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Ultimate Guide to the FAR Section: CPA Exam Blueprint and Study Resources

Area I - Financial Reporting (30-40%)

Skill
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
A. General-Purpose Financial Reporting: For-Profit Business Entities
1. Balance sheet/Statement of financial position Prepare a classified balance sheet from a trial balance and supporting documentation.
Article: The Basics of a Classified Balance Sheet
Article: Understanding Trial Balance
Article: Decoding the Supporting Documentation
Article: From Trial Balance to Classified Balance Sheet
Article: How to Categorize Assets, Liabilities, and Equity on a Balance Sheet
Article: Adjusting Entries: The Key to Accurate Financial Statements
Article: Common Errors in Balance Sheet Preparation
Article: How to Use Financial Ratios to Analyze a Balance Sheet
Article: Balance Sheet Practice Problems with Answers
Article: Balance Sheet Cheat Sheet
Adjust the balance sheet to correct identified errors.
Article: How to Make Balance Sheet Adjustments
Article: How to Find Balance Sheet Errors
Article: How to Correct Balance Sheet Errors
Article: How Balance Sheet Errors Affect the Financial Statements
Article: How to Prevent and Manage Balance Sheet Errors
Detect, investigate and correct discrepancies while agreeing the balance sheet amounts to supporting documentation, including the source data.
Article: How to Align Balance Sheet Amounts with Source Data and Documentation
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Income statement/Statement of profit or loss Prepare a single-step or multi-step income statement (e.g., operating, nonoperating, discontinued operations) from a trial balance and supporting documentation.
Article: How to Create a Single-Step Income Statement from a Trial Balance
Article: How to Prepare a Multi-Step Income Statement
Article: How to Use Non-Operating Items in an Income Statement
Article: How to Prepare an Income Statement from a Trial Balance Step-by-Step
Article: How to Use Discontinued Operations in an Income Statement
Article: Operating vs Non-Operating Activities in an Income Statement
Article: How to Use Supporting Documentation to Create an Income Statement
Article: A Checklist for Creating an Accurate Income Statement: A Step-by-Step Guide
Article: Single-Step vs Multi-Step Income Statements Differences
Adjust the income statement to correct identified errors.
Article: How to Identify and Correct Errors in the Income Statement
Calculate transaction gains or losses recognized from monetary transactions denominated in a foreign currency.
Article: Understanding Foreign Currency Transactions on the CPA Exams: Terms to Know
Article: Foreign Currency Transactions Initial Recognition and Subsequent Measurement
Article: Foreign Currency Transactions: Translation vs Remeasurement
Article: How is the Functional Currency Determined in Foreign Currency Transactions?
Article: How Are Accounts Receivable and Accounts Payable in Foreign Currencies Treated?
Article: What's the Difference Between Realized and Unrealized Gains and Losses on Foreign Currency Transactions?
Article: How are Foreign Currency Gains and Losses Reported in the Financial Statements?
Article: How Do Hedging Activities Affect the Accounting of Foreign Currency Transactions?
Article: How Do You Translate Foreign Currency Financial Statements into the Reporting Currency?
Article: How Do Foreign Currency Fluctuations Affect Financial Statement Accounts?
Detect, investigate and correct discrepancies while agreeing the income statement amounts to supporting documentation, including the source data.
Article: How to Correct Discrepancies in the Income Statement and the Implications
Article: The Most Common Causes of Discrepancies in the Income Statement
Article: How to Detect Discrepancies in the Income Statement
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
3. Statement of comprehensive income Recall the purpose, objectives and structure of the statement of comprehensive income.
Article: What is Other Comprehensive Income or OCI?
Article: Statement of Other Comprehensive Income vs Regular Income Statement
Article: How to Read and Understand a Statement of Other Comprehensive Income (OCI)
Article: How to Present the Statement of Comprehensive Income?
Article: How Does Other Comprehensive Income Affect Regular Income?
Article: How Does Other Comprehensive Income Affect Equity?
Identify items classified as other comprehensive income.
Article: What Items are Classified as Other Comprehensive Income?
Article: OCI vs AOCI - What's the Difference?
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
4. Statement of changes in equity Prepare a statement of changes in equity from a trial balance and supporting documentation.
Article: How Do Error Corrections Affect the Statement of Changes in Equity?
Article: How Do Changes in Accounting Policies Affect the Statement of Changes in Equity?
Article: How Do OCI Items Affect Equity?
Article: How Does Treasury Stock Affect Equity?
Adjust the statement of changes in equity to correct identified errors.
Detect, investigate and correct discrepancies while agreeing the statement of changes in equity amounts to supporting documentation, including the source data.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
5. Statement of cash flows Prepare a statement of cash flow using the indirect method and required disclosures from supporting documentation.
Article: Operating vs Investing vs Financing Cash Flows
Article: What's the Purpose of the Statement of Cash Flows?
Article: Indirect vs Direct Method of Statement of Cash Flows
Article: Are Non-Cash Transactions on the Statement of Cash Flows?
Article: What Are the Required Disclosures for the Statement of Cash Flows?
Article: Where Do Interest and Dividends Go on the Statement of Cash Flows?
Adjust a statement of cash flows to correct identified errors.
Article: What are the Most Common Mistakes When Preparing a Statement of Cash Flows?
Detect, investigate and correct discrepancies while agreeing the statement of cash flows amounts to supporting documentation, including the source data.
Derive the impact of transactions on the statement of cash flows.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
6. Consolidated financial statements (including wholly-owned subsidiaries and noncontrolling interests) Prepare consolidated financial statements (adjustments, and/or eliminations) from supporting documentation.
Article: What are Consolidated Financial Statements?
Article: Controlling Interest vs Noncontrolling Interest in Consolidated Financial Statements
Article: How are Intercompany Transactions Handled in Consolidated Financial Statements?
Article: What is the Acquisition Method in Business Combinations?
Article: Equity Method vs Acquisition Method in Business Combinations
Article: How Is Goodwill Treated in a Business Combination?
Article: How to Treat Foreign Subsidiaries in Consolidated Financial Statements?
Article: How are Joint Ventures Treated in Consolidated Financial Statements?
Adjust consolidated financial statements to correct identified errors.
Article: Most Common Errors When Preparing Consolidated Financial Statements
Detect, investigate and correct discrepancies identified while agreeing the consolidated financial statement amounts to supporting documentation, including the source data.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
7. Notes to financial statements Adjust the notes to the financial statements to correct identified errors and omissions.
Compare the notes to the financial statements to the financial statements and supporting documentation, including the source data, to identify inconsistencies and investigate those inconsistencies.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
B. General-Purpose Financial Reporting: Nongovernmental Not-for-Profit Entities
1. Statement of financial position Recall the purpose and objectives of the statement of financial position for a nongovernmental, not-for-profit entity.
Article: Decoding the Statement of Financial Position for Nonprofits: A Beginner's Guide
Article: Key Differences in Financial Statements of For-Profit vs Nonprofit Organizations
Article: Understanding Net Asset Categories for Nonprofit Organizations
Article: How to Read and Interpret a Nonprofit’s Statement of Financial Position
Article: Asset Management in Nonprofits: What Every CPA Candidate Should Know
Article: Liabilities in Nonprofits: Recognizing and Reporting Unique Obligations
Article: A Detailed Look at Liquidity Disclosures in Nonprofit Financial Statements
Article: Contributions, Grants, and Donations: Recognizing Revenue in Nonprofit Organizations
Article: Financial Health Indicators in Nonprofit Statements of Financial Position
Prepare a statement of financial position for a nongovernmental, not-for-profit entity from a trial balance and supporting documentation.
Article: Step-by-Step Guide to Preparing a Nonprofit's Statement of Financial Position
Article: Best Practices for Drafting Nonprofit Financial Statements
Article: Navigating the Complexities of Nonprofit Financial Reporting
Article: Essential Tips for Accurate and Compliant Nonprofit Financial Statements
Article: How to Prepare and Present Nonprofit Assets and Liabilities
Adjust the statement of financial position for a nongovernmental, not-for-profit entity to correct identified errors.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Statement of activities Recall the purpose and objectives of the statement of activities for a nongovernmental, not-for-profit entity.
Article: How Does Revenue Recognition Work in a Nonprofit?
Article: How to Read a Nonprofit Statement of Activities
Article: Understanding the Types of Net Assets in a Nonprofit
Article: Understanding Program vs Supporting Services Expenses in a Nonprofit
Article: Understanding Donations and Grants on a Nonprofit Statement of Expenses
Article: How to Read a Nonprofit Statement of Functional Expenses
Prepare a statement of activities for a nongovernmental, not-for-profit entity, including donor restrictions and releases from donor restrictions, from a trial balance and supporting documentation.
Adjust the statement of activities for a nongovernmental, not-for-profit entity to correct identified errors.
Report expenses by nature and function in either the statement of activities, the notes to the financial statements or a statement of functional expenses for a nongovernmental, not-for-profit entity.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
3. Statement of cash flows Recall the purpose and objectives of the statement of cash flows for a nongovernmental, not-for-profit entity.
Prepare a statement of cash flows and required disclosures using the direct method or indirect method for a nongovernmental, not-for-profit entity.
Adjust the statement of cash flows for a nongovernmental, not-for-profit entity to correct identified errors.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
4. Notes to the financial statements Adjust the notes to the financial statements to correct identified errors and omissions.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
C. State and Local Government Concepts
1. Measurement focus and basis of accounting Recall the measurement focus and basis of accounting used by state and local governments for fund and government-wide financial reporting.
2. Purpose of funds Determine the appropriate fund(s) that a state or local government should use to record its activities.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
D. Public Company Reporting Topics
Recall the purpose of forms 10-Q, 10-K and 8-K that a U.S. registrant is required to file with the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934.
Identify the items of Form 10-Q (Part I Items 1 through 3) and Form 10-K (Part II Items 7, 7A and 8) filed with the U.S. Securities and Exchange Commission.
Calculate basic earnings per share and diluted earnings per share considering the impact of stock options, preferred stock, convertible preferred stock and/or convertible debt.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
E. Special Purpose Frameworks
Recall appropriate financial statement titles to be used for the financial statements prepared under a special purpose framework.
Perform calculations to convert cash basis or modified cash basis financial statements to accrual basis financial statements.
Prepare financial statements using the cash basis or modified cash basis of accounting.
Prepare financial statements using the income tax basis of accounting.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
F. Financial Statement Ratios and Performance Metrics
Identify the appropriate financial statement ratio or performance metric to perform a specified type of analysis.
Calculate profitability ratios (e.g., gross profit margin, return on sales, return on assets, return on equity).
Calculate liquidity ratios (e.g., current, quick, accounts receivable turnover, inventory turnover, accounts payable turnover).
Calculate solvency ratios (e.g., debt-to-equity, total debt, times interest earned).
Calculate performance metrics (e.g., EBITDA, price-to-earnings, dividend payout, asset turnover).
Calculate variances between budget and actual results.

Area II - Select Balance Sheet Accounts (30-40%)

Skill
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
A. Cash and cash equivalents
Calculate cash and cash equivalents balances to be reported in the financial statements.
Reconcile the cash balance per the bank statement to the general ledger.
Investigate unreconciled cash balances to determine whether an adjustment to the general ledger is necessary.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
B. Trade receivables
Calculate trade receivables and allowances (e.g., credit losses, sales returns) and prepare journal entries.
Prepare any required journal entries to record the transfer of trade receivables (secured borrowings, factoring, assignment, pledging).
Prepare a rollforward of the trade receivables account balance using various sources of data and information.
Reconcile and investigate differences between the subledger and general ledger for trade receivables to determine whether an adjustment is necessary.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
C. Inventory
Calculate the carrying amount of inventory and prepare journal entries using various costing methods.
Use the lower of cost and net realizable value or the lower of cost or market approach to calculate the carrying amount of inventory.
Prepare a rollforward of the inventory account balance using various sources of data and information.
Reconcile and investigate differences between the subledger and general ledger for inventory to determine whether an adjustment is necessary.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
D. Property, plant and equipment
Calculate the gross and net property, plant and equipment balances and prepare journal entries.
Calculate gains or losses on the disposal of long-lived assets to be recognized in the financial statements.
Calculate impairment losses on long-lived assets to be recognized in the financial statements.
Determine whether an asset qualifies to be reported as held for sale in the financial statements.
Adjust the carrying amount of assets held for sale and calculate the loss to be recognized in the financial statements.
Prepare a rollforward of the property, plant and equipment account balance using various sources of data and information.
Reconcile and investigate differences between the subledger and general ledger for property, plant and equipment to determine whether an adjustment is necessary.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
E. Investments
1. Financial assets at fair value Identify investments that are eligible or required to be reported at fair value in the financial statements.
Calculate the carrying amount of investments measured at fair value (excluding impairment).
Calculate investment income to be recognized in net income for investments measured at fair value and prepare journal entries.
Calculate impairment losses to be recognized on applicable investments reported at fair value in the financial statements.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Financial assets at amortized cost Identify investments that are eligible to be reported at amortized cost in the financial statements.
Calculate the carrying amount of investments measured at amortized cost and prepare journal entries (excluding impairment).
Calculate impairment losses to be recognized on investments reported at amortized cost in the financial statements.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
3. Equity method investments Identify when the equity method of accounting can be applied to an investment.
Calculate the carrying amount of equity method investments and prepare journal entries (excluding impairment).
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
F. Intangible assets
Identify the criteria for recognizing intangible assets in the statement of financial position and classify intangible assets as either finite-lived or indefinite-lived.
Calculate the carrying amount of finite-lived intangible assets reported in the financial statements (initial measurement, amortization and impairment) and prepare journal entries.
Calculate the carrying amount of purchased software and cloud computing arrangements reported in the financial statements (initial measurement, amortization and impairment) and prepare journal entries.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
G. Payables and accrued liabilities
Recall the recognition and measurement requirements for asset retirement obligations.
Calculate the carrying amount of payables (e.g., accounts payable, dividends payable) and accrued liabilities (e.g., accrued wages, accrued vacation, accrued bonuses, self-insurance liabilities) and prepare journal entries.
Identify and calculate liabilities arising from exit or disposal activities (e.g., one-time termination benefits, severance arrangements) and determine the timing of recognition in the financial statements.
Reconcile and investigate differences between the subledger and general ledger for accounts payable and accrued liabilities to determine whether an adjustment is necessary.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
H. Debt (financial liabilities)
1. Notes and bonds payable Recall the criteria to classify a change to a debt instrument as either a modification of terms or an extinguishment of debt.
Understand when a change to the terms of a debt instrument qualifies as a troubled debt restructuring.
Calculate the interest expense attributable to notes and bonds payable reported in the financial statements (e.g., discounts, premiums, debt issuance costs).
Calculate the carrying amount of notes and bonds payable and prepare journal entries.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Debt covenant compliance Perform debt covenant calculations as stipulated in a debt agreement to ascertain compliance.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
I. Equity
Prepare journal entries to recognize equity transactions in the financial statements (e.g., equity issuance, stock dividends, stock splits, treasury stock, capital account activity in pass-through entities).

Area III - Select Transactions (25-35%)

Skill
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
A. Accounting changes and error corrections
Calculate a required adjustment to the financial statements due to an accounting change (change in accounting principle or change in accounting estimate) or error correction and determine whether it requires prospective or retrospective application.
Derive the impact to the financial statements and related note disclosures of an identified accounting change or an error correction.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
B. Contingencies and commitments
Recall the recognition and disclosure criteria used to identify commitments and contingencies.
Calculate amounts of contingencies and prepare journal entries.
Review supporting documentation to determine whether a commitment or contingency requires recognition and/or disclosure in the financial statements.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
C. Revenue recognition
Recall concepts of accounting for revenue using the five-step model.
Recall the recognition requirements associated with conditional and unconditional promises to give (pledges) for a nongovernmental, not-for-profit entity.
Identify transfers to a nongovernmental, not-for-profit entity acting as an agent or intermediary that are not recognized as contributions.
Determine the amount and timing of revenue to be recognized using the five-step model and prepare journal entries.
Determine the recognition and subsequent measurement requirements for contract costs and prepare journal entries.
Determine the amount and timing of revenue to be recognized by a nongovernmental, not-for-profit entity for contributed services received and prepare journal entries.
Calculate the amount to be recognized for contributions (financial assets and nonfinancial assets) to a nongovernmental, not-for-profit entity.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
D. Accounting for income taxes
Recall the accounting treatment for uncertainty in income taxes.
Recall the criteria for recognizing or adjusting a valuation allowance for a deferred tax asset.
Calculate the income tax expense and current taxes payable/receivable.
Calculate deferred tax assets/liabilities resulting from book to tax basis differences (e.g., allowance for credit losses, inventory costing methods, property, plant and equipment).
Prepare journal entries to record the tax provision.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
E. Fair value measurements
Identify the valuation techniques used to measure fair value.
Recall assumptions (e.g., highest and best use, market participant assumptions, unit of account) and approaches (cost, income, market) used to measure fair value.
Use the fair value hierarchy to determine the classification of a fair value measurement.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
F. Lessee accounting
Recall the appropriate accounting treatment for residual value guarantees, purchase options and variable lease payments included in leasing arrangements for a lessee.
Identify the criteria for classifying a lease arrangement for a lessee.
Calculate the carrying amount of lease-related assets and liabilities and prepare journal entries that a lessee should record.
Calculate the lease costs that a lessee should recognize in the income statement.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
G. Subsequent events
Identify a subsequent event and recall its appropriate accounting treatment.
Calculate required adjustments to financial statements and/or note disclosures based on identified subsequent events.
Derive the impact to the financial statements and required note disclosures due to identified subsequent events.