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ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY

OVER 3,200 ACCOUNTING TERMS

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IAS is Institute of Asset Management (UK).

IAS see INTERNATIONAL ACCOUNTING STANDARDS.

IASB see International Accounting Standards Board.

IASC is International Accounting Standards Committee.

IAW is In Accordance With or In Agreement With.

IBA, among others, can mean: Individual Brokerage Account, Individually Billed Accounts, Institute of Business Appraisers, International Bar Association, or, International Business Advisors.

IBAN is the International Bank Account Number. An IBAN has a maximum of 34 alphanumeric characters. It is a series of alphanumeric characters that uniquely identifies a customer's account held at a bank anywhere in the world. It helps facilitate the automatic processing of cross-border credit transfers. Currently there are 23 countries requiring IBAN numbers in order to wire EUROs.

IBER is Institute of Business and Economic Research (University of California) or International Business Ethics Review.

IBNR is Incurred But Not Reported.

IDENTIFIABLE ASSETS and LIABILITIES are those assets and liabilities of a business that can be disposed of without disposing of the entire business. It includes both tangible and intangible assets.

IDLE TIME is unproductive time caused by, e.g., machine breakdowns, shortages of material or inefficient scheduling. The cost of idle time is usually classified as an indirect rather a direct cost.

IFRS see INTERNATIONAL FINANCIAL REPORTING STANDARDS.

ILLIQUID is when cash flows generated by the firm are insufficient to meet the debt service. When speaking of money or an economy: being very liquid means it is driven by primarily by cash, checking/saving accounts, treasury bills, stocks and bonds, etc; while being very illiquid means it is driven primarily by human capital.

IMA, in accounting, refers to the Institute of Management Accountants.

IMAD, dependent upon usage, is Input Messaging Accountability Data: A time stamp that is assigned to a Fedwire message when it is processed by the Federal Reserve Bank Funds Transfer application; or, Information Management Assimilation & Delivery; or, Industrial Management and Distribution System.

IMMATERIALITY is of complete irrelevance requiring no further consideration.

IMMOVABLE is a. not able to be moved or changed; or, b. assets consisting of land, buildings, or other permanent items.

IMPAIRED ASSETS, in banking, applies to all problem assets which banks hold, and is not limited to problem loans. In addition to loans, it also captures off- balance sheet exposures and assets which have come onto banks balance sheets through enforcement of security conditions. See IMPAIRMENT OF VALUE.

IMPAIRED GOODWILL is the recognition of the reduction in value of the intangible asset known as goodwill.

IMPAIRMENT see FRS 11.

IMPAIRMENT OF VALUE is the permanent decline in the value of an asset. The entry is to debit the loss account and credit the asset for the loss in utility. See also FRS 11.

IMPERSONAL ACCOUNTS represents accounts other than Personal Accounts. This may be sub-classified into: a. Real Accounts, e.g. Asset Account; and, 2. Nominal Accounts, e.g. Income and Expenditure Accounts.

IMPERSONAL LEDGER see LEDGER.

IMPLICIT RATE OF INTEREST is when the stated interest rate is not indicative of the market rate at the time a note is negotiated, the value of the asset (cash or non-cash) or service exchanged for the note establishes the market rate.

IMPLIED COST is hidden or opportunity cost incurred in using the already paid for assets, without taking into account the income these assets would earn if hired out to others.

IMPOSE is to set forth authoritatively as obligatory by rule or by law, e.g. budgetary constraints imposed upon the U.S. Congress.

IMPOSTA VALORE AGGIUNTO TAX (IVA TAX), in Italy, like most other European countries, Italy imposes a value added tax (VAT) on most goods and services purchased in the country. In Italy, the value added tax is known as the Imposta sul Valore Aggiunto or IVA. This tax is normally included or built into the price of most goods and services. The general rate of tax is 19% of the sale price.

IMPREST see PETTY CASH.

IMPREST BASIS, in cash accounts, means that the exact amount of fund expenditures is replaced periodically.

IMPUTED COSTS refer to the cost of an asset, service, or company that is not physically recorded in any accounts but is implicit in the product.

IMPUTED VALUE is the logical or implicit value that is not recorded in any accounts, e.g., in the projection of annual figures, values are imputed for months for which the actual values are not yet known.

INBR see INCURRED BUT NOT REPORTED; could also mean Insurance Broker.

INCLUDIBLE COMPENSATION is defined in section 403(b)(3) of the Internal Revenue Service (IRS) Code as compensation, received from a qualifying employer by an employee, which is includible in the employee's gross income for the most recent period which may be counted as 1 year of service. In this connection, section 1.403(b)-1(e)(1) of the regulations provides that for purposes of computing an employee's exclusion allowance for a taxable year, such employee's includible compensation in respect of such taxable year means the amount of compensation which is includible in his gross income.

INCOME is the amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments.

INCOME CAPITALIZATION: First you must determine the capitalization rate - a rate of return required to take on the risk of operating the business (the riskier the business, the higher the required return). Earnings are then divided by that capitalization rate. The earnings figure to be capitalized should be one that reflects the true nature of the business, such as the last three years average, current year or projected year. When determining a capitalization rate you should compare with rates available to similarly risky investments.

INCOME GEARING RATIO is Interest Expense / Operating Profit.

INCOME SMOOTHING refers to measures taken to reduce the probability of income shocks before they occur, and includes strategies like diversifying income sources; making low-risk production and employment choices; building up physical, human, and social assets; and ensuring good financial management.

INCOME STATEMENT see PROFIT AND LOSS STATEMENT.

INCOME SUMMARY ACCOUNT is the account in the general ledger used to summarize the revenue and expenses for the fiscal period.

INCOME TAX is a tax paid on money made or profit realized from employment, business, or capital.

INCOME TAXES PAYABLE is income taxes due including current portion of deferred taxes.

INCOME THEORIES try to identify the real profit of an organization. The difficulty here is that you need to define whose income you are measuring, and that limiting income measurements to things that can be given a price devalues goods and services that are difficult or impossible to price.

INCOMPETENCE is lack of physical or intellectual ability or qualifications.

INCORPORATED is a legal entity that has undergone incorporation through approval by a state government.

INCORPORATION is a legal process through which a company receives a charter and the state in which it is based allows it to operate as a corporation.

INCREMENTAL is increasing gradually by regular degrees or additions.

INCREMENTAL BUDGET is the forecast of fixed overhead costs, computed by adding or subtracting a predetermined percentage from the historical costs (of current or past budgets).

INCREMENTAL COST is the increase or decrease in costs as a result of one more or one less unit of output.

INCREMENTAL COST OF CAPITAL is the weighted cost of the additional capital raised in a given period. Weighted cost of capital, also called composite cost of capital, is the weighted average of costs applicable to the issues of debt and classes of equity that compose the firm’s capital structure. Also called marginal cost of capital.

INCUR is acquiring or getting into something undesirable or making oneself subject to; bring upon oneself; become liable to, e.g. to incur a cost or debt.

INCURRED BUT NOT REPORTED (IBNR), in insurance, losses occurring over a specified period that have not been reported to the insurer. IBNR losses are often calculated as a percentage of claims paid and claims outstanding and are reported in an insurer's annual report. Reinsurers establish IBNR reserves as a part of their rating plans under a facultative reinsurance treaty, lest an overly optimistic view of treaty results lead to further under-rating on a book of business. Example: Product liability losses are seldom reported during a policy year. This "tail" of claims will upset any rating plan, unless an IBNR reserve is established and factored into the profit picture.

INDEBTEDNESS is being in debt because of an express agreement, without regard to the ability or inability of the party to pay or honor the same.

INDEFEASIBLE not liable to being annulled or voided or undone, usually in reference to an interest in real property (e.g., an indefeasible ownership interest in a piece of property).

INDENTURE is an agreement between lender and borrower which details specific terms of the bond issuance. Specifies legal obligations of bond issuer and rights of bondholders. There is usually a indenture document spelling out the specific terms of a bond as well as the rights and responsibilities of both the issuer of the security and the holder.

INDEX-LINKED BOND provides a secure investment in real terms, as the coupon payments and the redemption proceeds are linked to movements in the RPI (the Retail Prices Index).

INDEX STOCK is a security listed on a stock index. See STOCK INDEX.

INDIFFERENCE CURVE, in microeconomics, an indifference curve is a graph showing combinations of two goods to which an economic agent (such as a consumer or firm) is indifferent, that is, it has no preference for one combination over the other.

INDIFFERENCE POINT is that point on the indifference curve where the compared values intersect. See INDIFFERENCE CURVE.

INDIRECT COST is that portion of cost that is indirectly expended in providing a product or service for sale (cannot be traced to a given cost object in an economically feasible manner) and is included in the calculation of COST OF GOODS SOLD, e.g. rent, utilities, equipment maintenance, etc. Opposite of direct cost.

INDIRECT SHAREHOLDING is when one entity directly holds shares of another entity that owns shares of a third but different entity, for example, Shareholder A would have an indirect shareholding of Company C if Shareholder A directly owns shares of Company B while Company B owns shares of Company C.

INDUCEMENT is a reward for a specific behavior, designed to encourage that behavior; also called incentive. To provide the first months rent free would be a "lease inducement".

INDUCTIVE ACCOUNTING THEORY (scientific method) assumes accounting standards are somewhat like evolution of a species in nature --- survival of the fittest. It relies heavily upon controlled experimentation (e.g., behavioral accounting research) and statistical testing (e.g., capital markets "events" studies of the impact of accounting information on market prices and volume of transactions).

INDUSTRIAL REVENUE BOND (I.R.B.) is a bond issued by local government agencies in favor of corporations.

INDUSTRY is the people or companies engaged in a particular kind of commercial enterprise.

INDUSTRY ANALYSIS includes, but is not limited to: a. Definition of the industry; b. Industry Life Cycle - growth, maturity or decline; c. Industry History - how old is the industry; d. In-depth historical financial performance ratio analysis; e. Industry Trends - cyclical or seasonal, increased competition etc.; f. Industry Influential Factors - does economy, government, or competition effect industry; g. Primary Competitors along with entry risk and barriers to entry; and, h. Projected Industry Sales - total sales in the industry.

INFLATION is an increase in the general price level of goods and services; alternatively, a decrease in the purchasing power of the dollar or other currency.

INFLATION ACCOUNTING is a system of accounting which, unlike historical cost accounting, takes into account changing prices.

INFLATION ADJUSTMENT is whenever any figure is adjusted for inflation/deflation. It simply means that all fluctuations in price (upward or downward) that are directly attributable to inflation/deflation are reflected into that figure through either adding or subtracting the amount that is directly caused by inflation/deflation.

INFORMATION / INFORMATIONAL RETURN is one of many returns that only communicates to the Internal Revenue Service information relevant to tax liability and does not compute the actual liability of any taxpayer or accompany the actual payment of tax; used for sale of property, dividends, and others (e.g., W-2 and Forms 1099).

INFORMATION THEORY is a branch of mathematics that overlaps into communications engineering, biology, medical science, sociology, and psychology. The theory is devoted to the discovery and exploration of mathematical laws that govern the behavior of data as it is transferred, stored, or retrieved.

INFRASTRUCTURE is the resources (as personnel, buildings, or equipment) required for an activity.

INHERENT RISK, generally, it is the risk found in the environment and in human activities that is part of existence. In accounting, it is the susceptibility of an audit area to error which could be material, individually or in combination with other errors, assuming that there are no related internal controls.

INITIAL TERM is normally the first time period covered under an agreement or contract (the Term) at the end of which the agreement will either terminate or be automatically renewed under set conditions (Renewal Term), e.g. a one year contract.

INITIATE is to set going by taking the first step, e.g., initiate contract negotiations.

IN-KIND is the value of goods or services provided for which money would have otherwise been paid.

INPUT VAT is the VAT on a company's input supplies. See also VALUE ADDED TAX (VAT).

INSERTION ORDER, in marketing, is an agreement that specifies aspects related to an advertising campaign.

INSIDE INFORMATION is the information which the company temporarily withholds and has not been released to the public at large, and which is intended for use solely for a corporate purpose and not for any personal use.

INSIDERS are all persons who come into possession of material inside information before its public release. In securities, insiders are such persons who are controlling shareholders, directors, officers, managers and employees, including spouse, parents, siblings and those under the control of insiders as well as persons induced by such persons who come into possession of material inside information.

INSIDER TRADING is the trading, primarily of securities, by management or others who have special access to unpublished information. If the information is used to illegally make a profit, there may be large fines and possible jail sentences.

INSOLVENCY occurs when a business is unable to pay debts as they fall due.

INSTALLATION is 1. the act of installing something (as equipment); or, 2. a building or place that provides a particular service or is used for a particular industry.

INSTALLEMENT AGREEMENT see INSTALLMENT SALE.

INSTALLMENT SALE is selling property and receiving the sales price over a series of payments, instead of all at once at the close of the sale, is an installment sale. As the seller, unless you elect out, you will report the gain on that transaction as you receive it through the series of payments. As the buyer, you will usually pay interest on the unpaid balance.

INSURABLE EARNINGS, as it pertains to unemployment insurance, is the total amount of earnings that an insured person has from insurable employment: a. the total of all amounts, whether wholly or partly paid in legal tender, received or enjoyed by the insured person that are paid to the person by the person's employer in respect of that employment, and b. the amount of any gratuities that the insured person is required to declare under tax legislation.

INSURANCE CLAIM is a written notification to an insurance company requesting payment of an amount due under the terms of the policy.

INTANGIBLE ASSET is an asset that is not physical in nature. Examples are things like copyrights, patents, intellectual property, or goodwill. An intangible asset is the opposite of tangible asset.

INTANGIBLES (NET) are intangible assets, including goodwill, trademarks, patents, catalogs, brands, copyrights, formulas, franchises, and mailing lists, net of accumulated amortization.

INTEGRATED FINANCIAL MODEL is normally a spreadsheet based financial model that integrates all projected revenues and costs from all activity into financial performance pro-forma projections over time. Dependent upon the complexity of the model, the output can be at a very high level (non-complex) to highly granular output (higher degree of complexity).

INTEGRATED LEDGER see ENTERPRISE RESOURCE PLANNING.

INTELLECTUAL CAPITAL Intellectual capital bundles knowledge resources (how the ‘production functions”, that is the constellation of employees, users, processes and technologies, work). Intellectual capital enables a company to make a difference to users via its knowledge resources.

INTELLECTUAL CAPITAL STATEMENT (ICS) provides: a. Insights into the user’s situation (= the customers situation); b. Insight into the colleague’s skills and improvements of teamwork; c. Insight in the practical skills e.g. craftsmanship: from knowing how to develop and improve production methods to be capable of handling information technology etc.; d. Insights in the know-how represented in the company’s processes and systems and how these can be used to improve the quality of products or services; e. Insight in the motivation or commitment as regards the further development of the company’s products and services; f. Insight in the future needs for knowledge; g. Insight in the skills, competencies and qualification that can make a difference to the company.

INTELLECTUAL PROPERTY is intangible property that is the result of creativity, e.g. patents, trademarks or copyrights.

ITEMIZED DEDUCTIONS is amounts paid by an individual taxpayer for personal and quasi-business expenses that can be deducted in computing taxable income, such as medical expenses, property and income taxes, mortgage and investment interest, charitable contributions, moving expenses, casualty and theft losses, and certain miscellaneous expenses. See STANDARD DEDUCTIONS.

ITEMIZED STATEMENT is a record or transmittal that details product or services rendered and the costs incurred and payments received.

INTENSITY DRIVERS are used to directly charge for the resources used each time an activity is performed.

INTERCOMPANY or INTERCORPORATE means occurring between companies.

INTEREST, in law, is a right or legal share of something or a financial involvement with something; in finance, it is a fixed charge for borrowing money; usually a percentage of the amount borrowed.

INTEREST-BEARING means paying interest.

INTEREST COVERAGE is a ratio which indicates the ability of a company to cover net interest expenses with income before net interest and taxes. It is calculated by dividing income before interest and taxes by interest.

INTEREST EARNINGS is amounts from interest on all interest-bearing deposits and accounts; accrued interest on investment securities sold; interest on funds held for construction; and interest related public debt for private purposes. Excludes interest on deposits and investments of employee retirement and other insurance trust funds; dividends from investments; accrued interest on bonds issued by the government; recorded profits on sale of investments; and accrued interest on the purchase of investments.

INTERESTED PARTY is any person that has a real and direct interest in any proceeding or action being proposed or taken.

INTEREST EXPENSE is the cost of borrowing funds in the current period. It is shown as a financial expense item within the income statement.

INTEREST PAYABLE see PAYABLE.

INTEREST RATE is the rate of interest charged for the use of money, usually expressed as an annual rate. The rate is derived by dividing the amount of interest by the amount of principal borrowed. For example, if a bank charged $100 a year to borrow $1,000, the interest rate would be 10%. Interest rates are quoted on bills, notes, bonds, credit cards and many kinds of consumer and business loans. Rates in general tend to rise with inflation and in response to the Federal Reserve raising key short-term rates. A rise in interest rates has a negative effect on the stock market because investors can get more competitive returns from buying newly issued bonds instead of stocks. It also hurts the secondary market for bonds because rates look less attractive compared to newer issues.

INTEREST RATE SWAP (IRS) is a contractual arrangement between two counter-parties who agree to exchange interest payments on a defined principal amount for a fixed period of time.

INTEREST RATE SWAPTION is an option on an interest rate swap. It gives the holder the right but not the obligation to enter into an interest rate swap at a specific date in the future, at a particular fixed rate and for a specified term.

INTERFUND LOAN is an authorized (usually) short term loan from one fund to another.

INTERIM AUDIT is an audit conducted during the fiscal year usually as a means of minimizing the work and time involved in concluding the audit after the fiscal year. A corporation might have an interim audit covering the first nine months of the fiscal year so that at the end of the fiscal year most of the auditing will focus on the last three months of the fiscal year thus allowing for a comprehensive audit and early completion of the audit reports. An interim audit does not usually yield any formal reports from the external auditors.

INTERIM DIVIDEND is the declaration and payment of a dividend prior to annual earnings determination.

INTERIM EARNINGS see INTERIM STATEMENT.

INTERIM STATEMENT is a financial report covering only a portion of a fiscal year (prepared by accountants, but usually unaudited). Quarterly statements from publicly traded companies are one example of an interim statement. Interim statements are not as detailed or as exact as annual statements.

INTERMEDIARY is the person or institution empowered to be the intermediary in making investment decisions for others. Examples: banks, savings and loan institutions, insurance companies, brokerage firms, mutual funds, and credit unions.

INTERMEDIATION COST, in finance, is the cost involved in the placement of money with a financial intermediary. The person or institution empowered as the intermediary to make investment decisions for others. Examples: banks, savings and loan institutions, insurance companies, brokerage firms, mutual funds, and credit unions.

INTERNAL is inside the country, e.g. a nation's internal politics; or, happening, arising or located inside a company, e.g. internal requirements or transactions.

INTERNAL AUDIT is an independent appraisal function established within an organization to examine and evaluate its activities as a service to the organization. The objective of internal auditing is to assist members of the organization in the effective discharge of their responsibilities. To this end, internal auditing furnishes them with analyses, appraisals, recommendations, counsel, and information concerning the activities reviewed. The audit objective includes promoting effective control at reasonable cost. Occasionally a corporation may contract an external auditor or firm to conduct its internal audit function.

INTERNAL AUDITOR is an auditor who works directly for a company auditing its activities throughout the year. Internal auditors of corporations are often not certified auditors, though they usually have significant accounting experience. They should report directly to the board of directors of the corporation.

INTERNAL CONTROLS include policies and procedures that (a) pertain to the maintenance of accurate and reasonably detailed records, (b) provide reasonable assurance that transactions are properly recorded and authorized, and (c) safeguard assets.

INTERNAL CONTROL SYSTEM is a formalized system intended to provide reasonable assurance that the objectives of a program as a whole are met, e.g. financial control, quality control or process control.

INTERNALLY GENERATED refers to the creation of either tangible or intangible results within the confines of one entity, e.g. internally generated funds are those funds that are realized through the efforts or operations of the entity itself, i.e. the funds were not borrowed or realized through other external means.

INTERNAL RATE OF RETURN (IRR) is the discount rate that makes the project have a zero Net Present Value (NPV). IRR is an alternative method of evaluating investments without estimating the discount rate. IRR takes into account the time value of money by considering the cash flows over the lifetime of a project. The IRR and NPV concepts are related but they are not equivalent.

INTERNATIONAL ACCOUNTING is the international aspects of accounting, including such matters as accounting principles and reporting practices in different countries and their classification; patterns of accounting development; international and regional harmonization, foreign currency translation; foreign exchange risk; international comparisons of consolidation accounting and inflation accounting; accounting in developing countries; accounting in communist countries; performance evaluation of foreign subsidiaries.

INTERNATIONAL ACCOUNTING STANDARDS (IAS) see INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS).

INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB), based in London, UK. The IASB is responsible for setting International Financial Reporting Standards. The IASB hopes that through the creation of international standards, it makes one set of financial statements more compatible with the rest of the world. Currently, a company's financial report would be different for each country based on local generally accepted accounting principles. There are fourteen members of the IASB, of whom twelve are full-time members (ie employed only by the IASB). Five members must be former auditors, three former preparers of accounts, three former users of accounts and one an academic. The remaining two may be of any of these, or other, backgrounds. The non-profit organization IASC Foundation, incorporated in March 2001 in Delaware, US is the parental body of the IASB. The IASC Foundation is also the parent of the Standards Advisory Council and the International Financial Reporting Interpretations Committee.

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS), often known by the older name of International Accounting Standards (IAS), are a set of accounting standards. They are issued by the International Accounting Standards Board (IASB).

INTERNATIONAL FUND is a (mutual) fund that can invest only outside the home country, e.g. the United States.

INTERPERIOD EQUITY is a government’s obligation to disclose whether current-year revenues were sufficient to pay for current-year benefits, or did current citizens defer payments to future taxpayers, i.e. it refers to whether current-year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required to assume burdens for services previously provided.

INTERPERIOD TAX ALLOCATION is the process of apportioning income taxes among accounting periods.

INTERSEGMENT REVENUE is revenue generated within a segment; whether it be a business or geographical segment.

IN THE BLACK means making money; the opposite of "in the red."

IN-THE-MONEY OPTION is an expression used for any option series with intrinsic value, i.e., the option's strike (exercise) price and market price of the underlying security are such that the holder can exercise the option at a profit. For example, if a call option with a strike price of 30 and the underlying stock's market price is currently 33, the call is in the money. A put option is considered in the money when the underlying stock is selling below the strike price. Premiums and other transaction costs are not considered in determining whether the option is in the money or out of the money. See OUT-OF-THE-MONEY OPTION.

IN THE RED means losing money; the opposite of "in the black."

INTRACOMPANY means occurring within or taking place between branches or employees of a company.

IN TRANSIT literally means that the item(s) is in route. In marine insurance, "in transit" means that once goods leave the port (or place) of loading, they will be carried to the port (or place) of destination over the usual or most common route without undue delay or interruption, otherwise the insurance cover may be voided. In practice, however, marine insurance policies provide for some delay or interruption, especially those beyond the control of the insured party.

INTRINSIC VALUE, generally, is the value of a resource unto itself, regardless of its value to humans; often considered the ethical value of a resource, or the right of the resource to exist, e.g., in securities, it is the perceived actual value of a security, as opposed to its market price or book value.

INVENTORY for companies: includes raw materials, items available for sale or in the process of being made ready for sale (work in process); for securities: it is securities bought and held by a broker or dealer for resale.

INVENTORY ACCUMULATION is a buildup of inventory caused primarily by unplanned events, e.g., sales not meeting expectation.

INVENTORY AND PURCHASES BUDGET represents what a business plans to buy and how much inventory it intends to hold over a given timeframe, is based on three factors: a business’s desired ending inventory, cost of goods sold, and beginning inventory. A business’s desired ending inventory will drive that business’ budgeted purchases over a given period of time. A larger desired ending inventory will typically lead to a larger Purchases Budget and vice-versa. While the Purchases Budget, a component of the Inventory and Purchases Budget, represents an estimate of future purchases, this is an accrual-based accounting figure, and it is the Disbursements for Purchases Budget (another component of the Inventory and Purchases Budget) that drives a company’s cash flows.

INVENTORY CONTROL is the process of maintaining sufficient inventory measures to meet customer needs, weighted against the cost of carrying inventory to determine an appropriate inventory level.

INVENTORY LOAN is loan that is extended based upon the, usually, discounted / factored value of a business' inventory.

INVENTORY OBSOLESCENCE is when inventory is no longer salable. Possibly due to too much inventory on hand, out of fashion or demand. The true value of the inventory is seldom exactly what is shown on the balance sheet. Often, there is unrecognized obsolescence.

INVENTORY PROFITS is a capital-gains-like element in profits. It results from an increase in inventory prices.

INVENTORY SHRINK, as used in retail, is reduction in physical inventory caused primarily by shoplifting and employee theft.

INVENTORY SHRINKAGE is a reduction in the physical amount of inventory that is not easily explainable. The most common cause of shrinkage is theft.

INVENTORY TRANSFER can be a process by which inventory is physically tracked from location to location, e.g. from warehouse to shop floor; or, the transfer of assets from one account to another within the same or an alternate entity.

INVENTORY TURNOVER is a ratio that shows how many times the inventory of a firm is sold and replaced over a specific period.

INVENTORY TURNS (Period Average) measures the average efficiency of the firm in managing and selling inventories during the last period, i.e., how many inventory turns the company has per period and whether that is getting better or worse. It is imperative to compare a company’s inventory turns to the industry average. A company turning their inventory much slower than the industry average might be an indication that there is excessive old inventory on hand which would tie up their cash. The faster the inventory turns, the more efficiently the company manages their assets. However, if the company is in financial trouble, on the verge of bankruptcy, a sudden increase in inventory turns might indicate they are not able to get product from their suppliers, i.e., they are not carrying the correct level of inventory and may not have the product on hand to make their sales. If looking at a quarterly statement, there probably are more or less turns than an annual statement due to seasonality, i.e., their inventory levels will be higher just before the busy season than just after the busy season. This does not mean they are managing their inventory any differently; the ratio is just skewed because of seasonality. NOTE: Comparing the two INVENTORY TURNS (Period Average and Period End) suggests the direction in which inventories are moving, thereby allowing an analysis of efficiency improvements and/or potential burgeoning inventory problems. Formula: COGS / (Inventory (current) + Inventory (last period) / 2)

INVENTORY TURNS (Period End) measures the ending efficiency of the firm in managing and selling inventories during the last period, i.e., how many inventory turns the company has per period and whether that is getting better or worse. It is imperative to compare a company’s inventory turns to the industry average. A company turning their inventory much slower than the industry average might be an indication that there is excessive old inventory on hand which would tie up their cash. The faster the inventory turns, the more efficiently the company manages their assets. However, if the company is in financial trouble, on the verge of bankruptcy, a sudden increase in inventory turns might indicate they are not able to get product from their suppliers, i.e., they are not carrying the correct level of inventory and may not have the product on hand to make their sales. If looking at a quarterly statement, there probably are more or less turns than an annual statement due to seasonality, i.e., their inventory levels will be higher just before the busy season than just after the busy season. This does not mean they are managing their inventory any differently; the ratio is just skewed because of seasonality. NOTE: Comparing the two INVENTORY TURNS (Period Average and Period End) suggests the direction in which inventories are moving, thereby allowing an analysis of efficiency improvements and/or potential burgeoning inventory problems. Formula: COGS / Inventory (current)

INVENTORY VALUATION is the process of assigning a financial value to on-hand inventory, based on standard cost, first-in, first-out (FIFO), last-in, first-out (LIFO), average list price or other method. The method used is determined by a requirement to meet legal or other standards specified by a third party, or by an operational measure found to be useful in analyzing inventory positions.

INVENTORY VARIANCE see VARIANCE.

INVESTEE is the legal entity into which an investor has made an equity investment.

INVESTIGATION, generally, is the work of inquiring into something thoroughly and systematically. In accounting/finance, normally, it is an inquiry into unfamiliar or questionable activities.

INVESTMENT is the purchase of real property, stocks, bonds, collectible annuities, mutual fund shares, etc, with the expectation of realizing income or capital gain, or both, in the future. Investment is longer term and usually less risky than speculation.

INVESTMENT ACCOUNTING provides accurate and timely entity investment accounting information to related users of such information, e.g. Investments Office, Funds Management, Financial Reporting and Analysis, and individual departments; and to perform appropriate reconciliation and control procedures to safeguard the entity's investments.

INVESTMENT BANKER is an underwriter who serves as a middleman between a corporation issuing new securities and the public. Usually, an investment banker, or several investment bankers in a syndicate, buy the securities issue outright, then sell the securities to individuals or institutions.

INVESTMENT CAPITAL is capital realized from issuance of long term debt, common shares, or preferred shares.

INVESTMENT CENTER is the responsibility center within an organization that has control over revenue, cost, and investment funds. It is a profit center whose performance is evaluated on the basis of the return earned on invested capital, e.g. corporate headquarters or a division of a large decentralized organization.

INVESTMENT EXPENSE is any cost of investment realized aside from the principal investment itself. For example:, in mutual funds, investment expesne is normally contained within five types of investment costs that must be measured to determine your total investment expense: a. Annual mutual fund expenses (i.e. the expense ratio); b. Front or back end sales loads; c. Portfolio turnover and trading costs for the fund (i.e. bid/ask spread, premium for large block trades, etc.); d. Brokerage commissions; and, e. Other (i.e., wrap account fees, annuity mortality & expense charges, etc.).

INVESTMENT HOLDING COMPANY, generally, is to hold by way of investment any real or personal property whatsoever. Within business, it is a company which holds equity in or invests into other companies as subsidiary or associate companies.

INVESTMENT MANAGER is an individual, firm, or committee responsible for making day-to-day decisions to buy, hold, or sell assets; also known as money managers.

INVESTMENT OPPORTUNITY SET is a graphical depiction of the Capital Allocation Line; which depicts expected rates of return between risky and risk-free assets.

INVESTMENT TAX CREDIT is a tax credit in the United States that allows businesses to write-off a portion of the cost of purchasing equipment for business use.

INVESTMENT TURNOVER is a profitability measure used to calculate the number of times per year an investment or assets revolve.

INVESTOR is an entity that commits capital in order to gain financial returns.

INVOICE is a detailed list of goods shipped or services rendered, with an account of all costs; an itemized bill.

INVOICE, COMMERCIAL is a legal document that functions internationally as a bill of sale. It usually contains the exporting company, contents of the shipment, amount charged, name of carrying vessel, order number and payment terms.

INVOICE, CONSULAR is an invoice stamped or endorsed by the consulate of the country requiring such.

IOU is an informal debt instrument in the form of a written promise to pay back money owed; e.g., personal loans and professional services.

IPO (INITIAL PUBLIC OFFERING) is the first or primary offering of stock to the public.

IRC is Internal Revenue Code of 1986 (formerly 1954).

IRCA is International Register of Certified Auditors.

IRD, dependent upon usage, can mean Interest Rate Derivatives (finance), Inland Revenue Department (New Zealand's tax revenue collection department), or Interest Rate Differential.

IRR see INTERNAL RATE OF RETURN.

IRRELEVANT COST, in managerial accounting decision-making situations, is any positive or negative implications phenomenon which is not consequent upon the production process, whether it is denominated in money terms or not.

IRREVOCABLE LETTER OF CREDIT is a letter of credit in which the specified payment is guaranteed by the issuing bank if all terms and conditions are met by the drawee. It is as good as the issuing bank.

IRS is Internal Revenue Service; also see INTEREST RATE SWAP.

ISSUE, in securities, is stock or bonds sold by a corporation or a government; or, the selling of new securities by a corporation or government through an underwriter or private placement.

ISV can mean: Independent Software Vendor, Independent Solution Vendor, or Information Service Vendor.

ITC is International Trade Commission, Investment Tax Credit, Input Tax Credit (Canadian GST refund for businesses), etc.

IVA TAX see IMPOSTA VALORE AGGIUNTO TAX.