Accounting

Deferred Financing Costs Loan origination and arrangement fees capitalized and amortized over the life of the related debt.

Deferred Rent Under ASC 842 Deferred rent balance sheet treatment was eliminated by ASC 842; the lease standard now requires a right-of-use asset and liability that inherently captures all rent smoothing.

Deferred Revenue Cash received from customers before goods or services are delivered, recorded as a liability that converts to revenue as performance obligations are met.

Deferred Revenue Explained What is deferred revenue in accounting: cash received before goods or services are delivered, recorded as a liability until earned.

Deferred Revenue Liability Prepayment received but not yet earned as income, recorded as liability until service delivery.

Deferred Revenue on the Cash Flow Statement Deferred revenue increases are cash inflows treated as operating cash flow add-backs; decreases are cash outflows that reduce operating cash flow in cash-basis accounting.

Deferred tax asset A deferred tax asset is an accounting entry representing the tax benefit of a temporary difference between book and tax accounting. It appears on the balance sheet when the company expects future tax deductions.

Deferred Tax Asset Valuation Allowance A reserve that reduces reported deferred tax assets when a company doubts it will earn enough future taxable income to utilize the tax benefits.

Deferred Tax Asset vs Deferred Tax Liability Timing differences between book income and taxable income create deferred tax assets and liabilities. Learn when each appears and how they reverse.

Deferred Tax Asset vs Deferred Tax Liability Explained Understand when a company records a deferred tax asset versus a deferred tax liability, including timing differences in depreciation, warranties, and revenue recognition.

Deferred Tax Liability Tax owed in future periods from temporary differences between book and tax accounting methods.

Deferred Tax Liability Explained A deferred tax liability arises when taxable income is less than book income in the current period, typically from accelerated tax depreciation or differences in revenue recognition.

Deposits and Advances on the Balance Sheet How refundable deposits paid to suppliers and advance payments to vendors are classified as assets on the balance sheet and expensed over time.

Depreciation Depreciation is the accounting method that allocates the cost of a long-lived asset across its useful life. It is a non-cash expense that reduces reported earnings.

Derecognition of Financial Assets When financial assets can be removed from the balance sheet. Conditions for derecognition under accounting standards.

Derivative Accounting (Hedging) Mark-to-market and hedge accounting treatment of derivatives, with special rules for hedge relationships.

Derivative Financial Instrument (Balance Sheet) Outstanding derivatives marked to fair value each period and carried as assets or liabilities on the balance sheet.

Diluted Earnings Per Share The earnings-per-share figure adjusted to assume all employee stock options, warrants, and convertible securities are exercised or converted, showing the worst-case EPS impact.

Diluted vs Basic Earnings Per Share Diluted EPS factors in convertible bonds, stock options, and warrants to show earnings per share under worst-case dilution. Here's how it differs from basic EPS.

Direct Method Cost Allocation The simplest cost-allocation approach, which assigns service-department costs directly to production departments and ignores inter-departmental services.

Direct vs Indirect Method for the Cash Flow Statement Direct vs indirect method for the cash flow statement: how each approach builds operating cash flow and why indirect dominates public markets.

Discontinued Operations Accounting How companies segregate, measure, and present the financial results of businesses being disposed of or held for sale.

Discontinued Operations Reporting How divested or held-for-sale business segments are presented separately on financial statements to isolate their operating results from continuing operations.

Dividends Payable as a Current Liability How declared but unpaid dividends are recognized as current liabilities on the balance sheet and when they are settled.

Double-Entry Bookkeeping The fundamental rule that every transaction debits one account and credits another, maintaining balance in the ledger.

Dual-Rate Cost Allocation Dual-rate cost allocation splits a shared cost into fixed and variable components before allocating each separately to user departments.

EBITDA EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a popular metric for comparing companies across different capital structures and accounting methods.

Embedded Derivative Bifurcation Embedded derivative bifurcation accounting splits hybrid financial instruments into a host contract and separately measured derivative under US GAAP and IFRS rules.

Emphasis of Matter Paragraph in an Audit Report What an emphasis of matter paragraph signals in an audit report and why auditors add it without modifying their clean opinion.

Engagement Quality Review: What It Is and When It Is Required Understand the engagement quality review, a mandatory concurring-partner audit procedure that scrutinizes high-risk engagements before the auditor's report is issued.

Environmental Liability Obligation recognized on the balance sheet to remediate pollution or environmental damage caused by a business; includes cleanup costs and regulatory compliance.

Equity Financing Raising capital by issuing shares to investors, with no obligation to repay or pay fixed interest.

Equity Method Accounting Accounting method for investments in which the investor significantly influences (but does not control) the investee.

Equity Method Investment A long-term investment in an associate recorded at cost, adjusted for the investor's share of earnings and dividends.

Equity Method Investment Impairment How other-than-temporary impairment testing works for equity-method investments, and why write-downs are permanent under accounting rules.

Equivalent Units of Production A measurement that converts partially complete inventory into full-unit equivalents for fair cost allocation in process costing.

Error Correction vs Change in Accounting Estimate The different retrospective and prospective treatments required when fixing a prior-period error versus updating a forward-looking estimate under GAAP and IFRS.

Fair value Fair value is the price at which an asset would change hands between a willing buyer and a willing seller in a current transaction. It is a measurement basis used for some assets under GAAP and IFRS.

Fair Value Measurement Hierarchy ASC 820's three-level input hierarchy that governs how observable versus unobservable data ranks in fair-value estimates.

FIFO FIFO (First-In, First-Out) is an inventory accounting method where the oldest purchased inventory is assumed to be sold first. It is the most common method globally.

FIFO Process Costing A process-costing method that keeps beginning-inventory costs separate from current-period costs, isolating the cost of new production.

Finance lease A finance lease is a lease where the lessee effectively owns the asset, bearing substantially all risks and rewards. It is recorded as an asset and liability on the balance sheet.

Finance Lease Obligation The liability component of a finance lease, representing the present value of minimum future lease payments on the balance sheet.

Financial Accounting Standards Board The FASB is the private, independent board that sets accounting standards in the United States. It develops GAAP and is recognized by the SEC as the official standard-setter.

Fixed Overhead Volume Variance Explained How fixed overhead volume variance arises when actual production volume differs from budgeted volume under absorption costing, creating a cost allocation gap.

Fixed vs Variable Overhead Allocation Fixed vs variable overhead allocation separates indirect costs by behavior to improve pricing accuracy and variance analysis.

Footnote disclosure Footnote disclosures are detailed explanations in financial statement notes that clarify accounting policies, contingencies, segment results, and other material information.

Foreign Currency Translation Adjustment The current-rate method for translating foreign subsidiary financials, with resulting gains or losses parked in accumulated other comprehensive income.

Franchise Fee Recognition How and when a franchisor recognizes revenue from upfront fees and ongoing payments, tied to distinct performance obligations.

Free cash flow Free cash flow is the cash generated by a company's operations minus capital expenditures. It is the cash available for debt repayment, dividends, and shareholder buybacks.

Full Absorption Costing vs Variable Costing Compare how fixed manufacturing overhead is allocated under absorption vs. variable costing, and why operating income differs when inventory rises or falls.

Functional Currency Determination Functional currency is determined by identifying the primary economic environment in which an entity operates, evaluated through cash-flow, financing, and cost dependencies.

Functional Currency Translation How subsidiaries' foreign-currency balance sheets and income statements are converted into a parent company's reporting currency using prescribed accounting methods.

Generally accepted accounting principles GAAP is the set of accounting standards and conventions used to prepare financial statements in the United States. It ensures comparability and consistency across companies and time.

Gift Card Breakage and Revenue Recognition How companies estimate and record breakage revenue from unredeemed gift cards using proportional or remote-likelihood methods.

Going concern Going concern is the accounting assumption that a company will continue operating indefinitely. If there is substantial doubt about this, auditors qualify their opinion and companies must disclose.

Going Concern Assessment Criteria Auditors evaluate whether a company can meet obligations over 12 months ahead. Learn the going concern assessment criteria that trigger disclosure.

Going Concern Assumption Explained The going concern assumption is the foundational presumption that a company will operate indefinitely. Learn when this assumption breaks down and what happens to financial statements.

Going Concern Disclosure in Financial Statements Going concern disclosure alerts investors when a company's ability to continue operating is in doubt. Learn what triggers these notes and what auditors must report.

Goodwill Goodwill is the amount paid above the fair value of identifiable assets in a business acquisition. It is tested for impairment annually rather than amortized.