CPA FAR notes · Financial Accounting and Reporting

US GAAP for businesses, not-for-profits and governments. The widest section. Calculations matter. The exam is 4 hours with 50 multiple choice questions and 7 task-based simulations.

Blueprint areas

Area I. Financial Reporting
Area II. Select Balance Sheet Accounts
Area III. Select Transactions

Chapters

Balance sheet and income statement. Classified balance sheet; single-step and multi-step income statements; discontinued operations; foreign currency transaction gains and losses; correcting errors against source data
Comprehensive income, changes in equity and the notes. Purpose and structure of comprehensive income; items in OCI; statement of changes in equity; correcting and checking note disclosures
Statement of cash flows. Indirect method; operating, investing and financing; required disclosures; the effect of transactions on cash flows
Consolidated financial statements. Adjustments and eliminations; wholly owned subsidiaries; noncontrolling interests
Not-for-profit financial statements. Statement of financial position; statement of activities; donor restrictions and releases; expenses by nature and function; cash flows; notes
State and local government concepts. Measurement focus and basis of accounting; fund and government-wide reporting; choosing the right fund
Public company reporting and earnings per share. Forms 10-K, 10-Q and 8-K and their key items; basic and diluted EPS with options, preferred stock and convertibles
Special purpose frameworks. Statement titles; cash and modified cash basis; converting cash basis to accrual; income tax basis statements
Ratios and performance metrics. Profitability, liquidity and solvency ratios; EBITDA, price to earnings, dividend payout, asset turnover; budget versus actual variances
Cash and cash equivalents. What counts as cash; bank reconciliation; investigating unreconciled items
Trade receivables. Allowance for credit losses and sales returns; factoring, pledging, assignment and secured borrowings; rollforwards; subledger to ledger reconciliation
Inventory. Costing methods; lower of cost and net realizable value; lower of cost or market; rollforwards and reconciliations
Property, plant and equipment. Capitalized cost; depreciation; disposals; impairment; assets held for sale; rollforwards and reconciliations
Investments. Fair value through net income and OCI; amortized cost; impairment and credit losses; the equity method
Intangible assets. Recognition criteria; finite and indefinite lives; amortization and impairment of finite-lived intangibles; purchased software and cloud computing arrangements
Payables and accrued liabilities. Accounts and dividends payable; accrued wages, vacation and bonuses; self-insurance; asset retirement obligations; exit and disposal costs
Debt. Notes and bonds; discounts, premiums and issue costs; effective interest; modification versus extinguishment; troubled debt restructuring; covenant calculations
Equity. Stock issuance; stock dividends and splits; treasury stock; capital accounts of pass-through entities
Accounting changes and error corrections. Change in principle, change in estimate and error correction; retrospective or prospective; effect on statements and notes
Contingencies and commitments. Probable, reasonably possible and remote; accrue or disclose; measuring the amount; reading supporting documents
Revenue recognition. The five-step model; contract costs; not-for-profit pledges, agency transactions, contributed services and noncash contributions
Accounting for income taxes. Current and deferred tax; temporary differences; valuation allowance; uncertain tax positions; the tax provision entry
Fair value measurement. Market, income and cost approaches; highest and best use; market participants; the three level hierarchy
Lessee accounting. Finance versus operating classification; lease liability and right-of-use asset; residual value guarantees, purchase options and variable payments; lease cost
Subsequent events. Recognized and nonrecognized events; adjusting the statements; disclosures