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Core · FAR

Financial Accounting and Reporting

FAR tests U.S. GAAP financial reporting for for-profit and not-for-profit entities: preparing and analyzing statements, balance-sheet accounts, and select transactions. Under CPA Evolution, much of governmental accounting moved to the BAR discipline.

50 flashcards15 MCQs4 high-yield notes

Time

4 hours

MCQs / TBS

50 / 7

Score weight

50% MCQ · 50% TBS

2025 pass rate

42.12%

Why it trips people up

Huge volume, heavy application/analysis skills, and historically the lowest core pass rate. Candidates who only memorize rules struggle on simulations that require reconciling, adjusting, and detecting discrepancies.

Mostly Application (45–55%) and Analysis (35–45%) — memorization alone will not get you to 75.

Typical study load: ~100–150 hours · Pairs well with BAR

Common traps

  • Reading lectures without enough MCQs/TBS practice
  • Ignoring NFP differences until too late
  • Skipping bank reconciliations, subsequent events, and error corrections
  • Running out of time on sims because MCQs ate the clock

How to study FAR

  1. 1

    Front-load FAR while motivation is highest — many candidates take it first.

  2. 2

    Practice journal entries and financial statement impacts daily, not just definitions.

  3. 3

    Spend serious time on revenue recognition (ASC 606), leases (ASC 842), and consolidations/business combinations.

  4. 4

    After every missed MCQ, rewrite the rule in your own words and make a flashcard.

  5. 5

    Do timed TBS sets weekly — FAR simulations are where scores often collapse.

Blueprint content areas

Weights are AICPA blueprint ranges. Use them to prioritize — do not ignore low-weight areas entirely, but spend more reps where the exam spends more score.

Area I — Financial Reporting

30–40%
  • • Conceptual framework & standard setting
  • • General-purpose financial statements (for-profit)
  • • Nongovernmental not-for-profit financial statements
  • • Public company reporting topics
  • • Employee benefit plan financial statements
  • • Special purpose frameworks

Area II — Select Balance Sheet Accounts

30–40%
  • • Cash & cash equivalents, receivables, inventory
  • • PPE, investments, intangibles
  • • Payables, long-term debt, equity
  • • Revenue recognition
  • • Compensation & benefits
  • • Income taxes (accounting for)

Area III — Select Transactions

25–35%
  • • Accounting changes & error corrections
  • • Business combinations
  • • Contingencies & commitments
  • • Derivatives & hedge accounting
  • • Foreign currency
  • • Leases
  • • Subsequent events & fair value
  • • R&D and software costs

FAR high-yield notes

Study these, then drill the FAR flashcards and MCQs.

FAR · High-yield

ASC 606 revenue — exam machine

Most FAR score movement on revenue comes from control transfer, variable consideration, and principal/agent presentation — not from memorizing the step titles alone.

  • Walk the five steps in order on every MCQ before jumping to journal entries.
  • Separate contract assets (conditional) from receivables (unconditional except time).
  • Constraint variable consideration; do not book the optimistic bonus by default.
  • Principal = gross; agent = net. Control before transfer is the hinge.
  • Licenses: right to use vs right to access can change timing.

Exam tip: If cash collection is mentioned, ask: did control transfer? Cash ≠ revenue.

FAR · High-yield

ASC 842 leases — lessee focus

Almost all leases >12 months are on-balance-sheet. Classification drives the expense pattern, not whether a liability exists.

  • Initial measurement: PV of unpaid lease payments → liability; ROU asset starts from that (adjusted for IDC/prepaids/incentives).
  • Finance: interest + amortization (front-loaded). Operating: single lease expense (often straight-line).
  • Watch reasonably certain renewals/purchase options — they change lease term and payments.
  • Short-term lease election can keep some leases off-balance-sheet.
  • Know the classification criteria that push toward finance.

Exam tip: If they ask for Year-1 expense, classification is the first fork in the road.

FAR · High-yield

ASC 740 deferred taxes

Book-tax differences that reverse create deferred taxes. Permanent differences affect effective rate but not DTAs/DTLs.

  • Taxable temporary difference → DTL. Deductible temporary difference → DTA.
  • Valuation allowance if DTA realization is not more likely than not.
  • Enacted rates used for measurement — not hoped-for future rates.
  • Intraperiod allocation can send tax expense to continuing ops / discontinued / OCI.
  • NOL and credit carryforwards are DTA sources (with allowance analysis).

Exam tip: Always identify temporary vs permanent before computing deferred balances.

FAR · High-yield

Not-for-profit net assets

Donor restrictions drive net asset class. Board intent does not create donor-restricted net assets.

  • Two classes: with donor restrictions / without donor restrictions.
  • Release restrictions when purpose/time conditions met.
  • Contributed services recognized only if specialized skills/criteria met.
  • Functional expense reporting matters (program vs support).
  • Agency transactions are not contributions.

Exam tip: If the board 'restricts' funds, classification is still without donor restrictions.

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