee stock ownership
plan debt as a result of payment of debt service. Those
shares are required to be allocated to participant accounts
as of the end of the employee stock ownership plan’s fiscal
year. Formulas used to determine the number of shares
released can be based on either of the following:
- The ratio of the current principal amount to the total original principal amount (in which case unearned employee stock ownership plan shares and debt balance will move in tandem)
- The ratio of the current principal plus interest amount to the total original principal plus interest to be paid.
Shares are released more rapidly under the second method than
under the first. Tax law permits the first method only if
the employee stock ownership plan debt meets certain
criteria.
Common Interest Realty Association
An association, also known as a community association,
responsible for the governance of the common interest
community, for which it was established to serve. A common
interest realty association is generally funded by its
members via periodic assessments by the common interest
realty association so that it can perform its duties, which
include management services and maintenance, repair, and
replacement of the common property, among other duties
established in the governing documents and by state
statute.
Common Property
A common interest realty association’s real or personal
property to which title or other evidence of ownership is
held by either:
- Individual members in common
- The common interest realty association directly.
Communication Date
The date the plan of termination for one-time employee
termination benefits meets all of the criteria in paragraph
420-10-25-4 and has been communicated to employees.
Comprehensive Income
The change in equity (net assets) of a business 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.
Comprehensive income comprises both of the following:
- All components of net income
- All components of other comprehensive income.
Conditional Asset Retirement Obligation
A legal obligation to perform an asset retirement activity in
which the timing and (or) method of settlement are
conditional on a future event that may or may not be within
the control of the entity.
Conditional Contribution
A contribution that contains a donor-imposed condition.
Conduit Debt Securities
Certain limited-obligation revenue bonds, certificates of
participation, or similar debt instruments issued by a state
or local governmental entity for the express purpose of
providing financing for a specific third party (the conduit
bond obligor) that is not a part of the state or local
government’s financial reporting entity. Although conduit
debt securities bear the name of the governmental entity
that issues them, the governmental entity often has no
obligation for such debt beyond the resources provided by a
lease or loan agreement with the third party on whose behalf
the securities are issued. Further, the conduit bond obligor
is responsible for any future financial reporting
requirements.
Contingency
An existing condition, situation, or set of circumstances
involving uncertainty as to possible gain (gain contingency)
or loss (loss contingency) to an entity that will ultimately
be resolved when one or more future events occur or fail to
occur.
Contingent Consideration
Usually an obligation of the acquirer to transfer additional
assets or equity interests to the former owners of an
acquiree as part of the exchange for control of the acquiree
if specified future events occur or conditions are met.
However, contingent consideration also may give the acquirer
the right to the return of previously transferred
consideration if specified conditions are met.
Continuing Involvement
Any involvement with the transferred financial assets that
permits the transferor to receive cash flows or other
benefits that arise from the transferred financial assets or
that obligates the transferor to provide additional cash
flows or other assets to any party related to the transfer.
For related implementation guidance, see paragraph
860-10-55-79A.
Contract
An agreement between two or more parties that creates
enforceable rights and obligations.
Contract Value
The value of an unallocated contract that is determined by
the insurance entity in accordance with the terms of the
contract.
Contractually Required Payments Receivable
The total undiscounted amount of all uncollected contractual
principal and contractual interest payments both past due
and scheduled for the future, adjusted for the timing of
prepayments, if considered, less any reduction by the
investor. For an acquired asset-backed security with
required contractual payments of principal and interest, the
contractually required payments receivable is represented by
the contractual terms of the security. However, when
contractual payments of principal and interest are not
specified by the security, it is necessary to consider the
contractual terms of the underlying loans or assets.
Contractually Specified Servicing Fees
All amounts that, per contract, are due to the servicer in
exchange for servicing the financial asset and would no
longer be received by a servicer if the beneficial owners of
the serviced assets (or their trustees or agents) were to
exercise their actual or potential authority under the
contract to shift the servicing to another servicer.
Depending on the servicing contract, those fees may include
some or all of the difference between the interest rate
collectible on the financial asset being serviced and the
rate to be paid to the beneficial owners of those financial
assets.
Contribution
An unconditional transfer of cash or other assets, as well as
unconditional promises to give, to an entity or a reduction,
settlement, or cancellation of its liabilities in a
voluntary nonreciprocal transfer by another entity acting
other than as an owner. Those characteristics distinguish
contributions from:
- Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate value
- Investments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its owners
- Other nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers.
In a contribution transaction, the resource
provider often receives value indirectly by providing a
societal benefit although that benefit is not considered to
be of commensurate value. In an exchange transaction, the
potential public benefits are secondary to the potential
direct benefits to the resource provider. The term
contribution revenue is used to apply to
transactions that are part of the entity’s ongoing major or
central activities (revenues), or are peripheral or
incidental to the entity (gains). See also Inherent Contribution and
Conditional
Contribution.
Contributory Plan
A plan under which retirees or active employees contribute
part of the cost. In some contributory plans, retirees or
active employees wishing to be covered must contribute; in
other contributory plans, participants’ contributions result
in increased benefits.
Control
Definition 1
The possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of an
entity through ownership, by contract, or otherwise.
Definition 2
The direct or indirect ability to determine the direction of
management and policies through ownership, contract, or
otherwise.
Definition 3
The same as the meaning of controlling financial interest in
paragraph 810-10-15-8.
Corporate Joint Venture
A corporation owned and operated by a small group of entities
(the joint venturers) as a separate and specific business or
project for the mutual benefit of the members of the group.
A government may also be a member of the group. The purpose
of a corporate joint venture frequently is to share risks
and rewards in developing a new market, product or
technology; to combine complementary technological
knowledge; or to pool resources in developing production or
other facilities. A corporate joint venture also usually
provides an arrangement under which each joint venturer may
participate, directly or indirectly, in the overall
management of the joint venture. Joint venturers thus have
an interest or relationship other than as passive investors.
An entity that is a subsidiary of one of the joint venturers
is not a corporate joint venture. The ownership of a
corporate joint venture seldom changes, and its stock is
usually not traded publicly. A noncontrolling interest held
by public ownership, however, does not preclude a
corporation from being a corporate joint venture.
Cost Approach
A valuation approach that reflects the amount that would be
required currently to replace the service capacity of an
asset (often referred to as current replacement cost).
Credit Derivative
A derivative instrument that has both of the following
characteristics:
- One or more of its underlyings are related to any of
the following:
- The credit risk of a specified entity (or a group of entities)
- An index based on the credit risk of a group of entities.
- It exposes the seller to potential loss from credit-risk-related events specified in the contract.
Examples of credit derivatives include, but
are not limited to, credit default swaps, credit spread
options, and credit index products.
Credit Risk
For purposes of a hedged item in a fair value hedge, credit
risk is the risk of changes in the hedged item’s fair value
attributable to both of the following:
- Changes in the obligor’s creditworthiness
- Changes in the spread over the benchmark interest rate with respect to the hedged item’s credit sector at inception of the hedge.
For purposes of a hedged transaction in a cash flow hedge,
credit risk is the risk of changes in the hedged
transaction’s cash flows attributable to all of the
following:
- Default
- Changes in the obligor’s creditworthiness
- Changes in the spread over the contractually specified interest rate or the benchmark interest rate with respect to the related financial asset’s or liability’s credit sector at inception of the hedge.
Currency Risk
The risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in
foreign exchange rates.
Customer
A party that has contracted with an entity to obtain goods or
services that are an output of the entity’s ordinary
activities in exchange for consideration.
Dealer Market
A market in which dealers stand ready to trade (either buy or
sell for their own account), thereby providing liquidity by
using their capital to hold an inventory of the items for
which they make a market. Typically, bid and ask prices
(representing the price at which the dealer is willing to
buy and the price at which the dealer is willing to sell,
respectively) are more readily available than closing
prices. Over-the-counter markets (for which prices are
publicly reported by the National Association of Securities
Dealers Automated Quotations systems or by OTC Markets Group
Inc.) are dealer markets. For example, the market for U.S.
Treasury securities is a dealer market. Dealer markets also
exist for some other assets and liabilities, including other
financial instruments, commodities, and physical assets (for
example, used equipment).
Debt-Equity Swap
A debt-equity swap is an exchange
transaction of a monetary asset for a nonmonetary asset.
Debt Security
Any security representing a creditor relationship with an
entity. The term debt security also includes all of the
following:
- Preferred stock that by its terms either must be redeemed by the issuing entity or is redeemable at the option of the investor
- A collateralized mortgage obligation (or other instrument) that is issued in equity form but is required to be accounted for as a nonequity instrument regardless of how that instrument is classified (that is, whether equity or debt) in the issuer’s statement of financial position
- U.S. Treasury securities
- U.S. government agency securities
- Municipal securities
- Corporate bonds
- Convertible debt
- Commercial paper
- All securitized debt instruments, such as collateralized mortgage obligations and real estate mortgage investment conduits
- Interest-only and principal-only strips.
The term debt security excludes all of the following:
- Option contracts
- Financial futures contracts
- Forward contracts
- Lease contracts
- Receivables that do not meet the definition of
security and, so, are not debt securities,
for example:
- Trade accounts receivable arising from sales on credit by industrial or commercial entities
- Loans receivable arising from consumer, commercial, and real estate lending activities of financial institutions.
Defensive Intangible Asset
An acquired intangible asset in a situation in which an
entity does not intend to actively use the asset but intends
to hold (lock up) the asset to prevent others from obtaining
access to the asset.
Defined Benefit Plan
A defined benefit plan provides participants with a
determinable benefit based on a formula provided for in the
plan.
- Defined benefit health and welfare plans — Defined benefit health and welfare plans specify a determinable benefit, which may be in the form of a reimbursement to the covered plan participant or a direct payment to providers or third-party insurers for the cost of specified services. Such plans may also include benefits that are payable as a lump sum, such as death benefits. The level of benefits may be defined or limited based on factors such as age, years of service, and salary. Contributions may be determined by the plan’s actuary or be based on premiums, actual claims paid, hours worked, or other factors determined by the plan sponsor. Even when a plan is funded pursuant to agreements that specify a fixed rate of employer contributions (for example, a collectively bargained multiemployer plan), such a plan may nevertheless be a defined benefit health and welfare plan if its substance is to provide a defined benefit.
- Defined benefit pension plan — A pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service, or compensation. Any pension plan that is not a defined contribution pension plan is, for purposes of Subtopic 715-30, a defined benefit pension plan.
- Defined benefit postretirement plan — A plan that defines postretirement benefits in terms of monetary amounts (for example, $100,000 of life insurance) or benefit coverage to be provided (for example, up to $200 per day for hospitalization, or 80 percent of the cost of specified surgical procedures). Any postretirement benefit plan that is not a defined contribution postretirement plan is, for purposes of Subtopic 715-60, a defined benefit postretirement plan. (Specified monetary amounts and benefit coverage are collectively referred to as benefits.)
Defined Contribution Plan
A plan that provides an individual account
for each participant and provides benefits that are based on
all of the following: amounts contributed to the
participant’s account by the employer or employee;
investment experience; and any forfeitures allocated to the
account, less any administrative expenses charged to the
plan.
- Defined contribution health and welfare plans — Defined contribution health and welfare plans maintain an individual account for each plan participant. They have terms that specify the means of determining the contributions to participants’ accounts, rather than the amount of benefits the participants are to receive. The benefits a plan participant will receive are limited to the amount contributed to the participant’s account, investment experience, expenses, and any forfeitures allocated to the participant’s account. These plans also include flexible spending arrangements.
- Defined contribution postretirement plan — A plan that provides postretirement benefits in return for services rendered, provides an individual account for each plan participant, and specifies how contributions to the individual’s account are to be determined rather than specifies the amount of benefits the individual is to receive. Under a defined contribution postretirement plan, the benefits a plan participant will receive depend solely on the amount contributed to the plan participant’s account, the returns earned on investments of those contributions, and the forfeitures of other plan participants’ benefits that may be allocated to that plan participant’s account.
Derecognize
Remove previously recognized assets or liabilities from the
statement of financial position.
Derivative Financial Instrument
A derivative instrument that is a financial instrument.
Derivative Instrument
Paragraphs 815-10-15-83 through 15-139 define the term
derivative instrument.
Direct Financing Lease
From the perspective of a lessor, a lease that meets none of
the criteria in paragraph 842-10-25-2 but meets the criteria
in paragraph 842-10-25-3(b).
Direct Financing Leases
From the perspective of a lessor, a lease that meets none of
the criteria in paragraph 842-10-25-2 but meets the criteria
in paragraph 842-10-25-3(b) and is not an operating lease in
accordance with paragraph 842-10-25-3A.
Discount Rate
A rate or rates used to reflect the time
value of money. Discount rates are used in determining the
present value as of the measurement date of future cash
flows currently expected to be required to satisfy the
pension obligation or other postretirement benefit
obligation. See Actuarial Present
Value.
Discount Rate Adjustment Technique
A present value technique that uses a risk-adjusted discount
rate and contractual, promised, or most likely cash
flows.
Disposal Group
A disposal group for a long-lived asset or assets to be
disposed of by sale or otherwise represents assets to be
disposed of together as a group in a single transaction and
liabilities directly associated with those assets that will
be transferred in the transaction. A disposal group may
include a discontinued operation along with other assets and
liabilities that are not part of the discontinued
operation.
Donor-Imposed Condition
A donor stipulation (donors include other types of
contributors, including makers of certain grants) that
represents a barrier that must be overcome before the
recipient is entitled to the assets transferred or promised.
Failure to overcome the barrier gives the contributor a
right of return of the assets it has transferred or gives
the promisor a right of release from its obligation to
transfer its assets.
Donor-Imposed Restriction
A donor stipulation (donors include other types of
contributors, including makers of certain grants) that
specifies a use for a contributed asset that is more
specific than broad limits resulting from the following:
- The nature of the not-for-profit entity (NFP)
- The environment in which it operates
- The purposes specified in its articles of incorporation or bylaws or comparable documents for an unincorporated association.
Some donors impose restrictions that are temporary in nature,
for example, stipulating that resources be used after a
specified date, for particular programs or services, or to
acquire buildings or equipment. Other donors impose
restrictions that are perpetual in nature, for example,
stipulating that resources be maintained in perpetuity. Laws
may extend those limits to investment returns from those
resources and to other enhancements (diminishments) of those
resources. Thus, those laws extend donor-imposed
restrictions.
Embedded Credit Derivative
An embedded derivative that is also a credit derivative.
Embedded Derivative
Implicit or explicit terms that affect some or all of the
cash flows or the value of other exchanges required by a
contract in a manner similar to a derivative instrument.
Employee Stock Ownership Plan
An employee stock ownership plan is an employee benefit plan
that is described by the Employee Retirement Income Security
Act of 1974 and the Internal Revenue Code of 1986 as a stock
bonus plan, or combination stock bonus and money purchase
pension plan, designed to invest primarily in employer
stock. Also called an employee share ownership plan.
Entry Price
The price paid to acquire an asset or received to assume a
liability in an exchange transaction.
Equity Interests
Used broadly to mean ownership interests of investor-owned
entities; owner, member, or participant interests of mutual
entities; and owner or member interests in the net assets of
not-for-profit entities.
Equity Security
Definition 1
Any security representing an ownership interest in an entity
(for example, common, preferred, or other capital stock) or
the right to acquire (for example, warrants, rights, forward
purchase contracts, and call options) or dispose of (for
example, put options and forward sale contracts) an
ownership interest in an entity at fixed or determinable
prices. The term equity security does not include any of the
following:
- Written equity options (because they represent obligations of the writer, not investments)
- Cash-settled options on equity securities or options on equity-based indexes (because those instruments do not represent ownership interests in an entity)
- Convertible debt or preferred stock that by its terms either must be redeemed by the issuing entity or is redeemable at the option of the investor.
Definition 2
Any security representing an ownership interest in an entity
(for example, common, preferred, or other capital stock) or
the right to acquire (for example, warrants, rights, forward
purchase contracts, and call options) or dispose of (for
example, put options and forward sale contracts) an
ownership interest in an entity at fixed or determinable
prices. However, the term does not include convertible debt
or preferred stock that by its terms either must be redeemed
by the issuing entity or is redeemable at the option of the
investor.
Exchange
An exchange (or exchange transaction) is a reciprocal
transfer between two entities that results in one of the
entities acquiring assets or services or satisfying
liabilities by surrendering other assets or services or
incurring other obligations.
Exchange Market
A market in which closing prices are both readily available
and generally representative of fair value. An example of
such a market is the New York Stock Exchange.
Exit Price
The price that would be received to sell an asset or paid to
transfer a liability.
Expected Cash Flow
The probability-weighted average (that is, mean of the
distribution) of possible future cash flows.
Fail-to-Receive
A fail-to-receive is a securities purchase from another
broker-dealer not received from the selling broker-dealer by
the close of business on the settlement date.
Fair Value
The price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between
market participants at the measurement date.
Fair Value Hedge
A hedge of the exposure to changes in the fair value of a
recognized asset or liability, or of an unrecognized firm
commitment, that are attributable to a particular risk.
Federal Home Loan Mortgage Corporation
Often referred to as Freddie Mac, FHLMC is a private
corporation authorized by Congress to assist in the
development and maintenance of a secondary market in
conventional residential mortgages. FHLMC purchases mortgage
loans and sells mortgages principally through mortgage
participation certificates representing an undivided
interest in a group of conventional mortgages. FHLMC
guarantees the timely payment of interest and the collection
of principal on the participation certificates.
Federal National Mortgage Association
Often referred to as Fannie Mae, FNMA is an investor-owned
corporation established by Congress to support the secondary
mortgage loan market by purchasing mortgage loans when other
investor funds are limited and selling mortgage loans when
other investor funds are available.
Film Group
The unit of account used for impairment testing for a film or
a license agreement for program material when the film or
license agreement is expected to be predominantly monetized
with other films and/or license agreements instead of being
predominantly monetized on its own. A film group represents
the lowest level for which identifiable cash flows are
largely independent of the cash flows of other films and/or
license agreements.
Films
Feature films, television specials, television series, or
similar products (including animated films and television
programming) that are sold, licensed, or exhibited, whether
produced on film, video tape, digital, or other video
recording format.
Finance Lease
From the perspective of a lessee, a lease that meets one or
more of the criteria in paragraph 842-10-25-2.
Financial Asset
Cash, evidence of an ownership interest in an entity, or a
contract that conveys to one entity a right to do either of
the following:
- Receive cash or another financial instrument from a second entity
- Exchange other financial instruments on potentially favorable terms with the second entity.
Financial Instrument
Cash, evidence of an ownership interest in an entity, or a
contract that both:
- Imposes on one entity a contractual obligation
either:
- To deliver cash or another financial instrument to a second entity
- To exchange other financial instruments on potentially unfavorable terms with the second entity.
- Conveys to that second entity a contractual right
either:
- To receive cash or another financial instrument from the first entity
- To exchange other financial instruments on potentially favorable terms with the first entity.
The use of the term financial instrument in this definition
is recursive (because the term financial instrument is
included in it), though it is not circular. The definition
requires a chain of contractual obligations that ends with
the delivery of cash or an ownership interest in an entity.
Any number of obligations to deliver financial instruments
can be links in a chain that qualifies a particular contract
as a financial instrument.
Contractual rights and contractual obligations encompass both
those that are conditioned on the occurrence of a specified
event and those that are not. All contractual rights
(contractual obligations) that are financial instruments
meet the definition of asset (liability) set forth in FASB
Concepts Statement No. 6, Elements of Financial Statements,
although some may not be recognized as assets (liabilities)
in financial statements — that is, they may be
off-balance-sheet — because they fail to meet some other
criterion for recognition.
For some financial instruments, the right is held by or the
obligation is due from (or the obligation is owed to or by)
a group of entities rather than a single entity.
Pending Content (Transition Guidance:
ASC 105-10-65-9)
Cash, evidence of an ownership
interest in an entity, or a contract that both:
- Imposes on one entity a
contractual obligation either:
- To deliver cash or another financial instrument to a second entity
- To exchange other financial instruments on potentially unfavorable terms with the second entity.
- Conveys to that second entity
a contractual right either:
- To receive cash or another financial instrument from the first entity
- To exchange other financial instruments on potentially favorable terms with the first entity.
The use of the term financial instrument in
this definition is recursive (because the term
financial instrument is included in it), though it
is not circular. The definition requires a chain
of contractual obligations that ends with the
delivery of cash or an ownership interest in an
entity. Any number of obligations to deliver
financial instruments can be links in a chain that
qualifies a particular contract as a financial
instrument.
Contractual rights and contractual obligations
encompass both those that are conditioned on the
occurrence of a specified event and those that are
not. Some contractual rights (contractual
obligations) that are financial instruments may
not be recognized in financial statements—that is,
they may be off-balance-sheet—because they fail to
meet some other criterion for recognition.
For some financial instruments, the right is
held by or the obligation is due from (or the
obligation is owed to or by) a group of entities
rather than a single entity.
Financial Liability
A contract that imposes on one entity an obligation to do
either of the following:
- Deliver cash or another financial instrument to a second entity
- Exchange other financial instruments on potentially unfavorable terms with the second entity.
Financial Statements Are Available to Be Issued
Financial statements are considered available to be issued
when they are complete in a form and format that complies
with GAAP and all approvals necessary for issuance have been
obtained, for example, from management, the board of
directors, and/or significant shareholders. The process
involved in creating and distributing the financial
statements will vary depending on an entity’s management and
corporate governance structure as well as statutory and
regulatory requirements.
Firm Commitment
Definition 1
An agreement with a third party that is binding on both
parties. The agreement specifies all significant terms,
including items to be exchanged, consideration, and timing
of the transaction. The agreement includes a disincentive
for nonperformance that is sufficiently large to ensure the
expected performance. In the context of episodic television
series, a firm commitment for future production includes
only episodes to be delivered within one year from the date
of the estimate of ultimate revenue.
Definition 2
An agreement with an unrelated party, binding on both parties
and usually legally enforceable, with the following
characteristics:
- The agreement specifies all significant terms, including the quantity to be exchanged, the fixed price, and the timing of the transaction. The fixed price may be expressed as a specified amount of an entity’s functional currency or of a foreign currency. It may also be expressed as a specified interest rate or specified effective yield. The binding provisions of an agreement are regarded to include those legal rights and obligations codified in the laws to which such an agreement is subject. A price that varies with the market price of the item that is the subject of the firm commitment cannot qualify as a fixed price. For example, a price that is specified in terms of ounces of gold would not be a fixed price if the market price of the item to be purchased or sold under the firm commitment varied with the price of gold.
- The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable. In the legal jurisdiction that governs the agreement, the existence of statutory rights to pursue remedies for default equivalent to the damages suffered by the nondefaulting party, in and of itself, represents a sufficiently large disincentive for nonperformance to make performance probable for purposes of applying the definition of a firm commitment.
Forward Commitment Dollar Roll
Forward Exchange Contract
A forward exchange contract is an agreement between two
parties to exchange different currencies at a specified
exchange rate at an agreed-upon future date.
Freestanding Financial Instrument
A financial instrument that meets either of the following
conditions:
- It is entered into separately and apart from any of the entity’s other financial instruments or equity transactions.
- It is entered into in conjunction with some other transaction and is legally detachable and separately exercisable.
Fully Benefit-Responsive Investment Contract
An investment contract is considered fully benefit-responsive
if all of the following criteria are met for that contract,
analyzed on an individual basis:
- The investment contract is effected directly between the plan and the issuer and prohibits the plan from assigning or selling the contract or its proceeds to another party without the consent of the issuer.
- Either of the following conditions exists:
- The repayment of principal and interest credited to participants in the plan is a financial obligation of the issuer of the investment contract.
- Prospective interest crediting rate adjustments are provided to participants in the plan on a designated pool of investments held by the plan or the contract issuer, whereby a financially responsible third party, through a contract generally referred to as a wrapper, must provide assurance that the adjustments to the interest crediting rate will not result in a future interest crediting rate that is less than zero.
If an event has occurred such that realization of full contract value for a particular investment contract is no longer probable (for example, a significant decline in creditworthiness of the contract issuer or wrapper provider), the investment contract shall no longer be considered fully benefit-responsive. - The terms of the investment contract require all
permitted participant-initiated transactions with
the plan to occur at contract value with no
conditions, limits, or restrictions. Permitted
participant-initiated transactions are those
transactions allowed by the plan, such as any of the
following:
- Withdrawals for benefits
- Loans
- Transfers to other funds within the plan.
- An event that limits the ability of the plan to
transact at contract value with the issuer and that
also limits the ability of the plan to transact at
contract value with the participants in the plan,
such as any of the following, must be probable of
not occurring:
- Premature termination of the contracts by the plan
- Plant closings
- Layoffs
- Plan termination
- Bankruptcy
- Mergers
- Early retirement incentives.
- The plan itself must allow participants reasonable access to their funds.
If access to funds is substantially restricted by plan
provisions, investment contracts held by those plans may not
be considered to be fully benefit-responsive. For example,
if plan participants are allowed access at contract value to
all or a portion of their account balances only upon
termination of their participation in the plan, it would not
be considered reasonable access and, therefore, investment
contracts held by that plan would generally not be deemed to
be fully benefit-responsive. However, in plans with a single
investment fund that allow reasonable access to assets by
inactive participants, restrictions on access to assets by
active participants consistent with the objective of the
plan (for example, retirement or health and welfare
benefits) will not affect the benefit responsiveness of the
investment contracts held by those single-fund plans. Also,
if a plan limits participants’ access to their account
balances to certain specified times during the plan year
(for example, semiannually or quarterly) to control the
administrative costs of the plan, that limitation generally
would not affect the benefit responsiveness of the
investment contracts held by that plan. In addition,
administrative provisions that place short-term restrictions
(for example, three or six months) on transfers to competing
fixed-rate investment options to limit arbitrage among those
investment options (equity wash provisions) would not affect
a contract’s benefit responsiveness.
Gain Contingency
An existing condition, situation, or set of circumstances
involving uncertainty as to possible gain to an entity that
will ultimately be resolved when one or more future events
occur or fail to occur.
General Account
Definition 1
An undivided fund maintained by an insurance entity that
commingles plan assets with other assets of the insurance
entity for investment purposes. That is, funds held by an
insurance entity that are not maintained in a separate
account are in its general account.
Definition 2
All operations of an insurance entity that are not reported
in the separate account(s).
Goodwill
An asset representing the future economic benefits arising
from other assets acquired in a business combination or an
acquisition by a not-for-profit entity that are not
individually identified and separately recognized. For ease
of reference, this term also includes the immediate charge
recognized by not-for-profit entities in accordance with
paragraph 958-805-25-29.
Pending Content (Transition
Guidance: ASC 805-60-65-1)
An asset representing the
future economic benefits arising from other assets
acquired in a business combination, acquired in an
acquisition by a not-for-profit entity, or
recognized by a joint venture upon formation that
are not individually identified and separately
recognized. For ease of reference, this term also
includes the immediate charge recognized by
not-for-profit entities in accordance with
paragraph 958-805-25-29.
Government National Mortgage Association
Often referred to as Ginnie Mae, GNMA is a U.S. governmental
agency that guarantees certain types of mortgage-backed
securities and provides funds for and administers certain
types of low-income housing assistance programs.
Government National Mortgage Association Rolls
The term Government National Mortgage Association (GNMA)
rolls has been used broadly to refer to a variety of
transactions involving mortgage-backed securities,
frequently those issued by the GNMA. There are four basic
types of transactions:
- Type 1. Reverse repurchase agreements for which the exact same security is received at the end of the repurchase period (vanilla repo)
- Type 2. Fixed coupon dollar reverse repurchase agreements (dollar repo)
- Type 3. Fixed coupon dollar reverse repurchase agreements that are rolled at their maturities, that is, renewed in lieu of taking delivery of an underlying security (GNMA roll)
- Type 4. Forward commitment dollar rolls (also referred to as to-be-announced GNMA forward contracts or to-be-announced GNMA rolls), for which the underlying security does not yet exist.
Group Participating Pension Contracts
Contracts between insurance entities and pension plans that
have account balance crediting provisions that give the
contract holder the total return based on a referenced pool
of assets over the life of the contract either through
crediting rates or termination adjustments.
Health and Welfare Benefit Plans
Health and welfare benefit plans include plans that provide
the following:
- Any of the following benefits:
- Medical, dental, visual, psychiatric, or long-term health care
- Life insurance (offered separately from a pension plan)
- Certain severance benefits
- Accidental death or dismemberment benefits.
- Benefits for unemployment, disability, vacations, or holidays
- Other benefits such as apprenticeships, tuition assistance, day care, dependent care, housing subsidies, or legal services.
Highest and Best Use
The use of a nonfinancial asset by market participants that
would maximize the value of the asset or the group of assets
and liabilities (for example, a business) within which the
asset would be used.
Hybrid Instrument
A contract that embodies both an embedded derivative and a
host contract.
Identifiable
An asset is identifiable if it meets either of the following
criteria:
- It is separable, that is, capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset, or liability, regardless of whether the entity intends to do so.
- It arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
Impairment
Impairment is the condition that exists when the carrying
amount of a long-lived asset (asset group) exceeds its fair
value.
Income Approach
Valuation approaches that convert future amounts (for
example, cash flows or income and expenses) to a single
current (that is, discounted) amount. The fair value
measurement is determined on the basis of the value
indicated by current market expectations about those future
amounts.
Inherent Contribution
A contribution that results if an entity voluntarily
transfers assets (or net assets) or performs services for
another entity in exchange for either no assets or for
assets of substantially lower value and unstated rights or
privileges of a commensurate value are not involved.
Inputs
The assumptions that market participants would use when
pricing the asset or liability, including assumptions about
risk, such as the following:
- The risk inherent in a particular valuation technique used to measure fair value (such as a pricing model)
- The risk inherent in the inputs to the valuation technique.
Inputs may be observable or unobservable.
Insurance Contract
A contract in which an insurance entity unconditionally
undertakes a legal obligation to provide specified benefits
to specific individuals in return for a fixed consideration
or premium. An insurance contract is irrevocable and
involves the transfer of significant risk from the employer
(or the plan) to the insurance entity.
Intangible Assets
Assets (not including financial assets) that lack physical
substance. (The term intangible assets is used to refer to
intangible assets other than goodwill.)
Interest Rate Risk
For recognized variable-rate financial instruments and
forecasted issuances or purchases of variable-rate financial
instruments, interest rate risk is the risk of changes in
the hedged item’s cash flows attributable to changes in the
contractually specified interest rate in the agreement.
For recognized fixed-rate financial instruments, interest
rate risk is the risk of changes in the hedged item’s fair
value attributable to changes in the designated benchmark
interest rate. For forecasted issuances or purchases of
fixed-rate financial instruments, interest rate risk is the
risk of changes in the hedged item’s cash flows attributable
to changes in the designated benchmark interest rate.
Intermediary
Although in general usage the term intermediary encompasses a
broad range of situations in which an entity acts between
two or more other parties, in this usage, it refers to
situations in which a recipient entity acts as a facilitator
for the transfer of assets between a potential donor and a
potential beneficiary (donee) but is neither an agent or
trustee nor a donee and donor.
Investee
An entity that issued an equity instrument that is held by an
investor.
Issuer
The entity that issued a financial instrument or may be
required under the terms of a financial instrument to issue
its equity shares.
Issuer’s Equity Shares
The equity shares of any entity whose financial statements
are included in the consolidated financial statements.
Lead Interest
The right to the benefits (cash flows or use) of assets
during the term of a split-interest agreement, which
generally starts upon the signing of the agreement and
terminates at either of the following times:
- After a specified number of years (period-certain)
- Upon the occurrence of a certain event, commonly either the death of the donor or the death of the lead interest beneficiary (life-contingent).
Lease
A contract, or part of a contract, that conveys the right to
control the use of identified property, plant, or equipment
(an identified asset) for a period of time in exchange for
consideration.
Legal Entity
Any legal structure used to conduct activities or to hold
assets. Some examples of such structures are corporations,
partnerships, limited liability companies, grantor trusts,
and other trusts.
Legal Obligation
An obligation that a party is required to settle as a result
of an existing or enacted law, statute, ordinance, or
written or oral contract or by legal construction of a
contract under the doctrine of promissory estoppel.
Lessee
An entity that enters into a contract to obtain the right to
use an underlying asset for a period of time in exchange for
consideration.
Lessor
An entity that enters into a contract to provide the right to
use an underlying asset for a period of time in exchange for
consideration.
Level 1 Inputs
Quoted prices (unadjusted) in active markets for identical
assets or liabilities that the reporting entity can access
at the measurement date.
Level 2 Inputs
Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly
or indirectly.
Level 3 Inputs
Unobservable inputs for the asset or liability.
Liability Issued With an Inseparable Third-Party Credit
Enhancement
A liability that is issued with a credit enhancement obtained
from a third party, such as debt that is issued with a
financial guarantee from a third party that guarantees the
issuer’s payment obligation.
License Agreement
A typical license agreement for program material (for
example, features, specials, series, or cartoons) covers
several programs (a package) and grants a television
station, group of stations, network, pay television, or
cable television system (licensee) the right to broadcast
either a specified number or an unlimited number of showings
over a maximum period of time (license period) for a
specified fee.
Life Settlement Contract
A life settlement contract is a contract between the owner of
a life insurance policy (the policy owner) and a third-party
investor (investor), and has all of the following
characteristics:
- The investor does not have an insurable interest (an interest in the survival of the insured, which is required to support the issuance of an insurance policy).
- The investor provides consideration to the policy owner of an amount in excess of the current cash surrender value of the life insurance policy.
- The contract pays the face value of the life insurance policy to an investor when the insured dies.
Liquidity
An asset’s or liability’s nearness to cash. Donor-imposed
restrictions may influence the liquidity or cash flow
patterns of certain assets. For example, a donor stipulation
that donated cash be used to acquire land and buildings
limits an entity’s ability to take effective actions to
respond to unexpected opportunities or needs, such as
emergency disaster relief. On the other hand, some
donor-imposed restrictions have little or no influence on
cash flow patterns or an entity’s financial flexibility. For
example, a gift of cash with a donor stipulation that it be
used for emergency-relief efforts has a negligible impact on
an entity if emergency relief is one of its major ongoing
programs.
Loan
Definition 1
A contractual right to receive money on demand or on fixed or
determinable dates that is recognized as an asset in the
creditor’s statement of financial position. Examples include
but are not limited to accounts receivable (with terms
exceeding one year) and notes receivable. This definition
encompasses loans accounted for as debt securities.
Definition 2
A contractual right to receive money on demand or on fixed or
determinable dates that is recognized as an asset in the
creditor’s statement of financial position. Examples include
but are not limited to accounts receivable (with terms
exceeding one year) and notes receivable.
Loan Commitment
Loan commitments are legally binding
commitments to extend credit to a counterparty under certain
prespecified terms and conditions. They have fixed
expiration dates and may either be fixed-rate or
variable-rate. Loan commitments can be either of the
following:
- Revolving (in which the amount of the overall commitment is reestablished upon repayment of previously drawn amounts)
- Nonrevolving (in which the amount of the overall commitment is not reestablished upon repayment of previously drawn amounts).
Loan commitments can be distributed through
syndication arrangements, in which one entity acts as a lead
and an agent on behalf of other entities that will each
extend credit to a single borrower. Loan commitments
generally permit the lender to terminate the arrangement
under the terms of covenants negotiated under the
agreement.
Loan Origination Fees
Origination fees consist of all of the following:
- Fees that are being charged to the borrower as prepaid interest or to reduce the loan’s nominal interest rate, such as interest buy-downs (explicit yield adjustments)
- Fees to reimburse the lender for origination activities
- Other fees charged to the borrower that relate directly to making the loan (for example, fees that are paid to the lender as compensation for granting a complex loan or agreeing to lend quickly)
- Fees that are not conditional on a loan being granted by the lender that receives the fee but are, in substance, implicit yield adjustments because a loan is granted at rates or terms that would not have otherwise been considered absent the fee (for example, certain syndication fees addressed in paragraph 310-20-25-19)
- Fees charged to the borrower in connection with the process of originating, refinancing, or restructuring a loan. This term includes, but is not limited to, points, management, arrangement, placement, application, underwriting, and other fees pursuant to a lending or leasing transaction and also includes syndication and participation fees to the extent they are associated with the portion of the loan retained by the lender.
Loan Syndication
A transaction in which several lenders share in lending to a
single borrower. Each lender loans a specific amount to the
borrower and has the right to repayment from the borrower.
It is common for groups of lenders to jointly fund those
loans when the amount borrowed is greater than any one
lender is willing to lend.
Loss Contingency
An existing condition, situation, or set of circumstances
involving uncertainty as to possible loss to an entity that
will ultimately be resolved when one or more future events
occur or fail to occur. The term loss is used for
convenience to include many charges against income that are
commonly referred to as expenses and others that are
commonly referred to as losses.
Management
Persons who are responsible for achieving the objectives of
the entity and who have the authority to establish policies
and make decisions by which those objectives are to be
pursued. Management normally includes members of the board
of directors, the chief executive officer, chief operating
officer, vice presidents in charge of principal business
functions (such as sales, administration, or finance), and
other persons who perform similar policy making functions.
Persons without formal titles also may be members of
management.
Mandatorily Redeemable Financial Instrument
Any of various financial instruments issued in the form of
shares that embody an unconditional obligation requiring the
issuer to redeem the instrument by transferring its assets
at a specified or determinable date (or dates) or upon an
event that is certain to occur.
Market Approach
A valuation approach that uses prices and other relevant
information generated by market transactions involving
identical or comparable (that is, similar) assets,
liabilities, or a group of assets and liabilities, such as a
business.
Market-Corroborated
Inputs
Inputs that are derived principally from or
corroborated by observable market data by correlation or
other means.
Market Participants
Buyers and sellers in the principal (or most advantageous)
market for the asset or liability that have all of the
following characteristics:
- They are independent of each other, that is, they are not related parties, although the price in a related-party transaction may be used as an input to a fair value measurement if the reporting entity has evidence that the transaction was entered into at market terms
- They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary
- They are able to enter into a transaction for the asset or liability
- They are willing to enter into a transaction for the asset or liability, that is, they are motivated but not forced or otherwise compelled to do so.
Market Risk
The risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in
market prices. Market risk comprises the following:
- Interest rate risk
- Currency risk
- Other price risk.
Market Risk Benefit
Pending Content (Transition Guidance: ASC
944-40-65-2)
A contract or contract feature
in a long-duration contract issued by an insurance
entity that both protects the contract holder from
other-than-nominal capital market risk and exposes
the insurance entity to other-than-nominal capital
market risk.
Mining Assets
Mining assets include mineral properties and rights.
Mortgage-Backed Securities
Securities issued by a governmental agency or corporation
(for example, Government National Mortgage Association
[GNMA] or Federal Home Loan Mortgage Corporation [FHLMC]) or
by private issuers (for example, Federal National Mortgage
Association [FNMA], banks, and mortgage banking entities).
Mortgage-backed securities generally are referred to as
mortgage participation certificates or pass-through
certificates. A participation certificate represents an
undivided interest in a pool of specific mortgage loans.
Periodic payments on GNMA participation certificates are
backed by the U.S. government. Periodic payments on FHLMC
and FNMA certificates are guaranteed by those corporations,
but are not backed by the U.S. government.
Most Advantageous Market
The market that maximizes the amount that would be received
to sell the asset or minimizes the amount that would be paid
to transfer the liability, after taking into account
transaction costs and transportation costs.
Multiemployer Plan
A pension or postretirement benefit plan to
which two or more unrelated employers contribute, usually
pursuant to one or more collective-bargaining agreements. A
characteristic of multiemployer plans is that assets
contributed by one participating employer may be used to
provide benefits to employees of other participating
employers since assets contributed by an employer are not
segregated in a separate account or restricted to provide
benefits only to employees of that employer. A multiemployer
plan is usually administered by a board of trustees composed
of management and labor representatives and may also be
referred to as a joint trust or union plan. Generally, many
employers participate in a multiemployer plan, and an
employer may participate in more than one plan. The
employers participating in multiemployer plans usually have
a common industry bond, but for some plans the employers are
in different industries and the labor union may be their
only common bond. Some multiemployer plans do not involve a
union. For example, local chapters of a not-for-profit
entity (NFP) may participate in a plan established by the
related national organization.
Mutual Entity
An entity other than an investor-owned entity that provides
dividends, lower costs, or other economic benefits directly
and proportionately to its owners, members, or participants.
Mutual insurance entities, credit unions, and farm and rural
electric cooperatives are examples of mutual entities.
Net Asset Value per Share
Net asset value per share is the amount of net assets
attributable to each share of capital stock (other than
senior equity securities, that is, preferred stock)
outstanding at the close of the period. It excludes the
effects of assuming conversion of outstanding convertible
securities, whether or not their conversion would have a
diluting effect.
Net Assets
The excess or deficiency of assets over
liabilities of a not-for-profit entity, which is divided
into two mutually exclusive classes according to the
existence or absence of donor-imposed restrictions. See
Net Assets With Donor
Restrictions and Net Assets Without Donor Restrictions.
Net Assets Available for Benefits
The difference between a plan’s assets and its liabilities.
For purposes of this definition, a plan’s liabilities do not
include participants’ accumulated plan benefits.
Net Assets With Donor Restrictions
The part of net assets of a not-for-profit entity that is
subject to donor-imposed restrictions (donors include other
types of contributors, including makers of certain
grants).
Net Assets Without Donor Restrictions
The part of net assets of a not-for-profit entity that is not
subject to donor-imposed restrictions (donors include other
types of contributors, including makers of certain
grants).
Net Carrying Amount of Debt
Net carrying amount of debt is the amount
due at maturity, adjusted for unamortized premium, discount,
and cost of issuance.
Net Income
A measure of financial performance resulting from the
aggregation of revenues, expenses, gains, and losses that
are not items of other comprehensive income. A variety of
other terms such as net earnings or earnings may be used to
describe net income.
Net Income Unitrust
A trust established in connection with a split-interest
agreement, in which the donor or a third-party beneficiary
receives distributions during the agreement’s term of the
lesser of the net income earned by the trust or a fixed
percentage of the fair value of the trust’s assets, with or
without recovery and distribution of the shortfall in a
subsequent year. Upon termination of the trust, a
not-for-profit entity (NFP) receives the assets remaining in
the trust.
Net Investment in an Original Loan
The net investment in an original loan includes the unpaid
loan principal, any remaining unamortized net fees or costs,
any remaining unamortized purchase premium or discount, and
any accrued interest receivable.
Net Periodic Pension Cost
The amount recognized in an employer’s financial statements
as the cost of a pension plan for a period. Components of
net periodic pension cost are service cost, interest cost,
actual return on plan assets, gain or loss, amortization of
prior service cost or credit, and amortization of the
transition asset or obligation existing at the date of
initial application of Subtopic 715-30. The term net
periodic pension cost is used instead of net pension expense
because the service cost component recognized in a period
may be capitalized as part of an asset such as
inventory.
Net Periodic Postretirement Benefit Cost
The amount recognized in an employer’s financial statements
as the cost of a postretirement benefit plan for a period.
Components of net periodic postretirement benefit cost
include service cost, interest cost, actual return on plan
assets, gain or loss, amortization of prior service cost or
credit, and amortization of the transition obligation or
asset.
Network Affiliation Agreement
A broadcaster may be affiliated with a network under a
network affiliation agreement. Under the agreement, the
station receives compensation for the network programming
that it carries based on a formula designed to compensate
the station for advertising sold on a network basis and
included in network programming. Program costs, a major
expense of television stations, are generally lower for a
network affiliate than for an independent station because an
affiliate does not incur program costs for network
programs.
New Basis Event
See Remeasurement
Event.
Noncontrolling Interest
The portion of equity (net assets) in a subsidiary not
attributable, directly or indirectly, to a parent. A
noncontrolling interest is sometimes called a minority
interest.
Nonfinancial Asset
An asset that is not a financial asset. Nonfinancial assets
include land, buildings, use of facilities or utilities,
materials and supplies, intangible assets, or services.
Nonmonetary Assets and Liabilities
Nonmonetary assets and liabilities are assets and liabilities
other than monetary ones. Examples are inventories;
investments in common stocks; property, plant, and
equipment; and liabilities for rent collected in
advance.
Nonperformance Risk
The risk that an entity will not fulfill an obligation.
Nonperformance risk includes, but may not be limited to, the
reporting entity’s own credit risk.
Nonpublic Entity
Any entity that does not meet any of the following
conditions:
- Its debt or equity securities trade in a public market either on a stock exchange (domestic or foreign) or in an over-the-counter market, including securities quoted only locally or regionally.
- It is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets).
- It files with a regulatory agency in preparation for the sale of any class of debt or equity securities in a public market.
- It is required to file or furnish financial statements with the Securities and Exchange Commission.
- It is controlled by an entity covered by criteria (a) through (d).
Nonreciprocal Transfer
Definition 1
Nonreciprocal transfer is a transfer of assets or services in
one direction, either from an entity to its owners (whether
or not in exchange for their ownership interests) or to
another entity, or from owners or another entity to the
entity. An entity’s reacquisition of its outstanding stock
is an example of a nonreciprocal transfer.
Definition 2
A transaction in which an entity incurs a liability or
transfers an asset to another entity (or receives an asset
or cancellation of a liability) without directly receiving
(or giving) value in exchange.
Not-for-Profit Entity
An entity that possesses the following characteristics, in
varying degrees, that distinguish it from a business
entity:
- Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return
- Operating purposes other than to provide goods or services at a profit
- Absence of ownership interests like those of business entities.
Entities that clearly fall outside this definition include
the following:
- All investor-owned entities
- Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.
Observable Inputs
Inputs that are developed using market data, such as publicly
available information about actual events or transactions,
and that reflect the assumptions that market participants
would use when pricing the asset or liability.
One-Time Employee Termination Benefits
Benefits provided to current employees that are involuntarily
terminated under the terms of a one-time benefit
arrangement.
Operating Lease
From the perspective of a lessee, any lease other than a
finance lease.
From the perspective of a lessor, any lease other than a
sales-type lease or a direct financing lease.
Option
Unless otherwise stated, a call option that
gives the holder the right to purchase shares of common
stock from the reporting entity in accordance with an
agreement upon payment of a specified amount. Options
include, but are not limited to, options granted and stock
purchase agreements entered into with grantees. Options are
considered securities. See Call
Option.
Orderly Transaction
A transaction that assumes exposure to the market for a
period before the measurement date to allow for marketing
activities that are usual and customary for transactions
involving such assets or liabilities; it is not a forced
transaction (for example, a forced liquidation or distress
sale).
Other Comprehensive Income
Revenues, expenses, gains, and losses that under generally
accepted accounting principles (GAAP) are included in
comprehensive income but excluded from net income.
Other Price Risk
The risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in
market prices (other than those arising from interest rate
risk or currency risk), whether those changes are caused by
factors specific to the individual financial instrument or
its issuer or by factors affecting all similar financial
instruments traded in the market.
Owners
Used broadly to include holders of ownership interests
(equity interests) of investor-owned entities, mutual
entities, or not-for-profit entities. Owners include
shareholders, partners, proprietors, or members or
participants of mutual entities. Owners also include owner
and member interests in the net assets of not-for-profit
entities.
Participating Insurance
Insurance in which the policyholder is entitled to
participate in the earnings or surplus of the insurance
entity. The participation occurs through the distribution of
dividends to policyholders.
Participating Interest
Paragraph 860-10-40-6A defines the term participating
interest.
Participation Costs
Parties involved in the production of a film may be
compensated in part by contingent payments based on the
financial results of a film pursuant to contractual formulas
(participations) and by contingent amounts due under
provisions of collective bargaining agreements (residuals).
Such parties are collectively referred to as participants,
and such costs are collectively referred to as participation
costs. Participations may be given to creative talent, such
as actors or writers, or to entities from whom distribution
rights are licensed.
Participation Right
A purchaser’s right under a participating insurance contract
to receive future dividends or retroactive rate credits from
the insurance entity.
Performance Indicator
A performance indicator reports results of operations. A
performance indicator and the income from continuing
operations reported by for-profit health care entities
generally are consistent, except for transactions that
clearly are not applicable to one kind of entity (for
example, for-profit health care entities typically would not
receive contributions, and not-for-profit health care
entities would not award stock compensation). That is, a
performance indicator is analogous to income from continuing
operations of a for-profit entity.
Perpetual Trust Held by a Third Party
An arrangement in which a donor establishes and funds a
perpetual trust administered by an individual or entity
other than the not-for-profit entity (NFP) that is the
beneficiary. Under the terms of the trust, the NFP has the
irrevocable right to receive the income earned on the trust
assets in perpetuity, but never receives the assets held in
trust. Distributions received by the NFP may be restricted
by the donor.
Phase
A contractually or physically distinguishable portion of a
real estate project (including time-sharing projects). That
portion is distinguishable from other portions based on
shared characteristics such as:
- Units a developer has declared or legally registered to be for sale
- Units linked to an owners association
- Units to be constructed during a particular time period
- How a developer plans to build the real estate project.
Physical Settlement
Definition 1
A form of settling a financial instrument under which both of
the following conditions are met:
- The party designated in the contract as the buyer delivers the full stated amount of cash or other financial instruments to the seller.
- The seller delivers the full stated number of shares of stock or other financial instruments or nonfinancial instruments to the buyer.
Definition 2
The party designated in the contract as the buyer delivers
the full stated amount of cash to the seller, and the seller
delivers the full stated number of shares to the buyer.
Plan
An arrangement that is mutually understood
by an employer and its employees, whereby an employer
undertakes to provide its employees with benefits after they
retire in exchange for their services over a specified
period of time, upon attaining a specified age while in
service, or a combination of both. A plan may be written or
it may be implied by a well-defined, although perhaps
unwritten, practice of paying postretirement benefits or
from oral representations made to current or former
employees. See Substantive
Plan.
Plan Assets
Definition 1
Assets — usually stocks, bonds, and other investments (except
certain insurance contracts as noted in paragraph
715-60-35-109) — that have been segregated and restricted
(usually in a trust) to be used for a health and welfare
plan (which can include active, terminated, and retired
employees or their dependents or beneficiaries). The amount
of plan assets includes amounts contributed by the employer,
and by plan participants for a contributory plan, and
amounts earned from investing the contributions, less
benefits, income taxes, and other expenses incurred. Plan
assets ordinarily cannot be withdrawn by the employer except
under certain circumstances when a plan has assets in excess
of obligations and the employer has taken certain steps to
satisfy existing obligations. Securities of the employer
held by the plan are includable in plan assets provided they
are transferable.
Assets not segregated in a trust, or otherwise effectively
restricted, so that they cannot be used by the employer for
other purposes are not plan assets, even though the employer
may intend that those assets be used to provide health and
welfare benefits, which may include postretirement benefits.
Those assets shall be accounted for in the same manner as
other employer assets of a similar nature and with similar
restrictions. If a plan has liabilities other than for
benefits, those nonbenefit obligations are considered as
reductions of plan assets. Amounts accrued by the employer
but not yet paid to the plan are not plan assets. If a trust
arrangement explicitly provides that segregated assets are
available to satisfy claims of creditors in bankruptcy, such
a provision would effectively permit those assets to be used
for other purposes at the discretion of the employer. It is
not necessary to determine that a trust is bankruptcy-proof
for the assets of the trust to qualify as plan assets.
However, assets held in a trust that explicitly provides
that such assets are available to the general creditors of
the employer in the event of the employer’s bankruptcy would
not qualify as plan assets.
Definition 2
Assets — usually stocks, bonds, and other investments — that
have been segregated and restricted, usually in a trust, to
provide for pension benefits. The amount of plan assets
includes amounts contributed by the employer, and by
employees for a contributory plan, and amounts earned from
investing the contributions, less benefits paid. Plan assets
ordinarily cannot be withdrawn by the employer except under
certain circumstances when a plan has assets in excess of
obligations and the employer has taken certain steps to
satisfy existing obligations. Assets not segregated in a
trust or otherwise effectively restricted so that they
cannot be used by the employer for other purposes are not
plan assets even though it may be intended that such assets
be used to provide pensions. If a plan has liabilities other
than for benefits, those nonbenefit obligations may be
considered as reductions of plan assets. Amounts accrued by
the employer but not yet paid to the plan are not plan
assets. Securities of the employer held by the plan are
includable in plan assets provided they are
transferable.
Pooled Income Fund
A trust in which donors are assigned a specific number of
units based on the proportion of the fair value of their
contributions to the total fair value of the pooled income
fund on the date of the donor’s entry to the pooled fund.
Until a donor’s death, the donor (or the donor’s designated
beneficiary or beneficiaries) is paid the actual income (as
defined under the arrangement) earned on the donor’s
assigned units. Upon the donor’s death, the value of these
assigned units reverts to the NFP.
Postretirement Benefit Plan
See Plan.
Prepaid Reinsurance Premiums
Amounts paid to the reinsurer relating to the unexpired
portion of reinsured contracts.
Present Value
A tool used to link future amounts (cash
flows or values) to a present amount using a discount rate
(an application of the income approach). Present value
techniques differ in how they adjust for risk and in the
type of cash flows they use. See Discount Rate Adjustment Technique.
Primary Beneficiary
An entity that consolidates a variable interest entity (VIE).
See paragraphs 810-10-25-38 through 25-38J for guidance on
determining the primary beneficiary.
Principal Market
The market with the greatest volume and
level of activity for the asset or liability.
Principal-to-Principal Market
A market in which transactions, both originations and
resales, are negotiated independently with no intermediary.
Little information about those transactions may be made
available publicly.
Probable
The future event or events are likely to
occur.
Probable Reserves
Probable reserves are reserves for which quantity and grade
and/or quality are computed from information similar to that
used for proven reserves, but the sites for inspection,
sampling, and measurement are farther apart or are otherwise
less adequately spaced. The degree of assurance, although
lower than that for proven (measured) reserves, is high
enough to assume continuity between points of
observation.
Proceeds
Cash, beneficial interests, servicing assets, derivative
instruments, or other assets that are obtained in a transfer
of financial assets, less any liabilities incurred.
Producer
An individual or an entity that produces and has a financial
interest in films for exhibition in movie theaters, on
television, or elsewhere.
Promise to Give
A written or oral agreement to contribute cash or other
assets to another entity. A promise carries rights and
obligations — the recipient of a promise to give has a right
to expect that the promised assets will be transferred in
the future, and the maker has a social and moral obligation,
and generally a legal obligation, to make the promised
transfer. A promise to give may be either conditional or
unconditional.
Proven Reserves
Proven reserves are reserves for which both of the following
conditions are met:
- Quantity is computed from dimensions revealed in outcrops, trenches, workings, or drill holes; grade and/or quality are computed from the results of detailed sampling.
- The sites for inspection, sampling, and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth, and mineral content of reserves are well established.
Public Business Entity
A public business entity is a business entity meeting any one
of the criteria below. Neither a not-for-profit entity nor
an employee benefit plan is a business entity.
- It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing).
- It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC.
- It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer.
- It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market.
- It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion.
An entity may meet the definition of a public business entity
solely because its financial statements or financial
information is included in another entity’s filing with the
SEC. In that case, the entity is only a public business
entity for purposes of financial statements that are filed
or furnished with the SEC.
Publicly Traded Company
A publicly traded company includes any company whose
securities trade in a public market on either of the
following:
- A stock exchange (domestic or foreign)
- In the over-the-counter market (including securities quoted only locally or regionally), or any company that is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets).
Additionally, when a company is required to file or furnish
financial statements with the SEC or makes a filing with a
regulatory agency in preparation for sale of its securities
in a public market it is considered a publicly traded
company for this purpose.
Conduit debt securities refers to certain limited-obligation
revenue bonds, certificates of participation, or similar
debt instruments issued by a state or local governmental
entity for the express purpose of providing financing for a
specific third party (the conduit bond obligor) that is not
a part of the state or local government’s financial
reporting entity. Although conduit debt securities bear the
name of the governmental entity that issues them, the
governmental entity often has no obligation for such debt
beyond the resources provided by a lease or loan agreement
with the third party on whose behalf the securities are
issued. Further, the conduit bond obligor is responsible for
any future financial reporting requirements.
Purchased Call Option
A contract that allows the reporting entity
to buy a specified quantity of its own stock from the writer
of the contract at a fixed price for a given period. See
Call Option.
Purchased Financial Assets With Credit
Deterioration
Acquired individual financial assets (or
acquired groups of financial assets with similar risk
characteristics) that as of the date of acquisition have
experienced a more-than-insignificant deterioration in
credit quality since origination, as determined by an
acquirer’s assessment. See paragraph 326-20-55-5 for more
information on the meaning of similar risk characteristics
for assets measured on an amortized cost basis.
Pushdown Accounting
Use of the acquirer’s basis in the preparation of the
acquiree’s separate financial statements.
Rabbi Trusts
Rabbi trusts are grantor trusts generally set up to fund
compensation for a select group of management or highly paid
executives. To qualify as a rabbi trust for income tax
purposes, the terms of the trust agreement must explicitly
state that the assets of the trust are available to satisfy
the claims of general creditors in the event of bankruptcy
of the employer.
Reacquisition Price of Debt
The amount paid on extinguishment, including a call premium
and miscellaneous costs of reacquisition. If extinguishment
is achieved by a direct exchange of new securities, the
reacquisition price is the total present value of the new
securities.
Readily Determinable Fair Value
An equity security has a readily determinable fair value if
it meets any of the following conditions:
- The fair value of an equity security is readily determinable if sales prices or bid-and-asked quotations are currently available on a securities exchange registered with the U.S. Securities and Exchange Commission (SEC) or in the over-the-counter market, provided that those prices or quotations for the over-the-counter market are publicly reported by the National Association of Securities Dealers Automated Quotations systems or by OTC Markets Group Inc. Restricted stock meets that definition if the restriction terminates within one year.
- The fair value of an equity security traded only in a foreign market is readily determinable if that foreign market is of a breadth and scope comparable to one of the U.S. markets referred to above.
- The fair value of an equity security that is an investment in a mutual fund or in a structure similar to a mutual fund (that is, a limited partnership or a venture capital entity) is readily determinable if the fair value per share (unit) is determined and published and is the basis for current transactions.
Recipient Entity
A not-for-profit entity (NFP) or charitable trust that
accepts assets from a donor or other resource provider and
agrees to use those assets on behalf of or transfer those
assets, the return on investment of those assets, or both to
a beneficiary that is specified by the donor or resource
provider.
Reinsurance
A transaction in which a reinsurer (assuming entity), for a
consideration (premium), assumes all or part of a risk
undertaken originally by another insurer (ceding entity).
For indemnity reinsurance, the legal rights of the insured
are not affected by the reinsurance transaction and the
insurance entity issuing the insurance contract remains
liable to the insured for payment of policy benefits.
Assumption or novation reinsurance contracts that are legal
replacements of one insurer by another extinguish the ceding
entity’s liability to the policyholder.
Reinsurance Recoverable
All amounts recoverable from reinsurers for paid and unpaid
claims and claim settlement expenses, including estimated
amounts receivable for unsettled claims, claims incurred but
not reported, or policy benefits.
Related Parties
Related parties include:
- Affiliates of the entity
- Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity
- Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management
- Principal owners of the entity and members of their immediate families
- Management of the entity and members of their immediate families
- Other parties with which the entity may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests
- Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
Remainder Interest
The right to receive all or a portion of the assets of a
split-interest agreement remaining at the end of the
agreement’s term.
Remeasurement Event
A remeasurement (new basis) event is an
event identified in other authoritative accounting
literature, other than the measurement of an impairment
under Topic 321 or credit loss under Topic 326, that
requires a financial instrument to be remeasured to its fair
value at the time of the event but does not require that
financial instrument to be reported at fair value
continually with the change in fair value recognized in
earnings. Examples of remeasurement events are business
combinations and significant modifications of debt as
discussed in paragraph 470-50-40-6.
Reporting Entity
An entity or group whose financial statements are being
referred to. Those financial statements reflect any of the
following:
- The financial statements of one or more foreign operations by combination, consolidation, or equity accounting
- Foreign currency transactions.
Repurchase Agreement
An agreement under which the transferor (repo party)
transfers a financial asset to a transferee (repo
counterparty or reverse party) in exchange for cash and
concurrently agrees to reacquire that financial asset at a
future date for an amount equal to the cash exchanged plus
or minus a stipulated interest factor. Instead of cash,
other securities or letters of credit sometimes are
exchanged. Some repurchase agreements call for repurchase of
financial assets that need not be identical to the financial
assets transferred.
Research and Development
Research is planned search or critical investigation aimed at
discovery of new knowledge with the hope that such knowledge
will be useful in developing a new product or service
(referred to as product) or a new process or technique
(referred to as process) or in bringing about a significant
improvement to an existing product or process.
Development is the translation of research findings or other
knowledge into a plan or design for a new product or process
or for a significant improvement to an existing product or
process whether intended for sale or use. It includes the
conceptual formulation, design, and testing of product
alternatives, construction of prototypes, and operation of
pilot plants.
Residual Value
The estimated fair value of an intangible asset at the end of
its useful life to an entity, less any disposal costs.
Revenue
Inflows or other enhancements of assets of
an entity or settlements of its liabilities (or a
combination of both) from delivering or producing goods,
rendering services, or other activities that constitute the
entity’s ongoing major or central operations.
Reverse Acquisition
An acquisition in which the entity that issues securities
(the legal acquirer) is identified as the acquiree for
accounting purposes based on the guidance in paragraphs
805-10-55-11 through 55-15. The entity whose equity
interests are acquired (the legal acquiree) must be the
acquirer for accounting purposes for the transaction to be
considered a reverse acquisition.
Risk Premium
Compensation sought by risk-averse market participants for
bearing the uncertainty inherent in the cash flows of an
asset or a liability. Also referred to as a risk
adjustment.
Sales-Type Lease
From the perspective of a lessor, a lease that meets one or
more of the criteria in paragraph 842-10-25-2 and is not an
operating lease in accordance with paragraph
842-10-25-3A.
Securitization
The process by which financial assets are transformed into
securities.
Security
Definition 1
The evidence of debt or ownership or a related right. It
includes options and warrants as well as debt and stock.
Definition 2
A share, participation, or other interest in property or in
an entity of the issuer or an obligation of the issuer that
has all of the following characteristics:
- It is either represented by an instrument issued in bearer or registered form or, if not represented by an instrument, is registered in books maintained to record transfers by or on behalf of the issuer.
- It is of a type commonly dealt in on securities exchanges or markets or, when represented by an instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for investment.
- It either is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations.
Separate Account
Definition 1
A special account established by an insurance entity solely
for the purpose of investing the assets of one or more
plans. Funds in a separate account are not commingled with
other assets of the insurance entity for investment
purposes.
Definition 2
A separate investment account established and maintained by
an insurance entity under relevant state insurance law to
which funds have been allocated for certain contracts of the
insurance entity or similar accounts used for foreign
originated products. The term separate accounts includes
separate accounts and subaccounts or investment divisions of
separate accounts.
Separate Account Arrangement
An arrangement under which all or a portion of a contract
holder’s funds is allocated to a specific separate account
maintained by the insurance entity.
Servicing Assets
A contract to service financial assets under which the
benefits of servicing are expected to more than adequately
compensate the servicer for performing the servicing. A
servicing contract is either:
- Undertaken in conjunction with selling or securitizing the financial assets being serviced
- Purchased or assumed separately.
Servicing Liabilities
A contract to service financial assets under which the
estimated future revenues from contractually specified
servicing fees, late charges, and other ancillary revenues
(benefits of servicing) are not expected to adequately
compensate the servicer for performing the servicing.
Shares
Shares includes various forms of ownership that may not take
the legal form of securities (for example, partnership
interests), as well as other interests, including those that
are liabilities in substance but not in form. (Business
entities have interest holders that are commonly known by
specialized names, such as stockholders, partners, and
proprietors, and by more general names, such as investors,
but all are encompassed by the descriptive term owners.
Equity of business entities is, thus, commonly known by
several names, such as owners’ equity, stockholders’ equity,
ownership, equity capital, partners’ capital, and
proprietorship. Some entities [for example, mutual
organizations] do not have stockholders, partners, or
proprietors in the usual sense of those terms but do have
participants whose interests are essentially ownership
interests, residual interests, or both.)
Significant Influence
Paragraphs 323-10-15-6 through 15-11 define significant
influence.
Spinoff
The transfer of assets that constitute a business by an
entity (the spinnor) into a new legal spun-off entity (the
spinnee), followed by a distribution of the shares of the
spinnee to its shareholders, without the surrender by the
shareholders of any stock of the spinnor.
Split-Interest Agreement
An agreement in which a donor enters into a trust or other
arrangement under which a not-for-profit entity (NFP)
receives benefits that are shared with other beneficiaries.
A typical split-interest agreement has the following two
components:
- A lead interest
- A remainder interest.
Split-Off
A transaction in which a parent entity exchanges its stock in
a subsidiary for parent entity stock held by its
shareholders.
Sponsor
In the case of a pension plan established or maintained by a
single employer, the employer; in the case of a plan
established or maintained by an employee entity, the
employee entity; in the case of a plan established or
maintained jointly by two or more employers or by one or
more employers and one or more employee entities, the
association, committee, joint board of trustees, or other
group of representatives of the parties that have
established or that maintain the pension plan.
Standalone Selling Price
The price at which an entity would sell a promised good or
service separately to a customer.
Stock Dividend
An issuance by a corporation of its own common shares to its
common shareholders without consideration and under
conditions indicating that such action is prompted mainly by
a desire to give the recipient shareholders some ostensibly
separate evidence of a part of their respective interests in
accumulated corporate earnings without distribution of cash
or other property that the board of directors deems
necessary or desirable to retain in the business. A stock
dividend takes nothing from the property of the corporation
and adds nothing to the interests of the stockholders; that
is, the corporation’s property is not diminished and the
interests of the stockholders are not increased. The
proportional interest of each shareholder remains the
same.
Structured Note
A debt instrument whose cash flows are linked to the movement
in one or more indexes, interest rates, foreign exchange
rates, commodities prices, prepayment rates, or other market
variables. Structured notes are issued by U.S.
government-sponsored enterprises, multilateral development
banks, municipalities, and private entities. The notes
typically contain embedded (but not separable or detachable)
forward components or option components such as caps, calls,
and floors. Contractual cash flows for principal, interest,
or both can vary in amount and timing throughout the life of
the note based on nontraditional indexes or nontraditional
uses of traditional interest rates or indexes.
Sublease
A transaction in which an underlying asset is re-leased by
the lessee (or intermediate lessor) to a third party (the
sublessee) and the original (or head) lease between the
lessor and the lessee remains in effect.
Subsidiary
An entity, including an unincorporated entity such as a
partnership or trust, in which another entity, known as its
parent, holds a controlling financial interest. (Also, a
variable interest entity that is consolidated by a primary
beneficiary.)
Substantive Plan
The terms of the postretirement benefit plan as understood by
an employer that provides postretirement benefits and the
employees who render services in exchange for those
benefits. The substantive plan is the basis for the
accounting for that exchange transaction. In some situations
an employer’s cost-sharing policy, as evidenced by past
practice or by communication of intended changes to a plan’s
cost-sharing provisions, or a past practice of regular
increases in certain monetary benefits, may indicate that
the substantive plan differs from the extant written
plan.
Systematic Risk
The common risk shared by an asset or a liability with the
other items in a diversified portfolio. Portfolio theory
holds that in a market in equilibrium, market participants
will be compensated only for bearing the systematic risk
inherent in the cash flows. (In markets that are inefficient
or out of equilibrium, other forms of return or compensation
might be available.) Also referred to as nondiversifiable
risk.
Trading
An activity involving securities sold in the near term and
held for only a short period of time. The term trading
contemplates a holding period generally measured in hours
and days rather than months or years. See paragraph
948-310-40-1 for clarification of the term trading for a
mortgage banking entity.
Trading Purposes
The determination of what constitutes trading purposes is
based on the intent of the issuer or holder and shall be
consistent with the definition of trading in paragraph
320-10-25-1(a).
Trading Securities
Securities that are bought and held principally for the
purpose of selling them in the near term and therefore held
for only a short period of time. Trading generally reflects
active and frequent buying and selling, and trading
securities are generally used with the objective of
generating profits on short-term differences in price.
Transaction Costs
The costs to sell an asset or transfer a liability in the
principal (or most advantageous) market for the asset or
liability that are directly attributable to the disposal of
the asset or the transfer of the liability and meet both of
the following criteria:
- They result directly from and are essential to that transaction
- They would not have been incurred by the entity had the decision to sell the asset or transfer the liability not been made (similar to costs to sell, as defined in paragraph 360-10-35-38).
Transaction Price
The amount of consideration to which an entity expects to be
entitled in exchange for transferring promised goods or
services to a customer, excluding amounts collected on
behalf of third parties.
Transfer
Definition 1
The term transfer is used in a broad sense consistent with
its use in FASB Concepts Statement No. 6, Elements of
Financial Statements (such as in paragraph 137), rather than
in the narrow sense in which it is used in Subtopic
860-10.
Pending Content (Transition Guidance:
ASC 105-10-65-9)
Definition 1
The term transfer is used in a broad sense,
rather than in the narrow sense in which it is
used in Subtopic 860-10.
Definition 2
The conveyance of a noncash financial asset by and to someone
other than the issuer of that financial asset.
A transfer includes the following:
- Selling a receivable
- Putting a receivable into a securitization trust
- Posting a receivable as collateral.
A transfer excludes the following:
- The origination of a receivable
- Settlement of a receivable
- The restructuring of a receivable into a security in a troubled debt restructuring.
Transferee
An entity that receives a financial asset, an interest in a
financial asset, or a group of financial assets from a
transferor.
Transferor
An entity that transfers a financial asset, an interest in a
financial asset, or a group of financial assets that it
controls to another entity.
Transferred Financial Assets
Transfers of any of the following:
- An entire financial asset
- A group of entire financial assets
- A participating interest in an entire financial asset.
Transportation Costs
The costs that would be incurred to transport an asset from
its current location to its principal (or most advantageous)
market.
Troubled Debt Restructuring
A restructuring of a debt constitutes a troubled debt
restructuring if the creditor for economic or legal reasons
related to the debtor’s financial difficulties grants a
concession to the debtor that it would not otherwise
consider.
Trustee
Definition 1
A person appointed by the Bankruptcy Court in certain
situations based on the facts of the case, not related to
the size of the entity or the amount of unsecured debt
outstanding, at the request of a party in interest after a
notice and hearing.
Definition 2
An entity that has a duty to hold and manage assets for the
benefit of a specified beneficiary in accordance with a
charitable trust agreement. In some states, not-for-profit
entities (NFPs) are organized under trust law rather than as
corporations. Those NFPs are not trustees as defined
because, under those statutes, they hold assets in trust for
the community or some other broadly described group, rather
than for a specific beneficiary.
Unallocated Contract
A contract with an insurance entity under which payments to
the insurance entity are accumulated in an unallocated fund
(not allocated to specific plan participants) to be used
either directly or through the purchase of annuities, to
meet benefit payments when employees retire. Funds held by
the insurance entity under an unallocated contract may be
withdrawn and otherwise invested.
Uncommitted Loans
A mortgage loan that does not meet the specific terms of a
commitment or for which a reasonable doubt exists about the
acceptance of the loan under a commitment.
Unconditional Promise to Give
A promise to give that depends only on passage of time or
demand by the promisee for performance.
Underlying
A specified interest rate, security price, commodity price,
foreign exchange rate, index of prices or rates, or other
variable (including the occurrence or nonoccurrence of a
specified event such as a scheduled payment under a
contract). An underlying may be a price or rate of an asset
or liability but is not the asset or liability itself. An
underlying is a variable that, along with either a notional
amount or a payment provision, determines the settlement of
a derivative instrument.
Underlying Asset
An asset that is the subject of a lease for which a right to
use that asset has been conveyed to a lessee. The underlying
asset could be a physically distinct portion of a single
asset.
Unit of Account
The level at which an asset or a liability is aggregated or
disaggregated in a Topic for recognition purposes.
Unobservable Inputs
Inputs for which market data are not available and that are
developed using the best information available about the
assumptions that market participants would use when pricing
the asset or liability.
Unsystematic Risk
The risk specific to a particular asset or liability. Also
referred to as diversifiable risk.
Value Beyond Proven and Probable Reserves
Value beyond proven and probable reserves is the economic
value that exists in a mining asset beyond the value
attributable to proven and probable reserves. The
distinction between the categories of reserves relates to
the level of geological evidence and, therefore, confidence
in the reserve estimates.
Variable Interest Entity
A legal entity subject to consolidation according to the
provisions of the Variable Interest Entities Subsections of
Subtopic 810-10.
Voluntary Health and Welfare Entity
A not-for-profit entity (NFP) that is formed for the purpose
of performing voluntary services for various segments of
society and that is tax exempt (organized for the benefit of
the public), supported by the public, and operated on a
not-for-profit basis. Most voluntary health and welfare
entities concentrate their efforts and expend their
resources in an attempt to solve health and welfare problems
of our society and, in many cases, those of specific
individuals. As a group, voluntary health and welfare
entities include those NFPs that derive their revenue
primarily from voluntary contributions from the general
public to be used for general or specific purposes connected
with health, welfare, or community services. For purposes of
this definition, the general public excludes governmental
entities when determining whether an NFP is a voluntary
health and welfare entity.
Warranty
A guarantee for which the underlying is related to the
performance (regarding function, not price) of nonfinancial
assets that are owned by the guaranteed party. The
obligation may be incurred in connection with the sale of
goods or services; if so, it may require further performance
by the seller after the sale has taken place.