CAE05 INTERMEDIATE ACCOUNTING 2

Explain the following terms in essay.

Contingencies
- A contingency emerges when a situation has an uncertain outcome and
must be resolved in the future, perhaps resulting in a loss. Only those
losses that are likely and for which a loss amount may be reasonably
predicted are recognized when accounting for a contingency.
Contingency means something that could happen or come up
depending on other occurrences. An example of a contingency is the
unexpected need for a bandage on a hike. The definition of a
contingency is something that depends on something else in order to
happen.

Fair Value Option

- A Fair value is the price that two parties are willing to pay for an
asset or liability, preferably in an active market. In this situation, the
effects of supply and demand will likely impact the value associated
with the asset under examination. A less accurate measure of fair
value is when there is an active market for a similar item, while the
least accurate measurement method is to use the discounted cash
flows associated with the future performance of an item.

Ratios
- A ratio is a comparison of two or more financial data that is used to
analyze a company's financial statements. It is a useful tool for
shareholders, creditors, and other stakeholders to understand a
company's profitability, strength, and financial health. This is also
known as financial ratios, which are used to track corporate
performance and make key business choices.

IFRS
- IFRS is short for International Financial Reporting Standards. IFRS is
the international accounting framework within which to properly
organize and report financial information. It is derived from the
pronouncements of the London-based International Accounting
Standards Board (IASB). It is currently the required accounting
framework in more than 120 countries. IFRS requires businesses to
report their financial results and financial position using the same
rules; this means that, barring any fraudulent manipulation, there is
considerable uniformity in the financial reporting of all businesses
 using IFRS, which makes it easier to compare and contrast their
financial results.

GAAP
- Generally Accepted Accounting Principles (GAAP) is an acronym for
Generally Accepted Accounting Principles. GAAP is a collection of
accounting standards and accepted business practice that has evolved
through time. Organizations utilize it to properly organize their financial
data into accounting records, summarize those records into financial
statements, and disclose specific supporting data.