Glossary of Terms

Abbreviation for Advance-Decline (indicator).

(Credit rating). Indicating the strongest long term credit rating.

1. USA. Abbreviation for American Banker’s Association.

2. USA. Abbreviation for American Bar Association.

Pensions. A reduction to a pension, for example as a result of early retirement, often according to a formula set out in the pension scheme Rules.

UK company law. In order to reduce administrative burdens on small and meduim sized companies in the UK, they are not required under company law to produce full accounts. Instead they are allowed to prepare shorter-form 'abbreviated accounts'.

USA. Accrual or accretion bond.

Abbreviation for Asset Backed Commercial Paper.

Abbreviation for Arab Bank for Economic Development in Africa.
Also abbreviated to BADEA.

Abbreviation for Association of British Insurers.

Abbreviation for Accrued Benefit Obligation.

Abbreviation for Asset-Backed Securities.

A form of purchasing power parity which claims that under a fully floating exchange rate regime the ratio between domestic and foreign price levels equals the equilibrium rate of exchange between the domestic and foreign currencies.

Associate of the Institute of Chartered Accountants in England and Wales.

Abbreviation for Association of Chartered Certified Accountants, UK-based professional association.

Loan documentation. The requirement for the immediate repayment of the whole of a loan by a borrower - regardless of the scheduled repayment terms - following an Event of default.

Credit transfer. Giros usually supplied and completed by the beneficiary with all the relevant details and sent to the payor along with an invoice.
The payor then signs the giro (in other words he/she accepts it) and forwards it to his/her bank. The bank debits the payor’s account and puts the giro into the clearing system.

1. A bill of exchange which has been 'accepted' by a high quality credit - usually a bank - effectively guaranteeing payment and thereby enhancing the credit quality of the bill.

2. Law. One of the essential requirements for the formation of a contract. Another essential requirement being an offer.

A UK money-market term for a bill of exchange drawn by a customer on its bank, which is accepted and then discounted by the bank, the proceeds being paid to the customer.

Abbreviation for American and Canadian Connection for Efficient Securities Settlement.

1. A balance held with a financial institution to facilitate transactions, such as a bank account or securities account.

2. Accounting. A division of a ledger for entries recording related transactions.

A statement, essentially an invoice for services, which a financial institution provides to its commercial customers specifying services provided, volumes of transactions processed and charges assessed.

The statement is used by the customer for cash management and other purposes.

The task of establishing, usually on a daily basis, the expected end-of-day closing cash position.
Also known as cash positioning.

The practice and theory of preparing Accounts for an organisation, whether for internal or for external use.

The methods developed for applying fundamental accounting concepts to individual transactions and financial items.

Four fundamental concepts which underlie the completion of periodic financial accounts of businesses under UK GAAP.
The concepts are going concern, accruals, consistency and prudence.

The potential impact on an entity's accounts of a particular policy or transaction.

For example the effect on group accounts in applying accounting policies relating to the translation of assets and liabilities denominated in currencies other than the group's functional currency.

A group is deemed to exist for accounting purposes in circumstances where a parent undertaking controls one or more subsidiary or associate undertakings.

1. A period upon which UK corporation tax is assessed and charged on profits arising in the period. This period cannot exceed 12 months.

2. Same as period of account.

Accounting bases of valuation or measurement specific to a reporting entity. The entity should consistently follow accounting policies from period to period. Accounting policies must be determined in accordance with the relevant GAAP.

(ARR). A measure of accounting return on investment.

The date to which a reporting entity's accounts are made up.

A measure of profitability based on accounting profits divided by the book value of invested capital.

This measure may be calculated in a number of different ways, for example:
[Average annual accounting profit over the project life] ÷ [Average book value of investment in the project]

Published guidance for the preparation of financial statements including - in the UK - FRSs (Financial Reporting Standards) and IASs (International Accounting Standards).

(ASB). That part of the Financial Reporting Council in the UK that is responsible for making, amending and withdrawing accounting standards.

Details of their work and standards issued are available from: www.frc.org.uk.

1. The externally reported financial statements of an organisation. These include summaries, in conventional and prescribed formats, of the organisation's assets, liabilities, income, expenditure and cash flows.

2. The internal financial summaries used by an organisation. Also known as management accounts.

3. The fully detailed internal financial records of an organisation.

Short-term obligations owed by a business to creditors, suppliers and vendors.

The different strategies that allow companies to manage the cost of the liabilities resulting from the purchase of goods and services.

Assets resulting from the extension of trade credit to customers.
Also known as trade debtors.

(ARC). USA An automated clearing house transaction format that allows the electronic clearing and settlement of cheques by converting them to electronic transactions at lockboxes or other collection sites.
Also know as conversion.

The different strategies that can be adopted to manage the collection of outstanding receivables.

A term meaning that the principal amount is increasing over time, for example as a result of the scheduled drawdown of a loan in tranches. This would also apply to a deposit where any interest is effectively re-invested.

A type of interest rate swap.

An accreting swap is one where the notional principal amount is growing over time. Used - for example - to hedge a loan being drawn down in instalments.

1. In accounting, an amount owing - but not yet invoiced - for services or goods received during the accounting period. An accrual is a form of liability, because it represents cash that will have to be paid out in the future, for a benefit that has already been received.

2. In a Defined Benefit Pension Scheme, the build up over time of entitlement to future benefits, resulting from additional years of pensionable service.

Pensions. The rate at which benefits build up for each year of service in a Defined Benefit pension scheme. See also Pensionable service.

1. In financial accounting, the spreading of profits and losses on hedging instruments over the life of the underlying exposure being hedged.

2. In accounting more generally, the appropriate spreading of income and expenditure items into the periods to which they relate. This may differ from the period in which the associated cash receipts or payments take place. (An alternative simpler basis of accounting would be a cash basis.)

3. A basis of taxation which follows the accruals basis of financial accounting.

4. UK tax. The recognition for UK tax purposes of all profits and losses on a loan relationship over the life of the loan.

The accounting principle that revenues, profits and the associated costs incurred while earning them should be included in the same Profit and Loss Account or Income Statement.

(ABO). The present value of pension benefits owed to employees under a pension scheme’s benefit formula without any projected salary increases and discounted at a nominal rate of interest.

Pensions. The benefits for service up to a given point of time in a Defined Benefit pension scheme, whether or not vested.
They may be calculated in relation to current salary or projected salary and allowance may also be made for statutory or discretionary revaluation.

A pensions Funding method in which the Actuarial valuation at the Valuation date relates to the actual benefits for Pensioners and Deferred pensioners and their Dependants and the Accrued benefits of Active members.
Allowance will generally need to be made for future increases to salaries and benefits and for new members and Early leavers.

Revenue earned by a business but not yet invoiced or received.

(AI). The interest accumulated on a debt security since its issue date but not yet paid out. This is accounted for in the actual gross purchase price of the debt security.

The accounting values of most fixed assets, such as buildings, machinery, office equipment and vehicles are depreciated over their useful lifetime.
Land is not depreciated as its value is not considered to diminish over time.

(ANAV). A method of compensating money market fund investors through increasing the net asset value (NAV) of each fund unit rather than through dividend payout.

USA. Abbreviation for American (Stock Exchange) Commodities Exchange.

Abbreviation for Automated Clearing House System.

An automated clearing house (ACH) transaction that involves the transfer of funds from an originator’s account to a receiver’s account.

An automated clearing house (ACH) transaction that moves funds from the receiver’s account to the originator’s account.

An automated clearing house (ACH) association or Federal Reserve Bank that processes and distributes ACH transactions received from an originating financial institution.

Same as Quick ratio.

Same as Quick ratio.

A financial institution - often a subsidiary of a bank - that ‘buys’ credit card transactions, with recourse, from a retailer.

The acquirer will present the transactions to the card issuer for payment and will then pay the retailer the amount of the card transactions less a discount - which covers their own and the card issuer’s fee for handling the transaction. This is how retailers get paid.

The purchase by a business of another business (including its assets and its liabilities, its contracts with employees, and its other contractual rights and obligations).

This is now the generally accepted method of financial accounting for subsidiaries, also known as full consolidation.

Acquisition accounting regards the combination of the holding company and the subsidiary as being the acquisition by one company of another. The difference between the fair value of the consideration given and the fair values of the entity acquired is accounted for as goodwill.

VAT. Goods or services purchased by a UK VAT registered business from a business registered for VAT in another EC member state.

Abbreviation for Automated Clearing Settlement System.

1. Abbreviation for UK Advanced Corporation Tax.

2. Association of Corporate Treasurers.

3. An Act is a formal codification of law by a country's legislative body (for example the Companies Act 2006 of the UK Parliament).

Actuarial Standards Board.

Tax. Income for which the taxpayer performs services. Examples are wages, salaries, tips, bonuses, and business and partnership income.

Pensions. A member of a Defined Benefit pension scheme who is at present accruing benefits under that scheme by virtue of continuing service.

A financial ratio designed to measure the efficiency of management in controlling the working capital of the business.
For example, the inventory turnover ratio.

See Actuarial gains and losses.

Pensions accounting.
Changes in actuarial deficits or surpluses over time arising from either or both of:

1. Differences between the actual events as they have turned out and the assumptions that were made as at the date of the earlier actuarial valuation. (Known as Experience gains and losses.)

2. Changes in the actuarial assumptions.

Pensions. The value placed on all the liabilities of a Defined Benefit pension scheme falling due after the Valuation date.

See Actuarial gains and losses.

(Act SB). A body proposed by the Morris Review to set technical standards for the actuarial profession.

1. Pensions. An investigation by an Actuary into the ability of a Defined Benefit pension scheme to meet its Actuarial liability.

2. The related money amounts - assessed by an Actuary - of the pension scheme's liabilities, assets and surplus or deficit.

An individual qualified - amongst other skills - to advise on certain financial matters in connection with pension schemes, for example the valuation of assets and liabilities, including key assumptions such as mortality.

Abbreviation for Asian Clearing Union.

Economics. Abbreviation for Aggregate Demand.

A charge based on the value of the transaction.

Abbreviation for Asian Development Bank.

(AVC). UK pension contributions over and above those contractually required, paid by a scheme member and thus securing additional pension benefits.

Payments to a scheme separate from the members’ Occupational pension scheme are known as free-standing additional voluntary contributions (FSAVCs).

Abu Dhabi Interbank Offered Rate.

UK tax. The process in stamp duty whereby the document and supporting evidence is sent to HMRC to determine the amount of stamp duty payable.

Pensions. This is the Normal contribution rate adjusted to eliminate any difference between the Target Fund and actual asset value at the Valuation date (the difference being the surplus or the deficit).

(APV). A method of project appraisal which seeks to identify and evaluate separately the benefits of using debt for part of the capital requirements of the project.

It does this by calculating separately:

1. The net present value of the project assuming it were all-equity financed.

2. The Present Value of the tax shield benefits of the proposed debt finance (+/- PV of any other benefits/costs of debt finance).

The APV of the project is the total of these two items.

These encompass the general costs of running the business. For example salaries and related costs of general management including administrative overheads.

UK insolvency law. An order of the court made in relation to a company in financial difficulties with a view to securing its survival as a going concern or, failing that, to achieving a more favourable realistion of its assets than would be possible on a liquidation or through a voluntary arrangement. While the order is in force, the affairs of the company are managed by an administrator.

An insolvency practitioner appointed by the holder of a floating charge over a company's property.

1. The person notified to HMRC (in the UK) as being responsible for the management of a pension scheme.

2. More generally, a person responsible for day to day administration, in any type of organisation.

3. Loosely, an administrative receiver.

Abbreviation of American Depository Receipt.

Abbreviation for Approved Deferred Share Trust.

(ACT). A payment which was formerly made to the Inland Revenue whenever a UK company paid a dividend - now abolished.

(A-D). Technical analysis. A measure of the ratio of rising assets against falling ones in the market under review.

In transactions involving letters of credit (LCs), an institution advising the beneficiary (exporter), of an LC opened in its favour.

Also called Position netting.

Abbreviation for Annual Effective Rate.

Abbreviation for Annuity Factor.

A written statement of fact made for legal purposes under oath before a notary public or other authorised officer.

Australia. Abbreviation for Australian Financial Markets Association.

Abbreviation for Authorised Futures and Options Fund.

France. Abbreviation for Association Francaise des Tresoriers d’Entreprise (French Association of Corporate Treasurers).

Germany. Abbreviation for Aktiengesellschaft.

Agency is a relationship between at least two parties in which one, the principal, authorises the other, the agent, to represent his legal interests and to perform legal acts that bind the principal.

See Agency theory.

This theory states that company directors act on behalf of shareholders as their agents.
An important consequence of agency theory is agency costs. Agency costs can arise when the interests of directors and shareholders are not well aligned, and the directors act in their own personal interests, and not in the best interests of the shareholders.

See Agency.

1. A bank which is responsible for the administration (including interest rate fixing) of a syndicated credit or bond issue, and which represents the lenders collectively in any negotiations with the borrower.

2. A custody term designating any bank providing custody services on behalf of a custodian for securities traded in the country where the bank is based.

(AD). Total demand for goods and services in the economy. Aggregate demand is defined as: Budget deficit + Investment + Consumption expenditure + Balance of trade surplus.

In pensions funding, an example of a Projected benefits funding method.

Aggregate demand for goods and services measured in nominal terms.

Total supply of goods and services in an economy by firms.

Accounting. One of the key stages in the preparation of consolidated group accounts. Aggregation is the adding up of the individual assets, liabilities and trading of each of the entities in the group.

The other key stage in this process is the making of consolidation adjustments.

Abbreviation for Annual General Meeting.

Abbreviation for Accrued Interest.

Abbreviation for Association of International Bond Dealers, now the International Capital Market Association (ICMA).

Abbreviation for Amsterdam Interbank Offered Rate.

USA. Abbreviation for American Institute of Certified Public Accountants.

Abbreviation for Alternative Investment Market.

(AG). Germany. A term used for a corporation that is limited by shares.

Asset-liability Management Committee.

The risk that a borrower may realise some or all of the assets that form the lender’s security.

A foreign currency translation method. All items denominated in foreign currency are translated at current exchange rates.
Also called the closing rate method or current rate method.

Company law. The process whereby a company issues shares to its members, for value.

Abbreviation for Asset-Liability Management.

That portion of an investment’s return arising from specific (that is non-market) risk. It is a measure of the difference between the actual return and the expected performance arising from exposure to market risk factors.
Also known as the error term.

Abbreviation for Adjustable Long-term Puttable Securities.

The hypothesis that applies when the null hypothesis is false.

(AIM). The London Stock Exchange’s international market for smaller growing companies.

See American-style option.

(ADR). Certificate of ownership issued by a US bank to investors in place of the underlying corporate shares, which are held in custody.

An option which can be exercised at any time up to and including its final maturity.

1. USA. American Stock Exchange.

2. American Express Company. Global financial services company based in New York.

3. American Express Company credit card or charge card.

1. The spreading of a pension scheme surplus or deficit over a period of time, often for the purposes of granting a Contributions holiday (in the case of a surplus) or calculating deficit reduction contributions (in the case of a deficit).

2. The repayment or reduction of the principal amount of an obligation over time. For example the repayment of loan principal by instalments.

3. In financial accounting, the writing down of the value of an intangible asset over time. Similar to the depreciation of tangible fixed assets.

A type of interest rate swap.

Amortising swaps calculate interest on a reducing notional principal amount over the life of the swap, in order to hedge underlying exposures whose principal amount is also reducing. For example, to hedge a loan being repaid by instalments.

Same as Amortisation.

USA. Abbreviation for Auction Market Preferred Stock.

Abbreviation for Accumulating Net Asset Value.

VAT. An adjustment made at the year end to correct errors in the allocation of input tax recovered.

(AER). The same as Effective Annual Rate (EAR).
The term AER is more commonly used in the context of investment. (The term EAR being more commonly used in the context of borrowing.)

Near enough the same as Effective Annual Rate.

The same as the Effective Annual Rate.

UK company law. A meeting of company members required to be held each year.
Also known as AGM.

UK tax. Interest which is not short interest.

A legally defined consistent basis for quoting and comparing retail rates of return and interest payable (especially interest payable).
Similar to the effective annual rate.

The complete document produced by a company (or other reporting entity) each year including the complete set of financial statements and other matter required under company law and relevant accounting practice together with - for companies with listed securities - relevant securities law and regulation, listing regulations, and other relevant regulations.
Sometimes known as the Report and accounts.

1. UK company law. A formal document that UK registered comapanies are required by law to send to the Registrar of Companies, each year.

2. More generally, any other similar report containing financial or other information.

1. A series of equal future periodic cash flows, starting at Time 1 and ending at a predetermined future Time n.

2. More generally, any series of future periodic cash flows, either equal in amount or growing at a fixed compound rate per period, starting at a future time or already in payment, and usually ending at a later future time.

3. Any financial arrangement in which a periodic income is paid to an individual, often as a pension.

4. An insurance contract purchased from a life assurance company that pays an income in exchange for a lump sum. There are many variations on such annuities, depending on the nature of the income stream.

An annuity in which each of the cash flows is paid in advance (at the start of each period).

(AF). A method for calculating the total present value of a simple fixed annuity. Mathematically it is the cumulative discount factor for maturities 1 to n inclusive, when the periodic cost of capital is the same for all relevant maturities.

The present value of the annuity is then:
= AF x Time 1 cash flow.

The Annuity Factor for 'n' periods at a periodic yield of 'r' is calculated as:
AF(n,r) = 1/r x [1-(1+r)^-n]

Also known as the Annuity formula.

The present value of an annuity calculated using an annuity factor as:

= AF x Time 1 cash flow.

An annuity in which each of the cash flows is paid in arrears (at the end of each period).
This is the usual case, so that such a pattern of cash flows is more commonly called simply an annuity.

Tax. A rule introduced by governments and/or tax authorities to combat avoidance of tax.

An increased likelihood for people to take out insurance contracts where they believe their particular risk is higher than the insurance company has allowed for in calculating its premiums.

Laws that discourage monopoly and restrictive practices and encourage greater competition.

Abbreviation for Association of Payment Clearing Services.

1. Auditing Practices Board.

2. USA. Abbreviation for Accounting Principles Board.

Abbreviation for Asset Purchase Facility.

Abbreviation for Average Price Option.

Pensions. See Scheme Actuary.

An increase in the value of a currency.

Law. In administrative law, the allocation of a sum of money to a particular purpose.

(ADST). A type of employee stock ownership plan enjoying approval by the UK Tax Authorities.

A retirement benefit scheme approved by HMRC (in the UK) and thus qualifying for certain advantageous tax treatments.

1. The use of estimation techniques to provide a rough calculation - sufficiently accurate for the given purpose - of a financial or other measure.

2. An expression in simpler or more rounded terms of a known financial or other measure, sufficiently accurate for a specified purpose.

Abbreviation for Annual Percentage Rate.

1. Abbreviation for Assured Payment System.

2. USA. Abbreviation for Auction Preferred Stock.

1. Abbreviation for Arbitrage Pricing Theory.

2. Abbreviation for Automated Pit Trading.

Abbreviation for Adjusted Present Value.

(ABEDA/BADEA). A financial institution funded by the Governments of the Member States of the League of Arab States.

1. In a broad sense, arbitrage means identifying discrepancies between quoted market prices, and then dealing simultaneously in the related market instruments to earn profits free from the risk of changes in market prices.

The simplest theoretical form of arbitrage activity would be to deal simultaneously in two identical instruments at two different market prices.
In practice such simple arbitrage opportunities are very rare. More commonly, arbitrage activities involve dealing in equivalent combinations of larger numbers of different instruments.

A market participant who takes advantage of arbitrage opportunities is known as an arbitrageur.
Under efficient market conditions, the activities of arbitrageurs and other market players create supply and demand pressures in the market which act to eliminate temporary pricing discrepancies.

Many valuation and pricing models are based on ‘no arbitrage’ assumptions. In other words, the valuation models assume that all pre-existing arbitrage opportunities in the market have been identified and eliminated, so that it is now possible to predict the values and market prices of traded instruments by calculating them from other related market prices.

2. Defined more narrowly, arbitrage means the purchase of securities in one market and the simultaneous sale of the same or equivalent securities in the same or related markets, in order to earn immediate profits from a price differential within a market or between related markets.

A market participant who takes advantage of arbitrage opportunities.

Contract law. A term of a contract constituting an agreement to refer disputes arising out of the contract to arbitration.

1. Abbreviation for Accounts Receivable Conversion.

2. USA. Adjustable rate consumer loan.

Abbreviation for Autoregressive Conditional Heteroscedasticity.

The arithmetic mean of a set of data is the simple average calculated by adding up all of the values and dividing by the total number of items.
For example, the arithmetic mean of 4%, 5% and 6% is = (4% +5% +6%)/3 = 5%.
Also known as the Mean or the Expected value E[X].

USA. Abbreviation for Adjustable Rate Mortgage.

See Arm's length principle.

When a transaction between two related or affiliated parties is conducted (and priced) as if they were unrelated, so that there is no question of a conflict of interest (or of tax avoidance).

The price at which a willing seller and an unrelated willing buyer will freely agree a transaction.

Abbreviation for Average Rate Option.

USA. Abbreviation for Adjustable Rate Preferred Stock.

Accounting Rate of Return.

A front-end fee normally charged by a lead bank for arranging a syndicated credit.
Occasionally a lender may seek to charge a similar fee in a bilateral arrangement, depending on market conditions.

This is the formal document that explains the internal organisation of a UK company.
The Articles of Association are filed along with the Memorandum of Association when registering a company.

Accounting Standards Board.

Netherlands. Abbreviation for Act on the Supervision of Credit Institutions.

Australia. Abbreviation for Australian Society of Corporate Treasurers. Now known as the Finance and Treasury Association.

Abbreviation for Association of South East Asian Nations.

A type of option where the amount that needs to be repaid is determined by the underlying asset’s average value over a specific period of time.

1. Same as ask rate (also known as offer rate).

2. Request.

The offered (selling) price of traded securities or other instruments, i.e. the price which a buyer would be expected to pay.

Same as offer rate.

Abbreviation for Application Service Provider.

(ABCP). Commercial paper secured by specified bundles of assets. For example mortgage loans, consumer loans, car loans and the like.
Frequently issued by special purpose vehicles to fund the investment in those assets.

The beta value for the securities issued by a company which can be observed incorporates both financial and business risk.
The asset beta is calculated from the observed beta; to reflect the beta value which would be observed if the company were all equity financed. It is therefore indicative of the business risk of the company.
The asset beta is also called the ungeared beta.

A ratio of tangible assets to debt. Loan covenants often require a minimum asset cover to protect the lender's security.

(APF). An arrangement established in January 2009 under which the Bank of England is authorised to buy high-quality private sector assets including: corporate bonds, securities issued under the Credit Guarantee Scheme, syndicated loans and asset-backed securities created in structures acceptable the Bank.

1. Pensions. The risk of adverse effects resulting from (i) losses in the market values of assets invested in by a pension fund, or (ii) worse than expected investment returns from those assets.

2. Similar risks for any other organisation which has part or all of its funds held in the form of investment assets.

1. The value of an asset in the accounts of a company.

2. The value of a business determined by estimating the value which might be obtained by selling the assets (as distinct from selling the business as a going concern). This use of the term originally meant literally selling assets; now it is as likely to mean selling the component businesses of a group as separate assets.

An interest rate or cross-currency interest rate swap entered into by a party to convert the coupon on an asset to another rate or another currency rate basis.

(ALM). An approach to risk management which analyses an organisation's assets and liabilities as a combined portfolio.

Asset-liability management is particularly concerned with the management of interest rate risk, taking account of the expected impact of interest rate changes both on assets and on liabilities, and also taking account of the relationships between the expected impact on the assets and the expected impact on the liabilities.

1. Financial accounting. Possessions or resources controlled or owned by the reporting entity.

2. More generally, possessions or resources (whether or not owned by a financial reporting entity).

The formal process by which a right or contract is transferred from one party to another.

Financial accounting. An investment is classed and accounted for as an associate (or associated undertaking) when:
(i) the investor exercises significant influence over the operating and financial policies of the other entity, which is normally through holdings of over 20%, but less than 50%; and
(ii) that other entity is not a subsidiary undertaking and the investment does not constitute an interest in a joint venture.

UK tax. A company which is either under common control or where one company controls the other.

UK group accounting. An undertaking in which another undertaking included in the consolidation has a participating interest, and over whose operations and financial policy it exercises a significant influence, and which is not a subsidiary or a joint venture.

(ACT). The leading global provider of treasury education, established in the UK in 1979.

(APS). An arrangement in an exchange-for-value system under which completion of the timely settlement of a payment instruction is supported by an irrevocable and unconditional commitment from a third party (typically a bank, syndicate of banks or clearing house).

Average strike rate option.

Australia. Australian stock exchange.

Same as Public key encryption.

1. An option is at the money when immediate exercise of the option would result in neither a gain nor a loss.

2. A derivative such as a swap is at the money when, for example, the swap rate is equal to the relevant current market rate, so that the net present value of the derivative is Nil.

Any time day or night Sundays and holidays inclusive.

1. Abbreviation for Automated Teller Machine.

2. Abbreviation for At The Money.

3. Netherlands. Amsterdam Treasury Bond Market.

Abbreviation for Aid Trade Provision.

Abbreviation for Association of Tin Producing Countries.

1. Abbreviation for Automated Trading System.

2. Abbreviation for Automatic Transfer Service.

Pensions funding. An example of a Projected benefits funding method.

In relation to accounting for long-term contracts, that part of the total profit currently estimated to arise over the duration of the contract, after allowing for estimated remedial and maintenance costs and increases in costs so far as not recoverable under the terms of the contract, that fairly reflects the profit attributable to that part of the work performed to date, as at the accounting date.

SWIFT currency code for the Australian Dollar.

1. The financial auditor’s primary role is to form an independent opinion on the truth and fairness of primary financial statements.

2. In a broader sense, auditing refers more generally to the process of independent reviewing and reporting on financial and non-financial information.

These are issued by the Auditing Practices Board in the UK and give guidance to external auditors, but they are not mandatory.

(APB). This body establishes auditing standards and guidelines for professional auditing firms.

UK auditing standards are prescriptive rules for external auditors on all audits.

A required constituent of a company’s annual audited accounts.
The auditors’ report states the financial information has been audited, it states the respective responsibilities of auditors and directors and gives the basis for the audit opinion and the opinion itself. The opinion will relate – among other things - to whether the accounts present a true and fair view of the state of affairs of the company.

Pensions. The improvement of benefits contractually payable under a pension arrangement, either by the exercise of discretionary powers by the Trustees, or at the request of the employer (in which case they will usually be accompanied by additional contributions).

Australia. Australian stock exchange.

Treasury. A key control in treasury. Authorisation needs to be provided for all transactions in treasury and given only by a small number of people with the appropriate (seniority) qualifications. The individuals with power of authorisation should be listed in a document also specifying the various transactions that can be authorised, procedures for controlling authorisation, etc.

Treasury. Limits set by treasury to the number of dealers allowed to carry out transactions, the value of the transactions they can execute and the number of people giving authorisation.

More generally, limits can also be applied to the financial risk that a company or organisation is willing to bear. Limits can, for example, be set for the proportion of foreign exchange exposures and the time period within which they should be hedged. The company/organisation may also, for liquidity reasons, limit the types of deals that it wants to have transacted. Another area of authority limit concerns the level of counterparty credit exposures resulting from deals such as those in derivative products.

In some exceptional situations, the dealer may have to exceed the risk and authority limits set by the management. In such cases, it is essential for the dealer to have the transaction approved by the relevant responsible manager.

Abbreviation for Association of Unit Trusts and Investment Funds. Following a merger is now known as the Investment Management Association.

(ACH). A domestic electronic clearing system in which payment orders are exchanged among financial institutions, primarily via magnetic media or telecommunication networks, and handled by a data-processing centre.

(ACSS). Canada. Low value transfer system.

(ATM). An electromechanical device that permits authorised users, typically using machine-readable plastic cards, to withdraw cash from their accounts and/or access other services, such as balance enquiries, transfer of funds or acceptance of deposits.
ATMs may be operated either online, with real-time access to an authorisation database, or offline.

1. When funds deposited with a bank or other financial institution will become available for use.

2. The time lag in days before funds will become available for use.

The amount of funds available for withdrawal from an account.

A third party guarantee of payment on a bill of exchange or promissory note.

Pensions. Additional Voluntary Contribution(s).

1. A calculation of the maturity of a bond taking account of any potential early redemption.

2. A calculation of the weighted average of the maturities of bonds in a portfolio, which includes all adjustable coupons, mortgage prepayments and puts.

The weighted average maturity of a loan, bond or security - after taking into account amortisation provisions.

The amount of time needed for all securities held in a portfolio to reach maturity, weighted by the amount of assets invested in each security.

As opposed to average effective maturity, it does not take account of a potential early call, adjustable coupons, mortgage prepayments and puts.

Management accounting. Total cost divided by output.

A calculation of the weighted average of the maturities of fixed income instruments held in a portfolio. Average weighted maturity is correlated to the risk profile of the portfolio, for example, longer Average Weighted Maturity implies greater price volatility.
Also known as Weighted Average Maturity.

Abbreviation for Asset Value Guarantee.