Introduction to OHADA and Uniform Acts
Expert-defined terms from the Executive Certificate in OHADA Accounting course at Stanmore School of Business. Free to read, free to share, paired with a professional course.
Accounting #
Refers to the systematic process of recording, classifying, and reporting financial information of a business, it involves the preparation of financial statements, such as the balance sheet and income statement, to provide stakeholders with a clear picture of a company's financial performance and position, in the context of OHADA, accounting plays a crucial role in ensuring that companies operating in the region comply with the uniform acts and regulations, for instance, the uniform act on accounting and financial reporting requires companies to prepare financial statements in accordance with the OHADA accounting standards.
Accounting Standards #
Are the rules and guidelines that govern the preparation of financial statements, they provide a framework for accountants to follow when recording and reporting financial transactions, in the context of OHADA, the uniform act on accounting and financial reporting sets out the accounting standards that companies operating in the region must follow, these standards are designed to ensure that financial statements are presented in a consistent and comparable manner, allowing stakeholders to make informed decisions, for example, the OHADA accounting standards require companies to recognize revenue when it is earned, regardless of when the cash is received.
Annual Report #
Is a comprehensive report that provides an overview of a company's financial performance and position over a specific period, usually a year, it includes the financial statements, such as the balance sheet and income statement, as well as other information, such as the company's strategy, governance, and social and environmental impact, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to prepare an annual report that includes the financial statements and other information, such as the company's management discussion and analysis, for instance, the annual report of a company operating in the OHADA region would include the financial statements, as well as information on the company's corporate governance and social responsibility.
Asset #
Is a resource owned or controlled by a company that is expected to generate future economic benefits, such as cash, inventory, property, plant, and equipment, assets can be classified into different categories, such as current and non-current assets, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure assets in accordance with the OHADA accounting standards, for example, a company operating in the OHADA region would recognize a piece of equipment as a non-current asset and depreciate it over its useful life.
Audit #
Is an independent examination of a company's financial statements and internal controls to ensure that they are presented fairly and in accordance with the applicable accounting standards and regulations, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to have their financial statements audited by an independent auditor, the auditor's report provides an opinion on whether the financial statements are presented fairly and in accordance with the OHADA accounting standards, for instance, an auditor would examine a company's financial statements to ensure that they are free from material errors and that the company has complied with the OHADA accounting standards.
Balance Sheet #
Is a financial statement that provides a snapshot of a company's financial position at a specific point in time, it lists the company's assets, liabilities, and equity, and provides information on the company's financial position and solvency, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to prepare a balance sheet that is presented in a specific format and includes specific disclosures, for example, a company operating in the OHADA region would prepare a balance sheet that includes its assets, such as cash and inventory, and its liabilities, such as accounts payable and loans.
Business Combination #
Is a transaction in which one company acquires control of another company, it can take the form of a merger or acquisition, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to account for business combinations in accordance with the OHADA accounting standards, which provide guidance on how to recognize and measure the assets and liabilities of the acquired company, for instance, a company operating in the OHADA region would account for a business combination by recognizing the assets and liabilities of the acquired company at their fair value.
Capital #
Refers to the funds provided by shareholders to a company, it can take the form of shares or loans, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to disclose information on their capital structure, including the amount of share capital and the number of shares issued, for example, a company operating in the OHADA region would disclose its share capital and the number of shares issued in its annual report.
Cash Flow Statement #
Is a financial statement that provides information on a company's inflows and outflows of cash over a specific period, it is divided into three sections: Operating, investing, and financing activities, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to prepare a cash flow statement that is presented in a specific format and includes specific disclosures, for instance, a company operating in the OHADA region would prepare a cash flow statement that includes its operating cash flows, such as cash received from customers, and its investing cash flows, such as cash paid for equipment.
Company Law #
Refers to the laws and regulations that govern the formation, operation, and dissolution of companies, in the context of OHADA, the uniform act on company law sets out the rules and procedures for the formation and operation of companies in the OHADA region, including the requirements for company registration, governance, and financial reporting, for example, the uniform act on company law requires companies to have a minimum share capital and to appoint a board of directors.
Consolidated Financial Statements #
Are financial statements that combine the financial information of a parent company and its subsidiaries, they provide a comprehensive picture of the group's financial performance and position, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to prepare consolidated financial statements that are presented in a specific format and include specific disclosures, for instance, a company operating in the OHADA region would prepare consolidated financial statements that include the financial information of its subsidiaries.
Corporate Governance #
Refers to the system of rules, practices, and processes by which a company is directed and controlled, it involves the relationships among a company's management, board of directors, shareholders, and other stakeholders, in the context of OHADA, the uniform act on company law sets out the rules and procedures for corporate governance, including the requirements for board composition, executive compensation, and shareholder rights, for example, the uniform act on company law requires companies to have a board of directors that is responsible for overseeing the company's management and strategy.
Cost of Goods Sold #
Is the direct cost of producing and selling a company's products or services, it includes the cost of materials, labor, and overheads, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure the cost of goods sold in accordance with the OHADA accounting standards, for instance, a company operating in the OHADA region would recognize the cost of materials and labor as part of its cost of goods sold.
Depreciation #
Is the systematic allocation of the cost of a tangible asset over its useful life, it represents the decrease in the asset's value due to wear and tear, obsolescence, or other factors, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure depreciation in accordance with the OHADA accounting standards, for example, a company operating in the OHADA region would depreciate a piece of equipment over its useful life using the straight-line method.
Dividend #
Is a payment made by a company to its shareholders, it represents a distribution of the company's profits, in the context of OHADA, the uniform act on company law sets out the rules and procedures for dividend payments, including the requirements for dividend declarations and payments, for instance, a company operating in the OHADA region would declare and pay dividends to its shareholders in accordance with the uniform act on company law.
Equity #
Refers to the residual interest in a company's assets after deducting its liabilities, it represents the ownership interest in the company, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure equity in accordance with the OHADA accounting standards, for example, a company operating in the OHADA region would recognize its share capital and retained earnings as part of its equity.
Financial Reporting #
Refers to the process of preparing and presenting financial statements, it involves the preparation of financial statements, such as the balance sheet and income statement, and the disclosure of other financial information, in the context of OHADA, the uniform act on accounting and financial reporting sets out the rules and procedures for financial reporting, including the requirements for financial statement presentation and disclosure, for instance, a company operating in the OHADA region would prepare its financial statements in accordance with the OHADA accounting standards and disclose its financial information in its annual report.
Financial Statement #
Is a document that provides information on a company's financial performance and position, it can take the form of a balance sheet, income statement, or cash flow statement, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to prepare financial statements that are presented in a specific format and include specific disclosures, for example, a company operating in the OHADA region would prepare its financial statements in accordance with the OHADA accounting standards.
GAAP #
Stands for Generally Accepted Accounting Principles, it refers to the rules and guidelines that govern the preparation of financial statements, in the context of OHADA, the uniform act on accounting and financial reporting sets out the OHADA accounting standards, which are based on the International Financial Reporting Standards (IFRS), for instance, the OHADA accounting standards require companies to recognize revenue when it is earned, regardless of when the cash is received.
Going Concern #
Refers to the assumption that a company will continue to operate for the foreseeable future, it is a fundamental principle of accounting that underlies the preparation of financial statements, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to prepare their financial statements on a going concern basis, unless there are indications that the company will not be able to continue operating, for example, a company operating in the OHADA region would prepare its financial statements on a going concern basis, unless it is facing significant financial difficulties.
Goodwill #
Is an intangible asset that represents the excess of the purchase price of a company over the fair value of its net assets, it is recognized when a company acquires another company, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure goodwill in accordance with the OHADA accounting standards, for instance, a company operating in the OHADA region would recognize goodwill when it acquires another company and amortize it over its useful life.
IAS #
Stands for International Accounting Standard, it is a standard that provides guidance on the preparation of financial statements, in the context of OHADA, the uniform act on accounting and financial reporting sets out the OHADA accounting standards, which are based on the IAS, for example, the OHADA accounting standards require companies to recognize revenue when it is earned, regardless of when the cash is received.
IASB #
Stands for International Accounting Standards Board, it is the organization that is responsible for developing and issuing the IAS, in the context of OHADA, the uniform act on accounting and financial reporting sets out the OHADA accounting standards, which are based on the IAS, for instance, the OHADA accounting standards require companies to recognize revenue when it is earned, regardless of when the cash is received.
IFRS #
Stands for International Financial Reporting Standards, it refers to the set of accounting standards that are developed and issued by the IASB, in the context of OHADA, the uniform act on accounting and financial reporting sets out the OHADA accounting standards, which are based on the IFRS, for example, the OHADA accounting standards require companies to recognize revenue when it is earned, regardless of when the cash is received.
Impairment #
Refers to the decrease in the value of an asset due to a permanent decline in its market value, it is recognized when the carrying amount of an asset exceeds its recoverable amount, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure impairment in accordance with the OHADA accounting standards, for instance, a company operating in the OHADA region would recognize impairment when the carrying amount of an asset exceeds its recoverable amount.
Income Statement #
Is a financial statement that provides information on a company's revenues and expenses over a specific period, it is also known as the profit and loss account, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to prepare an income statement that is presented in a specific format and includes specific disclosures, for example, a company operating in the OHADA region would prepare its income statement in accordance with the OHADA accounting standards.
Intangible Asset #
Is an asset that does not have physical substance, such as goodwill, patents, and trademarks, it is recognized when it is acquired or developed by a company, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure intangible assets in accordance with the OHADA accounting standards, for instance, a company operating in the OHADA region would recognize a patent as an intangible asset and amortize it over its useful life.
Inventory #
Is a current asset that represents the goods or materials that a company holds for sale or use in production, it is recognized when it is acquired or produced by a company, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure inventory in accordance with the OHADA accounting standards, for example, a company operating in the OHADA region would recognize its inventory at its cost or net realizable value, whichever is lower.
Liability #
Is a debt or obligation that a company is required to settle, it can take the form of a loan, account payable, or other type of debt, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure liabilities in accordance with the OHADA accounting standards, for instance, a company operating in the OHADA region would recognize a loan as a liability and measure it at its amortized cost.
Liquidity #
Refers to a company's ability to meet its short-term obligations, it is an important aspect of a company's financial health, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to disclose information on their liquidity, including their cash and cash equivalents, for example, a company operating in the OHADA region would disclose its cash and cash equivalents in its balance sheet.
Merger #
Is a transaction in which two or more companies combine to form a new company, it can take the form of a statutory merger or a consolidation, in the context of OHADA, the uniform act on company law sets out the rules and procedures for mergers, including the requirements for merger agreements and shareholder approvals, for instance, a company operating in the OHADA region would follow the procedures set out in the uniform act on company law to merge with another company.
Net Income #
Is a company's profit or loss for a specific period, it is calculated by subtracting the company's total expenses from its total revenues, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure net income in accordance with the OHADA accounting standards, for example, a company operating in the OHADA region would recognize its net income as the difference between its total revenues and total expenses.
OHADA #
Stands for Organisation pour l'Harmonisation en Afrique du Droit des Affaires, it is a regional organization that aims to harmonize business law in Africa, in the context of accounting, OHADA has developed a set of accounting standards and regulations that are applicable to companies operating in the OHADA region, for instance, the OHADA accounting standards require companies to recognize revenue when it is earned, regardless of when the cash is received.
OHADA Accounting Standards #
Are the accounting standards that are developed and issued by OHADA, they provide guidance on the preparation of financial statements and are applicable to companies operating in the OHADA region, for example, the OHADA accounting standards require companies to recognize revenue when it is earned, regardless of when the cash is received.
OHADA Region #
Refers to the countries that are members of OHADA, it includes 17 countries in West and Central Africa, in the context of accounting, the OHADA region is subject to the OHADA accounting standards and regulations, for instance, a company operating in the OHADA region would prepare its financial statements in accordance with the OHADA accounting standards.
Off #
Balance-Sheet Financing: Is a type of financing that is not recognized on a company's balance sheet, it can take the form of a lease or a guarantee, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to disclose information on their off-balance-sheet financing, including their lease obligations and guarantees, for example, a company operating in the OHADA region would disclose its lease obligations in its financial statements.
Operating Cash Flow #
Is a company's cash inflows and outflows from its operating activities, it is an important aspect of a company's financial health, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to disclose information on their operating cash flow, including their cash received from customers and cash paid to suppliers, for instance, a company operating in the OHADA region would disclose its operating cash flow in its cash flow statement.
Profit #
Is a company's income or earnings for a specific period, it is calculated by subtracting the company's total expenses from its total revenues, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure profit in accordance with the OHADA accounting standards, for example, a company operating in the OHADA region would recognize its profit as the difference between its total revenues and total expenses.
Retained Earnings #
Is a company's accumulated profits that are retained in the business, it is an important aspect of a company's equity, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure retained earnings in accordance with the OHADA accounting standards, for example, a company operating in the OHADA region would recognize its retained earnings as the accumulated profits that are retained in the business.
Revenue #
Is a company's income from its sales of goods or services, it is an important aspect of a company's financial performance, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure revenue in accordance with the OHADA accounting standards, for instance, a company operating in the OHADA region would recognize its revenue when it is earned, regardless of when the cash is received.
Solvent #
Refers to a company's ability to pay its debts as they fall due, it is an important aspect of a company's financial health, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to disclose information on their solvency, including their current assets and current liabilities, for example, a company operating in the OHADA region would disclose its current assets and current liabilities in its balance sheet.
Subsidiary #
Is a company that is controlled by another company, it can take the form of a wholly-owned subsidiary or a partially-owned subsidiary, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to disclose information on their subsidiaries, including their name, location, and ownership interest, for instance, a company operating in the OHADA region would disclose its subsidiaries in its financial statements.
Tax #
Is a compulsory payment that is levied by the government on a company's income or profits, it is an important aspect of a company's financial performance, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure tax in accordance with the OHADA accounting standards, for example, a company operating in the OHADA region would recognize its tax liability as an expense in its income statement.
Uniform Act #
Is a law that is applicable to all member states of OHADA, it provides a harmonized framework for business law in the OHADA region, in the context of accounting, the uniform act on accounting and financial reporting sets out the OHADA accounting standards and regulations, for instance, the uniform act on accounting and financial reporting requires companies to recognize revenue when it is earned, regardless of when the cash is received.
Uniform Act on Accounting and Financial Reporting #
Is a law that sets out the OHADA accounting standards and regulations, it provides a harmonized framework for accounting and financial reporting in the OHADA region, for example, the uniform act on accounting and financial reporting requires companies to recognize revenue when it is earned, regardless of when the cash is received.
Value Added Tax #
Is a type of tax that is levied on the value added to goods or services, it is an important aspect of a company's tax liability, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to recognize and measure value added tax in accordance with the OHADA accounting standards, for instance, a company operating in the OHADA region would recognize its value added tax liability as an expense in its income statement.
Working Capital #
Is a company's current assets minus its current liabilities, it is an important aspect of a company's liquidity, in the context of OHADA, the uniform act on accounting and financial reporting requires companies to disclose information on their working capital, including their current assets and current liabilities, for example, a company operating in the OHADA region would disclose its working capital in its balance sheet.