Glossary Index

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  • a

  • Accounting Software/Systems
    The collection of financial records used by decision makers to maintain their accounting history. These systems are usually computer-based and produce reports used by internal management and external advisors.
  • Activity-Based Costing
    A costing method which assigns costs to a product, service, or customer when an activity causes an organization to incur costs. When the costs of the activity are accounted for, they are allocated directly to the product, service, or customer that required the activity.
  • Agreed-Upon Procedures
    An external audit where a client asks an auditor to produce a report after performing specific tests and procedures. The auditor does not provide an opinion, certification, or any other assurance that the financial statements they reviewed are free from defect, and the user of the report must(...)
  • Audit
    The product of a CPA’s highest level of assurance services compared to a review and compilation. After an audit is performed, an opinion is expressed as to whether the financial statements fairly present the entity’s financial position and results of their operations.
  • Audit Findings
    Issues identified during an audit, such as regulatory non-compliance or fraud. The findings generally outline a problem that exists, a specific situation the auditor noticed that led to observing the problem, and the root of the problem or finding. Findings are commonly followed by(...)
  • b

  • Bankruptcy Support Services
    Strategies that protect assets and maintain a healthy business when a bankruptcy is imminent. These services include litigation support, restructuring entities, and maximizing tax savings through the bankruptcy process.
  • Budgeting
    The allocation of income and assets toward anticipated expenditures and savings, for a set period of time.
  • Business Continuity
    The ability for a business to maintain successful operations after a transformative incident.
  • Business Disruption
    An altercation of an existing market or industry that produces something new and more productive which transforms prior models.
  • Business Valuation
    The process of estimating the fair market value of a business or an owner’s interest in a business. Businesses valuations are most commonly conducted to determine the appropriate value of a business, owner’s interest, and how business assets are divided or treated during a separation of(...)
  • Buy-Sell Agreement
    A structured agreement used by closely-held businesses to divide their share of ownership if they become disabled, deceased, or elect to retire or sell their ownership. The agreement generally outlines the sale based on a prearranged formula agreed to by all involved parties. A buy-sell(...)
  • c

  • Capital Gains
    The profit realized when an asset is sold in excess of its purchase price.
  • Cashflow Projection
    Projecting cash inflows and outflows for a given amount of time. Forecasting assists organizations as they plan for financing, debt repayment, and other cash expenditures.
  • Charitable Giving
    A gift made to a nonprofit, charity, or private foundation. Although most commonly cash, the giving may also be in the form of real estate, personal property, or services.
  • Compilation
    The most basic level of financial-statement assistance that is sometimes compared to a more involved “financial statement review” or the most comprehensive level of assurance known as a “financial statement audit.” Compilations are most often prepared for privately-held entities which do not(...)
  • Conservation Tax Credits
    Tax credits given when land is donated to conservation organizations or governmental agencies for restricted use and long-term management.
  • Cost Reports
    The costs associated with maintaining production and output quality of a product or service. These reports outline the costs of production loss prevention, failure expenses, and quality assurance reviews.
  • Cost Segregation Study
    The process of identifying and classifying assets to specific categories in order to maximize depreciation and reduce income tax.
  • Critical Depth
    A term exclusive to K·Coe Isom that describes our full immersion in the markets we serve. Full immersion is achieved through passion and thought leadership, and it is evidenced when we are highly influential in a client’s industry, and advocate on the industry and client’s behalf, both(...)
  • d

  • Debt Restructuring
    A method used by companies to alter their existing debt to free up cash, avoid default, or take advantage of lower interest rates.
  • Deferred Income
    Income received for goods or services before it’s earned. An example of deferred income is an annual contact where the entire fee is collected at the beginning of the year, while the product or service is delivered over a year-long period. The annual fee is considered a liability until it is(...)
  • Defined Benefit Plan
    An employee-sponsored retirement plan where employee benefits are distributed based on a formula. This formula considers factors such as salary history and duration of employment.
  • Depreciation
    Spreading the cost of an asset over its useful life, for tax and accounting purposes.
  • Disclosures
    A statement released by an organization which identifies their financial strategies. Current and potential investors in the organization view these disclosures to determine the accounting methods used.
  • Distinct Abilities
    A term exclusive to K·Coe Isom that describes our belief is that our people should spend their day doing what they are great at, and most inspired by. Everyone has natural strengths and we help our people identify and hone them. We do this so that people who work for us are happy. Happy(...)
  • Due Diligence
    Reasonable research exercised in preparation for a business or personal transaction to confirm material facts.
  • e

  • Employee Benefit Plan Audit
    An employee benefit plan audit is generally required as part of annual reporting for plans with 100 or more participants. This audit’s purpose is to confirm that funds are available to pay retirement, health, and other employer-paid benefits.
  • Employee Benefit Planning
    Benefits provided by an employer to their employee which commonly includes health, dental, vision, and retirement benefits.
  • Entity Restructuring
    The Systematic creation and termination of closely-held business entities to maximize tax savings, protect against liability, and transfer wealth.
  • Entity Selection
    Determining which legal structure, from among all available options, is most appropriate for a new or existing business. Entity options include a sole proprietorship (SP), general partnership (GP), limited partnership (LP), limited liability partnership (LLP), limited liability limited(...)
  • Equity
    The ownership of any asset after all debts tied to the asset are settled. In real estate, equity is the difference between the property fair market value and the debts owed against the property.
  • Estate Plan
    Strategic planning related to asset distribution after someone’s death or incapacitation. Estate planning commonly includes creating a will, limiting estate taxes, naming an estate executor, and other tasks meant to preserve assets through a major life transition.
  • f

  • Farm Implement
    A device used in the production of agricultural products, such as machinery.
  • Financial Reporting
    Financial statements are prepared to display a business entity’s financial activities and position. The statements generally include income statements, balance sheet, cash flow, and other schedules.
  • Fixed Assets
    Tangible assets purchased for long-term, productive use which a business does not plan to liquidate within one year of purchase. Common fixed assets include real estate, equipment, and software.
  • Fraud Audit
    A formal review of organizational operations to examine for acts of omission designed to deceive others. The audit creates fraud awareness and suggests processes to prevent opportunities for fraud to occur reoccur. More sound internal control policies and hands-on leadership approaches are(...)
  • g

  • Government Tax Incentives & Credits
    Tax-saving reductions offered by the government which are subtracted from the tax owed by an individual or business. Credits are different from deductions because deductions reduce the tax base, while credits are directly subtracted from the tax amount. Governmental credits and incentives are(...)
  • h

  • Harmony/Harmonization
    A term K·Coe Isom uses with family businesses that describes the foundation for resolving business problems while maintaining healthy relationships between family members. Harmony helps family business owners commit to working on their business as well as in their business, engages family(...)
  • Historic Tax Credits
    A federal tax liability reduction given to encourage the renovation, restoration, or rebuild of historic buildings. This credit incentivizes historic preservation and applies to buildings constructed before 1936. Some states have also adopted rehabilitation tax credits.
  • i

  • IC-DISC (Interest-Charge Domestic International Sales Corporation)
    A “paper” entity used as an export-tax savings vehicle allowing for up to 20% of saved commission export tax. The business pays commissions to the IC-DISC, which are deductible and taxed at a lower rate than normal income.
  • IDITs
    An irrevocable trust which allows the grantor to freeze assets for estate planning purposes. This tool is commonly used to transfer wealth family which reduces the grantor’s estate size, while allowing the assets transferred to grow without reductions for income taxes.
  • Inputs
    Resources used in the initial stages of farm production including chemicals, fertilizer, pesticides, seed, and energy consumption.
  • Insurance Claims Evaluation
    A formal assessment of insurance claim proceeds to determine the proper accounting method was used.
  • Internal Audit
    An independent examination of an organization’s operations designed to identify weaknesses in reporting and processes and improvement opportunities available. This internal audit commonly analyzes the organization’s internal structure, employee responsibilities, risk management, and workflow(...)
  • International Transactions & Taxation
    Overseas policies and taxation related to business investments and exports.
  • Inventory Control Management
    Policies and procedures which maintain ideal inventory inputs and outputs to maximize profit.
  • Inventory Methods
    The accounting practices used to assign costs to inventory to accurately calculate the number of available assets and liabilities. These methods include: specific identification, first in first out, last in first out, and weighted average.
  • Investment Management
    Management of assets, including securities and other investments, to minimize taxes and maximize the rate of return.
  • l

  • Liabilities
    Debts or obligations which are settled over time by the repayment of money, goods, or services. Liabilities include loans, accounts payable, deferred revenues, and expenses.
  • Limited-Scope Audit
    An audit of financial statements where the auditor does not need to analyze investment information prepared and certified by a qualified bank, insurance carrier, or similar institution.
  • Loan Administration
    A company that services a loan by providing billing, collection, compliance, and record keeping services. The administrator can either be through the organization which provided the loan or a third-party contractor.
  • m

  • Management Letter
    An outline of deficiencies and weaknesses in a company’s organizational structure observed during an audit, but not required to be disclosed in the formal audit report. The letter is written by external auditors and signed by the company’s management. It provides valuable recommendations that(...)
  • Management Points
    The items in the management letter that are principles for management to follow in order to significantly improve organizational effectiveness and quality of controls.
  • Manufacturing Credits
    Tax credits offered to manufacturers intended to encourage improvement of a business’s energy efficiencies and ongoing innovation.
  • Medicaid & Medicare Cost Report Preparation & Analysis
    A study and report of Medicaid and Medicare filing accuracy and compliance to optimize reimbursements and prevent misfiling.
  • Medicaid Reimbursement Consulting
    A review of Medicaid claim policies and procedures to optimize profits through cost reports, monthly estimates, and improved reimbursements.
  • Merger & Acquisition
    The sale or transfer of business ownership intended to create a value larger than the sum of its two separate parts. This is a frequent business exit strategy and brings value to the successor by capturing additional market share.
  • Mezzanine Funding
    Debt capital financing which provides the lender with equity interest if the company fails to repay the loan. This loan generally assumes more risk than a secured loan and the lender demands a higher rate of return.
  • Multi-State
    A situation or business operation which involves multiple states and must adhere to diverse regulations.
  • n

  • Nexus (or Sales Tax Nexus)
    A determination of whether an out-of-state business selling products into a state is liable for collecting sales or use tax on sales into the state. This determination is required before an out-of-state entity is forced to pay taxes. Each state defines nexus differently, but most agree a(...)
  • NGO
    A nonprofit, citizen-run association which operates independent of government. These associations commonly serve social or political change.
  • o

  • Operating Capital
    Capital (financial resources) used by a business to cover daily operations.
  • Overhead Rate Audit (Architects & Engineers)
    A formal review and opinion as to whether an overhead schedule was prepared in compliance with Federal Acquisition Regulations (FAR) cost principals. This audit is commonly required by architects, engineers, and governmental contractors to obtain federal funding.
  • p

  • Personal Financial Plan
    An individual or family initiative to analyze short and long term financial needs. This generally includes utilization of budgets, insurance, savings, debt, and income to manage risk and preserve wealth.
  • Planned Giving
    Philanthropic giving, usually long-term or at death, which harnesses estate planning tools to maximize the gift amount and minimize taxes on the gift. Planned giving is also known as charitable giving.
  • Probate
    The legal process of determining if a deceased person’s will is valid, and distributing their assets to creditors and inheritors. Probate can be avoided through living trusts and other estate planning tools.
  • Process Improvement
    An analysis and improvement of existing business processes to create efficiencies and meet defined objectives.
  • Profitability Analysis
    A forecast of a project’s profitability and opportunities to increase earnings through proposed alterations to the project. This analysis commonly aids management in identifying key clients, products, or service with the highest return, and a shift in customer needs.
  • r

  • R&D (Research & Development) Tax Credit
    A dollar-for-dollar tax reduction for businesses that develop, design, or improve products, techniques, software, or similar activities. This credit promotes innovation and enables businesses to develop new processes and products at a reduced cost.
  • Regulatory Requirements
    Governmental guidelines and restrictions imposed on businesses meant to protect consumers and enforce laws.
  • Retirement Plan
    A strategy to invest funds in a manner which allows for a desired lifestyle after a person stops working. Retirement commonly consist of employee-offered plans and individual investments.
  • Review
    A formal review of a company’s financial statements to provide the organization with limited comfort that their financial statements do not require modifications. Commonly prepared for entities that have bank loans, outside investors, or trade creditors, when these third parties do not require(...)
  • s

  • Sales & Use Tax Audit
    A governmental audit of a business to confirm the business has not underreported or underpaid the appropriate sales and use taxes.
  • Single Audit
    An audit of state, local government, and non-profit entities that expend $750,000 or more in federal funds. The single audit is usually performed annually, aims to ensure the federal funds are used appropriately, and is also known as an OMB A-133 Audit.
  • Strategy
    The art and process of planning, to achieve a desired goal which defines the best course of action from among all available options at a given point in time.
  • Succession Plan
    Identification and development of potential successors for key positions in an organization to assure business continuity in light of leadership changes. Succession plans are commonly a key part of the steps used to preserve wealth and retain the assets of the organization as owners step away(...)
  • Sustainability
    A system built around the best use of natural resources, in favor of not harming the environment, and supporting long-term ecological balance. Sustainability helps build consumer trust, encourages responsible stewardship, and ensures long-term reliability of food and agricultural production.
  • t

  • Tax Planning
    A review of existing and projected financial conditions in an effort to align future goals with minimized tax liability. Tax planning commonly includes evaluating purchases, investments, income, tax credits and deductions to minimize undue tax liability.
  • Tax Preparation
    The preparation of government (local or federal) tax reporting forms, most commonly income tax returns, completed by the taxpayer or a professional. This preparation leads to a determination of underpayment or overpayment of taxes.
  • Transfer Pricing
    The price of goods or services traded between two entities related to one another. This is common between multinational divisions of the same enterprise.
  • Triple Bottom Line
    The measure of a company’s profit, social responsibility, and environmental responsibility. The triple bottom line concept outlines a company’s responsibility to its stakeholders and the areas in which it operates. The term is frequently accompanied by the three Ps: profit, people, and planet.
  • Trust Administration
    The trustee’s administration of assets in a trust according to the terms defined in the trust. Common trust administration duties include maintaining records, paying taxes, and hiring professionals when appropriate to assist with managing the trust.
  • Trustee
    An individual or group appointed as a fiduciary to administer assets for the benefit of third party. Trustees are appointed for a number of reasons including administration of charities, retirement plans, and seeing to the needs of children.
  • Trusts
    A fiduciary arrangement that allows a person or organization (the trustor) to grant a third party (the trustee) the right to hold assets on behalf of a beneficiary. Trusts are generally created to minimize taxes, preserve wealth, and control how wealth is distributed.
  • v

  • Value Creation
    A K·Coe Isom exclusive term that describes the understanding of what a client need and wants, what meeting those needs is worth to them, uniquely, and determining creative ways to achieve results. We sell results, not hours.
  • Value-Based Pricing
    A price based on the perceived worth of a service or product to the buyer. Value-based pricing is unlike other pricing models because it is subjective, in the eye of the beholder. K·Coe Isom uses this pricing model because it aligns the interests of the firm with the customer, creates clarity(...)
  • Value-Creation Agreement
    An upfront understanding we form with clients which formalizes the purpose, impact, and worth of a project. This agreement creates realistic expectations and certainty in price.
  • w

  • Wealth Management
    The combination of financial, tax, legal, and estate planning services to sustain and grow a person’s or family’s long-term wealth. Wealth management is often confused with financial management, which is only one facet of the larger wealth management plan.
  • Wealth Preservation
    A strategy geared toward preserving wealth and preventing financial losses. Long-term wealth preservation commonly includes an analysis of inflation, taxes, insurance, investment diversification, estate planning, and sale or succession planning for businesses.