accounting changesChanges from one acceptable method of accounting to another acceptable method; like straight-line depreciation to a declining balance approach
Accounting Principles BoardThe private sector group charged with developing accounting standards from 1959 to 1973; primary authoritative pronouncements were known as "opinions"
Accounting Standards CodificationResearch tool deemed to be the primary authoritative source and reference guide on accounting standards
Accounting Standards Update (ASU)The official notification issued by the Financial Accounting Standards Board of a new or modified accounting rule
basic EPSThe simplest earnings per share number; earnings available to common shares divided by weighted average shares, without factoring in potential dilution
book value per shareCommon stockholders' equity divided by common shares outstanding, to indicate stockholders' equity per share
comparabilityAn enhancing quality of accounting such that even though different companies may use different accounting methods, there is still sufficient basis for valid comparison
complex capital structureCompanies with options, warrants, or convertible bonds and stocks that may result in the issuance of additional shares
comprehensive incomeNet income plus items of other comprehensive income (e.g., market value adjustments of available for sale securities)
consistencyAn enhancing quality of accounting such that deviations in outcomes from period to period should be the result of deviations in underlying performance (not accounting quirks)
diluted EPSAn earnings per share number; adjusted to reflect the potential effect of dilutive securities
dilutive securitiesOptions, warrants, convertible bonds, convertible stocks, and other items that have the potential to increase the number of shares outstanding
discontinued operationsThe special income statement reporting of the impact of disposing or abandoning of a component of a business
dividend rateDividend per share divided by stock price; also called dividend yield
earningsA concept that relates to income from continuing operations plus/minus discontinued operations
Earnings per shareEPS; generally understood as the amount of income for each share of stock, but is actually better refined as basic and diluted EPS (see those definitions)
EBITAn analyst's calculation to reflect "earnings before interest and taxes"
EBITDAAn analyst's calculation to reflect "earnings before interest, taxes, depreciation, and amortization"
entity assumptionAccounting information should be presented for circumscribed distinct economic units
faithful representationA fundamental quality of accounting such that information must be truthful; complete, neutral, and free from error
GAAPGenerally accepted accounting principles -- encompass the rules, practices, and procedures that define the proper execution of accounting
going-concern assumptionIn the absence of evidence to the contrary, accountants assume that a business will continue to operate well into the future
intraperiod tax allocationSeparately reported items like discontinued operations, prior period adjustments, and other comprehensive income, are to reported net of their specifically related tax effects
monetary unit assumptionAccounting measures transactions and events in units of money, in contrast to some other unit of measure (e.g., acres of land)
net incomeIncome from continuing operations plus/minus discontinued operations, but before items of “other comprehensive income”
PCAOBPublic Company Accounting Oversight Board -- a private-sector, non-profit corporation charged with overseeing the auditors of public companies
price earnings ratioThe per share market value of a stock divided by its earnings per share
principles-basedThe idea that accounting standards should articulate broad-based principles rather than specific and detailed rules
prior period adjustmentTo correct errors from prior years; prior financial statements are retroactively changed to make them correct
relevancyA fundamental quality of accounting such that information should be timely and bear on the decision-making process by possessing predictive or confirmatory (feedback) value
remeasurementUses a variety of exchange rates to convert assets and liabilities of a foreign affiliate to the reporting currency; adjustment may impact operating income.
restatementThe financial statements of prior periods are redone to reflect the correct amounts
retrospective adjustmentRevision of the financial statements for prior periods to reflect the application of a current change in accounting method
return on assets ratioA ratio comparing income (net income plus interest) to the average total assets
return on equity ratioA ratio comparing income (net income minus preferred dividends) to the average total equity
rules-basedThe idea that accounting standards must be very specific to provide adequate guidance and drive consistency in reporting
Sarbanes-Oxley Act"SOX" -- Legislation that imposes stringent controls over reporting and auditing; created the Public Accounting Oversight Board
stable currency assumptionAn accounting assumption that presumes the currency is not impacted over time by inflation
timelinessAn enhancing quality of accounting such that information is available in sufficient time to be capable of influence
translationUses prevailing exchange rates to convert assets and liabilities of a foreign affiliate to the reporting currency; adjustment may impact other comprehensive income.
understandabilityAn enhancing quality of accounting such that information is clear and concise to those with reasonable business knowledge
verifiabilityAn enhancing quality of accounting such that different knowledgeable and independent observers reach similar conclusions
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