Certified Public Accountant (CPA) Financial Accounting and Reporting (FAR) — Core Syllabus

Financial Accounting and Reporting (FAR) — Core syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Financial Accounting and Reporting (FAR) — Core in Certified Public Accountant (CPA), not a summary of it.

1. 1

   Conceptual Framework and Financial Statement Presentation

   7 topics

   • FASB conceptual framework and qualitative characteristics
   • Standard-setting and the FASB Accounting Standards Codification
   • Balance sheet and income statement presentation
   • Statement of cash flows
     • Operating activities — direct and indirect methods
     • Investing and financing classifications
   • Statement of comprehensive income and equity
   • Notes, disclosures, and subsequent events
   • SEC reporting requirements and Forms 10-K and 10-Q
2. 2

   Select Financial Statement Accounts

   7 topics

   • Cash, cash equivalents, and the bank reconciliation
   • Receivables and the allowance for credit losses (CECL)
   • Inventory
     • Cost flow assumptions (FIFO, LIFO, weighted average)
     • Lower of cost or net realizable value
   • Property, plant, and equipment
     • Capitalization and depreciation methods
     • Impairment of long-lived assets
   • Intangible assets and goodwill impairment
   • Investments and the equity method
   • Payables and accrued liabilities
3. 3

   Select Transactions

   8 topics

   • Revenue recognition — the five-step model (ASC 606)
     • Identifying performance obligations
     • Variable consideration and contract modifications
     • Principal versus agent considerations
   • Leases (ASC 842)
     • Finance versus operating lease classification
     • Lessee right-of-use asset and lease liability
     • Lessor accounting
   • Income taxes and deferred tax accounting
     • Temporary versus permanent differences
     • Valuation allowances and uncertain tax positions
   • Bonds payable and debt issuance
   • Stockholders' equity, dividends, and treasury stock
   • Share-based compensation
   • Earnings per share — basic and diluted
   • Accounting changes and error corrections
4. 4

   Business Combinations and Consolidations

   6 topics

   • Acquisition method and goodwill measurement
   • Noncontrolling interests
   • Intercompany eliminations
     • Intercompany inventory and fixed asset transfers
     • Intercompany debt
   • Variable interest entities and consolidation criteria
   • Foreign currency translation and remeasurement
   • Derivatives and hedge accounting basics
5. 5

   State and Local Governments and Not-for-Profit Entities

   5 topics

   • Governmental reporting model (GASB)
     • Government-wide versus fund financial statements
     • Modified accrual basis and fund types
   • Measurement focus and basis of accounting
   • Reconciliation between fund and government-wide statements
   • Not-for-profit financial statements
     • Net asset classifications
     • Contributions and donor restrictions
   • Functional expense reporting for not-for-profits

Financial Accounting and Reporting (FAR) — Core flashcards for Certified Public Accountant (CPA)

19 of 51 cards from the Financial Accounting and Reporting (FAR) — Core deck — real questions with worked answers.

1. Under the FASB conceptual framework, what are the two fundamental qualitative characteristics of useful financial information?

   Relevance and faithful representation. Relevance includes predictive value, confirmatory value, and materiality; faithful representation means information is complete, neutral, and free from error.

2. Name the four enhancing qualitative characteristics of useful financial information under the FASB conceptual framework.

   Comparability, verifiability, timeliness, and understandability. They enhance the usefulness of information that is already relevant and faithfully represented.

3. Per FASB Concepts Statement No. 8, what is the fundamental constraint on providing useful financial information?

   The cost constraint — the benefits of reporting information must justify the costs of providing and using it.

4. List the five elements of present financial statements most relevant to position and three to performance under the FASB framework.

   Position: assets, liabilities, equity. Performance/other: revenues, expenses, gains, losses, and investments by/distributions to owners (plus comprehensive income).

5. What is the authoritative source of U.S. GAAP for nongovernmental entities, and how is its content organized?

   The FASB Accounting Standards Codification (ASC). It is the single source of authoritative nongovernmental U.S. GAAP, organized by Topic, Subtopic, Section, and Paragraph.

6. How does the FASB amend the Codification, and what status do these documents have?

   Through Accounting Standards Updates (ASUs). ASUs are not themselves authoritative; they amend the Codification, which is the authoritative GAAP. SEC guidance is included for SEC registrants.

7. On a classified balance sheet, what is the criterion for classifying an asset as current?

   An asset is current if it is expected to be realized in cash, sold, or consumed within one year or the operating cycle, whichever is longer.

8. What are the two acceptable formats for presenting the income statement, and how do they differ?

   Single-step (groups all revenues/gains and subtracts all expenses/losses, one subtotal) and multiple-step (separates operating from non-operating items, showing gross profit and operating income).

9. How are discontinued operations and their tax effects presented on the income statement?

   Reported separately, net of tax, below income from continuing operations. The income tax on continuing operations and on discontinued operations is shown separately (intraperiod tax allocation).

10. What are the three classification sections of the statement of cash flows?

    Operating activities, investing activities, and financing activities.

11. Compare the direct and indirect methods of presenting operating cash flows.

    Direct method reports gross operating cash receipts and payments. Indirect method starts with net income and adjusts for non-cash items and changes in working capital. Both yield the same net operating cash flow.

12. Under the indirect method, how is depreciation expense treated in computing operating cash flow, and why?

    It is added back to net income because it is a non-cash expense that reduced net income but used no cash.

13. Classify the following cash flows under U.S. GAAP: interest paid, dividends paid, interest received, dividends received.

    Interest paid — operating; dividends paid — financing; interest received — operating; dividends received — operating.

14. What is comprehensive income, and what are its two components?

    Comprehensive income is the change in equity from non-owner sources. It equals net income plus other comprehensive income (OCI). $\text{Comprehensive income} = \text{Net income} + \text{OCI}$.

15. Give four common items reported in Other Comprehensive Income (OCI).

    Unrealized gains/losses on available-for-sale debt securities, foreign currency translation adjustments, certain pension/postretirement plan adjustments, and effective portions of cash flow hedge gains/losses.

16. What does it mean to 'reclassify' an amount out of accumulated OCI?

    When an OCI item is realized (e.g., an AFS security is sold), the previously recognized amount is reclassified from accumulated OCI into net income to avoid double counting.

17. What is the difference between Type 1 and Type 2 subsequent events?

    Type 1 (recognized) — conditions existed at the balance sheet date; adjust the financial statements. Type 2 (nonrecognized) — conditions arose after the balance sheet date; disclose only if material.

18. Through what date must an entity evaluate subsequent events, depending on filer status?

    SEC filers evaluate through the date the statements are issued; non-SEC filers evaluate through the date the statements are available to be issued.

19. What is the primary purpose of the notes to the financial statements?

    To provide disclosures that supplement and explain the face of the statements — accounting policies, breakdowns, contingencies, and other information needed for fair presentation under GAAP.

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