This document provides flash cards and summaries for the CPA Financial Accounting and Reporting (FAR) exam. It covers major topics tested in FAR such as financial accounting concepts, business environment concepts, select financial statement accounts, and select transactions. For each topic, it lists key areas and concepts addressed and provides short summaries and notes to help commit information to memory through repetition. The overall goal is to help exam takers succeed on the FAR section with an efficient study approach.

1. CPA
2020 - FAR
FLASH CARD
Prepared By SURYA PADHI | suryapadhicpa@gmail.com
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2. SURYA PADHI | SURYAPADHI@GMAIL.COM | 908 300 9193
FINANCIAL ACCOUNTING
AND REPORTING
●COVERS EVERY TOPIC OF FAR
● AUTHORED BY SUCCESSFUL CPAS
● BASED ON TRUSTED RESOURCES
● ALL OF THE NEED-TO-KNOW CONCEPTS AND EQUATIONS
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BUSINESS ENVIRONMENT
AND CONCEPTS
●AREA – I : Conceptual Framework,
Standard-Setting and Financial
Reporting
●AREA – II : Select Financial
Statement Accounts
●AREA – III : Select Transactions
●AREA – IV : State and Local
Governments
● 400 SLIDES
●WITH MNEMONICS AND TIPS
●SHORT CUTS
●WITH UP TO DATE TOPICS
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AREA - I
● Conceptual framework and standard-setting for business and nonbusiness
entities
● General-purpose financial statements: for-profit business entities
● General-purpose financial statements: nongovernmental, not-for-profit entities
● Public company reporting topics (U.S. SEC reporting requirements, earnings per
share and segment reporting)
● Financial statements of employee benefit plans
● Special purpose frameworks
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American Institute of Certified Public Accountants (AICPA)
The professional organization for participating CPAs.
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Steps the FASB uses when issuing a new accounting standard
The process for issuing a new accounting standard update includes the following steps:
1. Identification - The FASB identifies a financial reporting issue.
2. Technical Agenda - The FASB Chairman adds a project to the technical agenda.
3. Public Meeting - Public meetings are held.
4. Exposure Draft - An exposure draft (proposed accounting standards update) is
issued.
5. Round Table - A public roundtable is held.
6. Proposed Standard - The FASB staff collects and analyzes all comments and the
FASB re-deliberates the proposed standard at public meetings.
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Securities and Exchange Commission (SEC) Function
It administers the U.S. securities laws, most notably the Securities Act of 1933 and the
Securities Exchange Act of 1934 as well as others.
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Financial Accounting Standards Advisory Council (FASAC)
Provides guidance on major policy issues, project priorities, and the formation of task
forces.
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How do user groups influence the outcome of the Financial Accounting Standards Board
(FASB) standards?
Users influence standards by providing input during the due process procedure.
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Main purpose of the Securities and Exchange Commission (SEC)
To promote efficient allocation of capital by maintaining open, orderly, and fair securities
markets.
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Financial Accounting Standards Board (FASB)
Establishes financial accounting standards for business entities.
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12. SURYA PADHI | SURYAPADHI@GMAIL.COM | 908 300 9193
AREA - II - Select Financial Statement
Accounts
● A. Cash and cash equivalents
● B. Trade receivables
● C. Inventory
● D. Property, plant and equipment
● E. Investments
● F. Intangible assets – goodwill and other
● G. Payables and accrued liabilities
● H. Long-term debt (financial liabilities)
● I. Equity
● J. Revenue recognition
● K. Compensation and benefits
● L. Income taxes
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Intangible assets that can be renewed indefinite: how to treat amortisation expense (if
any) ?
These type of assets need not be amortized, because indefinite assets have an "indefinite"
life (due to ease of renewal), but subject to impairment
Impairment
1. Should be reviewed annually or when circumstances indicate there may be
impairment
2. Impairment exist (other than goodwill) when BV > FV
3. Impairment loss (other than goodwill) = BV – FV
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Inventory valuation -> Lower of cost or NRV (IFRS method). NRV is defined as?
Net realisable value = selling price less costs to sell/complete
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Inventory write up / write down
Allowed under IFRS to the extent they cover previous write off
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Under IFRS ,under the revaluation method/model, if one asset within a class is accounted using
revaluation method, then all assets in that class must use revaluation method too.
Yes, All assets of assets class should follow revaluation model
Revaluation Model
1. Under revaluation model, assets are revaluated by assets class and reported as
carrying value (revaluation model) = fair value on the revaluation date – subsequent
accumulated depreciation – subsequent impairment.
2. Revaluation loss are reported on the income statement
3. Revaluation gains are reported on the other comprehensive income
4. There are no rules under IFRS regarding the frequency of revaluation although
revaluation should occur yearly basis
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AREA - III - Select Transactions
● A. Accounting changes and error corrections
● B. Business combinations
● C. Contingencies and commitments
● D. Derivatives and hedge accounting (e.g., swaps. options, forwards)
● E. Foreign currency transactions and translation
● F. Leases
● G. Nonreciprocal transfers
● H. Research and development costs
● I. Software costs
● J. Subsequent events
● K. Fair value measurements
● L. Differences between IFRS and U.S. GAAP
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Equipment used for current & future R&D projects: depreciation expense is reported such
that:
Depreciation expenses of the assets is allocated towards R & D expenses.
Cost of assets purchased for specific R & D purpose is expensed in the year of purchase.
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Routing testing, quality control : considered an R&D expense?
No, they are not, it is an operating expense.
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Design of tools, dies/ etc. for new technology : considered an R & D expense?
Yes, it is considered an R & D expense.
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21. SURYA PADHI | SURYAPADHI@GMAIL.COM | 908 300 9193
I wanted this system to be simple, effective, and fast so that you can
succeed on your CPA Financial Accounting & Reporting test with a
minimum amount of time spent preparing for it. Over time it is
proven repetition helps memorize various terms and applying the
terms in the examination.
Visit http://cpa.suryapadhi.com/education/cpa-2020.html
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