accrual basis
Accrual basis of accounting
Recording income and expenses in the period they are earned or incurred, regardless of when cash is received or paid. All IFRS financial statements, except the cash flow statement, use it.
IAS 1
amortisation
Amortisation
The systematic allocation of the cost of an intangible asset with a finite life, such as software or a licence, over its useful life. Intangibles with an indefinite life, and goodwill, are not amortised but tested for impairment.
IAS 38
BNPL
Buy now, pay later
A financing model where a customer receives goods now and pays in instalments, often through a fintech provider. The provider's BNPL receivables are financial assets that need classification and an ECL allowance.
IFRS 9
BOT
Build-operate-transfer
A concession model where a private operator builds an asset, operates it for an agreed period and then hands it over to the government. Where the government controls the infrastructure, the operator does not record the public infrastructure as its own PP&E.
IFRIC 12
CGU
Cash-generating unit
The smallest group of assets that produces cash inflows largely independent of other assets. Assets are tested for impairment at this level when they cannot be tested on their own.
IAS 36
CIF
Cost, insurance and freight
An Incoterm under which the seller pays freight and insurance to the destination port, while risk passes once goods are loaded on board. The entity should assess separately when control transfers and whether shipping after that point is a separate service.
IFRS 15
COD
Cash on delivery
A payment method where the customer pays the courier in cash when the goods arrive. When a third-party courier holds the cash before passing it on, the seller has a receivable from the courier whose credit risk needs an expected credit loss assessment.
IFRS 9
CODM
Chief operating decision maker
The person or group, such as the CEO or an executive committee, that allocates resources and assesses the performance of the entity's operating segments. Segment reporting follows what the CODM actually reviews.
IFRS 8
contingent liability
Contingent liability
A possible obligation whose existence depends on uncertain future events, or a present obligation where an outflow is not probable or cannot be measured reliably. It is not recognised; it is disclosed in the notes unless the chance of an outflow is remote.
IAS 37
contract asset
Contract asset
An entity's right to payment for work already delivered when that right still depends on something other than the passage of time, such as finishing the next milestone. It becomes a receivable once the right is unconditional.
IFRS 15
contract liability
Contract liability
An entity's obligation to transfer goods or services for which it has already received payment, or for which payment is due. It is recognised as revenue when the entity performs.
IFRS 15
CPI
Consumer price index
An official measure of inflation in consumer prices. Lease payments linked to CPI are included in the lease liability at the index level at the start of the lease and remeasured when the payments change.
IFRS 16
DAP
Delivered at place
An Incoterm under which the seller bears the risk until the goods arrive at the agreed destination, ready for unloading. Revenue is generally recognised later than under FOB, because control usually passes on arrival.
IFRS 15
deferred revenue
Deferred revenue
Cash received or billed before the related goods or services are delivered. It is a common name for a contract liability, for example annual software subscriptions paid upfront.
IFRS 15
depreciation
Depreciation
The systematic allocation of the cost of a tangible asset, less its residual value, over its useful life. It reflects how the asset's benefits are consumed, not a change in its market value.
IAS 16
DTA
Deferred tax asset
Income tax recoverable in future periods, arising mainly from deductible temporary differences and unused tax losses. It is recognised only to the extent that future taxable profit is probable.
IAS 12
EBITDA
Earnings before interest, tax, depreciation and amortisation
A performance metric widely used by lenders and investors that excludes financing costs, tax and non-cash depreciation and amortisation. It is not defined by IFRS, so each entity's calculation must be read carefully.
ECL
Expected credit loss
An allowance for the credit losses an entity expects on receivables, loans and similar assets, based on past experience, current conditions and forward-looking information. It is recognised before any default actually happens.
IFRS 9
EIR
Effective interest rate
The rate that exactly discounts a financial instrument's expected future cash payments or receipts to its initial carrying amount, taking into account fees and transaction costs that form part of the deal. It produces interest income or expense at a constant rate on the carrying amount over the instrument's life.
IFRS 9
EOSB
End-of-service benefits
A lump-sum payment owed to employees when they leave, calculated under local labour law from salary and years of service. Under IFRS it is usually a defined benefit obligation measured with actuarial assumptions, not just current salary times years.
IAS 19
EOT
Extension of time
Additional time granted to a contractor to finish a project, usually for delays caused by the employer or excusable events. Approved or likely EOT claims reduce the expected liquidated damages.
IFRS 15
EPC
Engineering, procurement and construction
A contract model where one contractor designs, sources materials for and builds a project, usually for a lump-sum price. When bundled with maintenance, the parts must be assessed to decide whether they are separate performance obligations.
IFRS 15
ESG
Environmental, social and governance
Sustainability criteria used to assess a company's environmental impact, social responsibility and governance quality. Loans with interest rates linked to ESG targets need careful assessment of whether they still pass the SPPI test.
fair value
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. It is a market-based exit price, not the entity's own view of value.
IFRS 13
FF&E
Furniture, fixtures and equipment
Movable furniture, fittings and equipment, common in hotels and offices. They are items of PP&E and are depreciated over their own useful lives.
IAS 16
FIFO
First-in, first-out
An inventory costing method that assumes the oldest items are sold first, so closing inventory reflects the most recent purchase costs. For interchangeable items, IFRS allows FIFO or weighted average, but not LIFO.
IAS 2
FOB
Free on board
An Incoterm under which the seller's delivery is complete once the goods are loaded on the vessel at the port of shipment. The Incoterm is a key indicator of when control passes to the buyer.
IFRS 15
functional currency
Functional currency
The currency of the main economic environment in which an entity operates, usually the currency in which it sells and pays its costs. It is determined by the facts, not chosen by management.
IAS 21
FVOCI
Fair value through other comprehensive income
A measurement category for financial assets: the asset is carried at fair value and fair value changes go to OCI rather than profit or loss. For debt instruments, interest, credit losses and FX still go to profit or loss, and the accumulated OCI amount is recycled when the asset is derecognised; for equity investments it is never recycled.
IFRS 9
FVTPL
Fair value through profit or loss
A measurement category where a financial instrument is carried at fair value and every change in value goes straight to profit or loss. Assets in this category are outside the ECL impairment model.
IFRS 9
FX
Foreign exchange
Refers to foreign currencies and the rates at which they convert into the entity's functional currency. FX differences arise when monetary balances in a foreign currency are retranslated at a new rate.
IAS 21
going concern
Going concern
The assumption that an entity will continue operating for the foreseeable future and has no need or intention to liquidate. Management must assess it for at least twelve months from the reporting date and disclose any material uncertainty.
IAS 1
GOP
Gross operating profit
A hotel industry measure: hotel revenue minus direct operating costs, before fixed charges. Hotel operators' incentive fees are often calculated as a percentage of GOP.
IFRS 15
GOSI
General Organization for Social Insurance
The Saudi body that runs the social insurance system funded by employer and employee contributions. Employer contributions to GOSI are generally accounted for like a defined contribution plan, expensed as employees work, separately from the end-of-service benefit obligation.
IAS 19
IFRIC
IFRS Interpretations Committee
The body that issues official interpretations of IFRS on specific issues, such as IFRIC 12 on service concession arrangements. An IFRIC interpretation is part of IFRS and is mandatory where it applies.
impairment
Impairment
A reduction in an asset's carrying amount when it is higher than the amount the entity can recover from it, recognised as a loss in profit or loss. For non-financial assets (IAS 36) the test compares carrying amount with recoverable amount; for financial assets, IFRS 9 uses the expected credit loss model instead.
IAS 36
IPO
Initial public offering
The first time a company offers its shares to the public on a stock exchange. Preparing for an IPO increases scrutiny of accounting policies, disclosures and related-party transactions.
LC
Letter of credit
A bank undertaking to pay a supplier on behalf of a buyer once agreed documents are presented, widely used in imports. Amounts owed under LCs in a foreign currency are monetary items retranslated at the closing rate.
LD
Liquidated damages
Penalty amounts agreed in a contract, typically paid by a contractor to the customer for late completion. They usually reduce the transaction price as variable consideration rather than being booked as an expense.
IFRS 15
lease liability
Lease liability
The lessee's obligation to make lease payments, measured at the present value of payments not yet made. Interest accrues on it and it falls as payments are made.
IFRS 16
materiality
Materiality
Information is material if leaving it out, misstating it or obscuring it could reasonably be expected to influence the decisions of users of the financial statements. It depends on both the size and the nature of an item.
IAS 1
MDR
Merchant discount rate
The all-in fee a payment acquirer charges a merchant on each card transaction, as a percentage of the amount. Part of it passes through to the card issuer and scheme, so the acquirer must assess whether it reports MDR gross or net.
IFRS 15
MPM
Management-defined performance measure
Under IFRS 18, a subtotal of income and expenses that management uses in public communications outside the financial statements, such as adjusted EBITDA. These measures must be disclosed and reconciled in the notes.
IFRS 18
NRV
Net realisable value
The estimated selling price of inventory in the normal course of business, less the estimated costs to complete and sell it. Inventory is carried at the lower of cost and NRV.
IAS 2
O&M
Operation and maintenance
Services to run and maintain an asset, such as a plant or facility, after it is built. In bundled construction contracts, O&M is often a separate performance obligation that needs its own share of the price.
IFRS 15
OCI
Other comprehensive income
Gains and losses that are recognised outside profit or loss, such as certain fair value changes and actuarial remeasurements. Some OCI items are later reclassified (recycled) to profit or loss and some never are.
IAS 1
OTA
Online travel agency
An online platform that sells hotel rooms and travel services to guests and earns a commission. A hotel must assess whether it or the OTA controls the room before it reaches the guest, which decides gross or net revenue.
IFRS 15
P&L
Profit or loss
The statement or section that shows income and expenses for the period and the resulting profit or loss. All income and expenses not recognised in OCI pass through it.
IAS 1
performance obligation
Performance obligation
A promise in a customer contract to transfer a distinct good or service. Revenue is recognised separately for each performance obligation when, or as, it is satisfied.
IFRS 15
POCI
Purchased or originated credit-impaired
Financial assets that are already credit-impaired when bought or granted, for example a defaulted loan bought at a deep discount. They follow a separate impairment track using a credit-adjusted effective interest rate.
IFRS 9
PP&E
Property, plant and equipment
Physical assets such as buildings, machinery and vehicles that an entity holds for use in its operations for more than one period. They are first recorded at cost and then depreciated over their useful lives.
IAS 16
PPP
Public-private partnership
An arrangement where a private operator builds or upgrades public infrastructure, such as a hospital, and operates it for a period under government rules. The operator usually records a financial asset or an intangible asset, not the infrastructure itself.
IFRIC 12
principal vs agent
Principal versus agent
The assessment of whether an entity controls a good or service before it reaches the customer (principal, revenue shown gross) or only arranges for another party to provide it (agent, only the commission or net fee is revenue).
IFRS 15
provision
Provision
A liability of uncertain timing or amount, such as a warranty or legal claim, recognised when there is a present obligation from a past event, an outflow is probable and the amount can be reliably estimated. It is measured at the best estimate of the amount needed to settle it.
IAS 37
PV
Present value
Today's value of an amount to be received or paid in the future, found by discounting it at an appropriate rate. It reflects the time value of money.
R&D
Research and development
Activities to gain new knowledge (research) and to apply it to create new products or systems (development). Research costs are expensed, while development costs are capitalised only when strict criteria are met.
IAS 38
recoverable amount
Recoverable amount
The higher of an asset's fair value less costs of disposal and its value in use. If the carrying amount is above it, the asset is impaired.
IAS 36
right-of-use asset
Right-of-use asset
The lessee's asset representing its right to use a leased item over the lease term. It starts at the lease liability plus initial direct costs, payments made in advance and estimated restoration costs, less lease incentives received, and is then depreciated.
IFRS 16
ROU
Right-of-use asset
The asset a lessee records for its right to use a leased item, such as a building or vehicle, during the lease term. It is usually depreciated over the shorter of the lease term and the asset's useful life.
IFRS 16
SAFE
Simple agreement for future equity
A funding instrument, common in start-ups, where an investor pays cash now in exchange for shares issued at a later financing round, often at a discount or valuation cap. Whether it is a liability or equity depends on its terms, not its label.
IAS 32
SAMA
Saudi Central Bank
The central bank and financial regulator of Saudi Arabia, which licenses and supervises banks, payment companies and finance companies. Its rules, such as safeguarding customer funds, can affect how balances are presented.
SICR
Significant increase in credit risk
The trigger for moving a financial asset from Stage 1 (12-month ECL) to Stage 2 (lifetime ECL). It looks at the change in default risk since initial recognition, not only at whether payments are late.
IFRS 9
SKU
Stock-keeping unit
A unique code for each distinct inventory item, used to track quantities, batches and expiry dates. Tracking at SKU level supports accurate costing and NRV write-downs.
IAS 2
SLA
Service level agreement
A contract term that sets the service standard a supplier must meet, often with credits or penalties if it falls short. Expected SLA credits are variable consideration that can reduce revenue.
IFRS 15
SPPI
Solely payments of principal and interest
A test of whether a financial asset's contractual cash flows are only repayments of principal and interest on the outstanding amount. Passing it is required, together with the business model test, for amortised cost or FVOCI measurement of debt assets.
IFRS 9
SPV
Special purpose vehicle
A separate legal entity set up for a narrow purpose, such as holding assets or raising financing. Whether it must be consolidated depends on who controls it, not on its legal form.
IFRS 10
SSP
Standalone selling price
The price at which an entity would sell a promised good or service separately to a customer. It is used to split the transaction price between performance obligations.
IFRS 15
standalone selling price
Standalone selling price
The price an entity would charge for a good or service if it sold it on its own. When it is not observable it is estimated, for example by adding a margin to expected cost.
IFRS 15
transaction price
Transaction price
The amount of consideration an entity expects to be entitled to for transferring goods or services, excluding amounts collected for others such as VAT. It includes estimates of variable amounts like discounts and penalties, subject to a constraint.
IFRS 15
VAT
Value added tax
An indirect tax charged on the supply of goods and services and collected on behalf of the tax authority. VAT collected from customers is not revenue of the entity.
VIU
Value in use
The present value of the future cash flows an entity expects from continuing to use an asset or CGU. Recoverable amount is the higher of VIU and fair value less costs of disposal.
IAS 36
WIP
Work in progress
Goods that have started production but are not yet finished. WIP is part of inventory and carries materials, labour and a share of production overhead.
IAS 2
ZATCA
Zakat, Tax and Customs Authority
The Saudi government authority that administers zakat, income tax, withholding tax, VAT and customs. Its rules drive the zakat and tax balances that Saudi entities report.