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Accounting Terms and Definitions by IAS and IFRS: [I to M]



incremental borrowing rate of interest (lessee’s) – The rate of interest the lessee would have to pay on a similar lease or, if that is not determinable, the rate that, at the inception of the lease, the lessee would incur to borrow over a similar term, and with a similar security, the funds necessary to purchase the asset. [IAS 17.4]

indirect method of reporting cash flows from operating activities – A method whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows. [IAS 7.18(b)]


initial direct costs – Incremental costs that are directly attributable to negotiating and arranging a lease, except for such costs incurred by manufacturer or dealer lessors. [IAS 17.4]

insurance asset – An insurer’s net contractual rights under an insurance contract. [IFRS 4.A]

insurance contract – A contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. (See IFRS 4 Appendix B for guidance on this definition.) [IFRS 4.A]

insurance liability – An insurer’s net contractual obligations under an insurance contract. [IFRS 4.A]

insurance risk – Risk, other than financial risk, transferred from the holder of a contract to the issuer. [IFRS 4.A]

insured event – An uncertain future event that is covered by an insurance contract and creates insurance risk. [IFRS 4.A]

insurer – The party that has an obligation under an insurance contract to compensate a policyholder if an insured event occurs. [IFRS 4.A]

intangible asset – An identifiable non-monetary asset without physical substance. [IAS 38.8, IFRS 3.A]

interest cost (for an employee benefit plan) – The increase during a period in the present value of a defined benefit obligation which arises because the benefits are one period closer to settlement. [IAS 19.7]

interest rate implicit in the lease – The discount rate that, at the inception of the lease, causes the aggregate present value of (a) the minimum lease payments and (b) the unguaranteed residual value to be equal to the sum of (i) the fair value of the leased asset and (ii) any initial direct costs of the lessor. [IAS 17.4]

interest rate risk – The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. [IFRS 7.A]

interim financial report – A financial report containing either a complete set of financial statements (as described in IAS 1) or a set of condensed financial statements (as described in IAS 34) for an interim period. [IAS 34.4].

interim period – A financial reporting period shorter than a full financial year. [IAS 34.4]

International Financial Reporting Standards (IFRSs) – Standards and Interpretations adopted by the International Accounting Standards Board (IASB). They comprise:
(a) International Financial Reporting Standards;
(b) International Accounting Standards; and
(c) Interpretations developed by the International
Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC). [IAS 1.7, IAS 8.5, IFRS 1.A]

intrinsic value – The difference between the fair value of the shares to which the counterparty has the (conditional or unconditional) right to subscribe or which it has the right to receive, and the price (if any) the counterparty is (or will be) required to pay for those shares. For example, a share option with an exercise price of CU15,* on a share with a fair value of CU20, has an intrinsic value of CU5. [IFRS 2.A]

inventories – Assets:
(a) held for sale in the ordinary course of business;
(b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Inventories encompass goods purchased and held for resale including, for example, merchandise purchased by a retailer and held for resale, or land and other property held for resale. Inventories also encompass finished goods produced, or work in progress being produced, by the entity and include materials and supplies awaiting use in the production process. In the case of a service provider, inventories include the costs of the service, as described in IAS 2 paragraph 19, for which the entity has not yet recognized the related revenue (see IAS 18). [IAS 2.6, IAS 2.8]

investing activities – The acquisition and disposal of long-term assets and other investments not included in cash equivalents. [IAS 7.6]

investment property – Property (land or a building—or part of a building—or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for:

(a) use in the production or supply of goods or services or for administrative purposes; or
(b) sale in the ordinary course of business.
[IAS 40.5]

investor in a joint venture – A party to a joint venture that does not have joint control over that joint venture. [IAS 31.3]

joint control – The contractually agreed sharing of control over an economic activity. [IAS 24.9]

joint control – The contractually agreed sharing of control over an economic activity; it exists only when the strategic and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers). [IAS 28.2, IAS 31.3]

joint venture – A contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. [IAS 31.3, IFRS 3.A]

jointly controlled entity – A joint venture that involves the establishment of a corporation, partnership or other entity in which each venturer has an interest. The entity operates in the same way as other entities, except that a contractual arrangement between the venturers establishes joint control over the economic activity of the entity. [IAS 31.24]

key management personnel – Those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. [IAS 24.9]

lease – An agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time. [IAS 17.4]

lease term – The non-cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option. [IAS 17.4]

legal obligation – An obligation that derives from:
(a) a contract (through its explicit or implicit terms);
(b) legislation; or
(c) other operation of law.
[IAS 37.10]

lessee’s incremental borrowing rate of interest – The rate of interest the lessee would have to pay on a similar lease or, if that is not determinable, the rate that, at the inception of the lease, the lessee would incur to borrow over a similar term, and with a similar security, the funds necessary to purchase the asset. [IAS 17.4]

liability – A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. [IAS 37.10, F.49(b)]

liability adequacy test – An assessment of whether the carrying amount of an insurance liability needs to be increased (or the carrying amount of related deferred acquisition costs or related intangible assets decreased), based on a review of future cash flows. [IFRS 4.A].

liquidity – The availability of cash in the near future after taking account of financial commitments over this period. [F.16]

liquidity risk – The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. [IFRS 7.A]

loans and receivables – Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than:
(a) those that the entity intends to sell immediately or in the near term, which shall be classified as held for trading, and those that the entity upon initial recognition designates as at fair value through profit or loss;
(b) those that the entity upon initial recognition designates as available for sale; or
(c) those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration, which shall be classified as available for sale.

An interest acquired in a pool of assets that are not loans or receivables (for example, an interest in a mutual fund or a similar fund) is not a loan or receivable. [IAS 39.9]

loans payable – Financial liabilities other than short-term trade payables on normal credit terms. [IFRS 7.A]

losses – Decreases in economic benefits and as such no different in nature from other expenses. [F.79]

market condition – A condition upon which the exercise price, vesting or exercisability of an equity instrument depends that is related to the market price of the entity’s equity instruments, such as attaining a specified share price or a specified amount of intrinsic value of a share option, or achieving a specified target that is based on the market price of the entity’s equity instruments relative to an index of market prices of equity instruments of other entities. [IFRS 2.A]

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 three types of risk: currency risk, interest rate risk and other price risk. [IFRS 7.A]

master netting arrangement – An arrangement providing for an entity that undertakes a number of financial instrument transactions with a single counterparty to make a single net settlement of all financial instruments covered by the agreement in the event of default on, or termination of, any one contract. [IAS 32.50]

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