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This section covers knowledge of generally accepted accounting principles for business enterprises, not-for-profit organizations, and governmental entities, and the skills needed to apply that knowledge.” — CPA Exam Candidate Bulletin
Let’s take a look at the syllabus and tips in this video:
For text version, please refer to the post below.
|1. Conceptual Framework, Standards, Standard Setting, and Presentation of Financial Statements||17%-23%|
|2. Financial Statement Accountants: Recognition, Measurement, Valuation, Calculation, Presentation, and Disclosures||27%-33%|
|3. Specific Transactions, Events and Disclosures: Recognition, Measurement, Valuation, Calculation, Presentation, and Disclosures||27%-33%|
|4. Governmental Accounting and Reporting||8%-12%|
|5. Not-for-Profit (Non-governmental) Accounting and Reporting||8%-12%|
To put it in layman terms, FAR tests the knowledge of US GAAP, including the financial accounting concepts, standards and application for general business, non-profit organizations and government entities. The CPA candidates are expected to be able to:
The CPA exam is fully computerized consisting of multiple choice and task-based simulation (TBS) questions. Effective April 2017, there will be 5 testlets: 2 testlets with 33 multiple choice each and 3 testlets with TBS, with 2 to 4 questions each. The score weighting of multiple choice and TBS is 50/50. You will have 4 hours to take this exam, with an optional 15-minute break in between.
Yes, and it’s quite substantial:
Since 2015, the IMA has introduced external financial reporting decision to Part 1 of the CMA exam (around 15%).
The FAR pass rate remains relatively stable with a very slight improvement towards 50%. You can expect the same trend going forward.
People have different opinions on this, and it largely depends on your own strengths and personality. As a general rule, I do recommend you start with FAR. Here are my reasons:
1. FAR Takes the Longest Time to Study
I don’t think FAR is the most difficult, but the coverage is the widest, and the sheer volume of materials can be overwhelming. You’ll be glad to get rid of this biggest beast.
2. The 18 Month Rule Consideration
This is a major reason for anyone consider taking FAR first. Since you only have 18 months to take AND pass all the 4 sections of the CPA exam, and that the clock starts to tick once you pass the first one, you might want to tackle the longest / hardest one first so in case you fail a few times your clock will still wait. One less thing to worry about.
3. Double Benefit
The great thing about FAR is that while it is time consuming to study, it isn’t the most difficult. If people have enough time to study (note that it is a big if, given the volume) they will likely pass. You get the double benefit of getting done with the biggest section and getting a quick win.
1. Important! Schedule Your CPA FAR Study Carefully
Many candidates fail FAR because they do not have enough time to study. This is understandable given the huge amount of materials.If you don’t want to repeat their mistakes, plan ahead your study schedule so you won’t run out of time.
Specifically, if you allow yourself 3 months to study, try to schedule finish watching the video (or other materials) in the first 2 months, and set aside the last month for final revision. Chances are that you’ll need 2.5 months to finish everything off.
2. Don’t Skip the Difficult Concepts and Hope They Won’t Appear in the Exam
Many candidates find bond, pension and stock holder equity the most difficult sections. For me governmental accounting is also a killer.
Towards the end of my study, I took the time to understand governmental accounting but ran out of time on other topics. I almost wanted to give up but thankfully, decided to set aside one afternoon to tackle bond and pension.
It’s worth the effort — I did see a lot of bonds and pensions in my exam. Everyone has their special “blind spots”, which means — again — that leaving some buffer time for your study is very important.
Another lesson learned: you never know which part will be on your version of the exam. Unless you don’t mind a retake, don’t risk skipping any part of study materials.
3. Make Sure You Understand Journal Entries
The ability to perform journal entries is the foundation of financial accounting. If you are not an accounting major, or that you haven’t touched JEs for a long time, put in the extra effort. Here are two helpful sources:
Rest assured that if you have ample time to study for FAR, you can pass. The questions and answers tend to be computational and clear-cut: you either get it or not (versus the subjective questions in AUD).
If you are familiar with GAAP and related calculation, this is a section that you can pass with relative confidence.
If you really worry about the risk of lagging behind the studying and not able to study the entire module on time, you might as well postpone the scheduling of the exam at the prometric center. You may run the risk of the prometric center being full, but you don’t need to force yourself to take the exam when you are not ready.
This is one of the best thing about the computerized exam since 2004. Take good advantage of it!
Strategies for other exam sections
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I am the author of How to Pass The CPA Exam (published by Wiley) and the publisher of this and several accounting professional exam prep sites
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