A Dictionary of Finance and Banking

By Brian Butler; David Butler et al. | Go to book overview

O

objectivity An accounting concept attempting to ensure that any subjective actions taken by the preparer of *accounts are minimized. The aim of the rules and regulations required to achieve objectivity is that users should be able to compare *financial statements for different companies over a period with some confidence that the statements have been prepared on the same basis. One of the major advantages claimed for *historical cost accounting is that it is objective, but necessarily some subjective decisions will have been made.

obligation1. The duty of a borrower to repay a loan and that of the lender to ensure that repayment is made. 2. A bond or other promise to pay a sum of money.

obligatory expenditure The spending of the European Union, governed by such treaties as the Common Agricultural Policy and the European Regional Development Fund. The European Parliament can add to the amount spent but if it wishes to reduce it, it must obtain the agreement of the Council of Ministers, or reject the whole of the Union Budget in that year.

OBSF Abbreviation for *off balance sheet finance.

occupation pension scheme A pension scheme open to employees within a certain trade or profession or working for a particular firm. An occupational pension scheme can either be insured or self-administered. If it is insured, an insurance company pays the benefits under the scheme in return for having the premiums to invest. In a self-administered scheme, the pension-fund trustees are responsible for investing the contributions themselves. In order to run an occupational pension scheme, an organization must satisfy the Occupational Pension Board that the scheme complies with the conditions allowing employers to contract out of the *State Earnings-Related Pension Scheme. After 1988 certain regulations relating to occupational pensions schemes were introduced. See also PERSONAL PENSION SCHEME.

odd lotSeeROUND LOT.

OECD Abbreviation for * Organization for Economic Cooperation and Development.

off balance sheet finance (OBSF) A method of financing a company's activities so that some or all of the finance and the corresponding assets do not appear on the *balance sheet of the company. By making use of OBSF a company can enhance its accounting ratios, such as the *gearing ratio and *return on capital employed, and also avoid breaking any agreements it has made with the banks in respect of the total amount it may borrow. It has been possible for companies, by drawing up complex legal agreements, to conduct off balance sheet finance and thus mislead the user of the accounts. The accounting profession has attempted to counter these practices by emphasizing that accounting should reflect the commercial reality of transactions and not simply their legal form. The recent Financial Reporting Standard 5, 'Reporting the Substance of Transactions', provides specific guidance for certain transactions, such as *factoring and consignment stock, for which companies have previously used off balance sheet finance.

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A Dictionary of Finance and Banking
Table of contents

Table of contents

  • Title Page iii
  • Preface v
  • A 1
  • B 23
  • C 48
  • D 91
  • E 112
  • F 131
  • G 152
  • H 164
  • I 168
  • J 190
  • K 192
  • L 194
  • M 211
  • N 233
  • O 247
  • P 258
  • Q 288
  • R 291
  • S 313
  • T 345
  • U 361
  • V 368
  • W 372
  • X, Y, Z 377
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