CIFA Intermediate Level
Financial Statements Analysis glossary
Every term this guide defines, A to Z, each with the chapter that teaches it. Open it when a word in a question is unfamiliar, and test yourself on it in the last week: cover the definition and say it in one sentence.
13 terms from the free first chapter
A
- Auditor's report
States whether the financial statements give a true and fair view, and flags any material uncertainty or qualification the analyst should weigh.
B
- Bottom-up approach
Starts directly from company-specific analysis, financial statements, competitive position, and builds outward to industry and macro context only as needed to interpret company-specific findings.
F
- Financial Accounting Standards Board (FASB)
Sets US Generally Accepted Accounting Principles (US GAAP), the dominant alternative framework, materially converged with IFRS in many areas but still differing in specific rules an analyst comparing companies across the two frameworks must watch for.
- Financial reporting
The company's own responsibility: preparing and communicating financial statements that fairly represent its performance, position and cash flows to those outside the business.
- Financial statement analysis
The user's responsibility: applying analytical judgement and technique to that reported information to answer a specific decision question, an investor's buy/sell decision, a lender's credit decision, a regulator's oversight question.
I
- International Accounting Standards Board (IASB)
Sets International Financial Reporting Standards (IFRS), the framework Kenyan companies, and this paper, are built around.
M
- Management commentary
Management's own narrative discussion of performance, strategy and outlook, useful but, unlike the audited statements, not independently verified.
N
- Notes to the financial statements
Disclose the accounting policies applied and the detail behind the summarised figures, frequently where the analytically important information actually lives.
R
- Regulatory authorities
National bodies (in Kenya, the Capital Markets Authority, covered in CIFA Regulation of Financial Markets) that mandate which framework listed companies must use and enforce compliance with it.
- Regulatory filings and press reports
Filings with the CMA (see CIFA Regulation of Financial Markets) and independent press coverage, both useful cross-checks against the company's own presentation of itself.
S
- Supplementary information, sustainability and integrated reports
Additional voluntary or required disclosure, increasingly including climate and sustainability reporting (see the final chapter, on climate change).
T
- The financial statements themselves
The statement of financial position, statement of comprehensive income, statement of cash flows and statement of changes in owners' equity, this guide's core subject matter, taken up in the chapters on reporting and on analysing the statements.
- Top-down approach
Starts from the macroeconomic environment, narrows to the industry, and finishes at the individual company, useful for understanding the broad forces shaping a company's results before examining the company itself.
The full glossary adds every term from the other 10 chapters, A to Z, each with the chapter that teaches it.