Get the ultimate study guide for the challenging 2023 Financial Accounting and Reporting (FAR) CPA exam.
Wiley's CPA 2023 Study Guide: Financial Accounting and Reporting offers effective overviews of the entire FAR section to help you succeed on your upcoming 2023 CPA exam. Designed to help you master all core topics you’ll see on FAR exam day, this guide delivers hands-on and practical instruction to demystify one of the hardest exams in the journey to becoming a Certified Public Accountant.
To ensure you are prepared for the FAR exam, this guide includes detailed coverage of all domains tested as of 2023, including:
- Conceptual Framework, Standard-Setting, and Financial Reporting
- Select Financial Statement Accounts
- Select Transactions
- State and Local Governments
Fully updated for the 2023 CPA exam cycle, Wiley's CPA 2023 Study Guide: Financial Accounting and Reporting separates content into manageable chunks to help you understand and retain essential information.
Table of Contents
About the Authors xi
About the Financial Accounting Professors xiii
Welcome to Financial Accounting and Reporting xv
Conceptual Framework, Standard-Setting and Financial Reporting 1
Overview of US GAAP 2
FASB and Standard Setting 2
Accrual Accounting 7
Financial Accounting Standards Codification 13
Conceptual Framework of Financial Reporting by Business Enterprises 17
Objectives and Qualitative Characteristics 17
Assumption and Principles 20
Constraint and Present Value 24
Fair Value Framework 27
Fair Value Framework - Introduction and Definitions 27
Recognition and Measurement 31
Inputs and Hierarchy 34
Disclosure Requirements 36
General-Purpose Financial Statements 39
Overview - General-Purpose Financial Statements 39
Income Statement 44
Balance Sheet/Statement of Financial Position 50
Statement of Comprehensive Income 57
Statement of Changes in Equity 61
Statement of Cash Flows 64
Sources and Uses of Cash 64
Operating, Investing, and Financing Activities 67
Operating Cash Flows - Indirect Method 74
Notes to Financial Statements 82
Notes to Financial Statements 82
Risks and Uncertainties 88
Subsequent Events 92
Exit or Disposal Activities and Discontinued Operations 95
Evaluating Financial Statements 99
Ratios - Liquidity/Solvency and Operational 99
Ratios - Profitability and Equity 103
Consolidated Financial Statements 106
Introduction to Consolidated Financial Statements 106
Consolidating Process 110
Consolidation at Acquisition 110
Consolidation Subsequent to Acquisition 117
Consolidation Less than 100% Ownership 122
Intercompany (I/C) Transactions and Balances 127
Intercompany I/C Transactions and Balances - Introduction 127
Intercompany (I/C) Inventory Transactions 130
Intercompany (I/C) Fixed Asset Transactions 140
Intercompany (I/C) Bond Transactions 152
Combined Financial Statements 160
Variable Interest Entities (VIEs) 162
Public Company Reporting Topics (SEC, EPS, Interim, and Segment) 164
U.S. Securities and Exchange Commission (SEC) 164
SEC - Role and Standard-Setting Process 164
SEC Reporting Requirements 167
Earnings Per Share 172
Introduction to Earnings per Share 172
Basic Earnings per Share 175
Diluted Earnings per Share 179
Segment Reporting 189
Interim Financial Reporting 193
Interim Reporting Principles 193
Interim Reporting - Details 197
Financial Statements of Employee Benefit Plans 200
Pension Plan Reporting 200
Special-Purpose Frameworks 203
Cash, Modified Cash, Income Tax 203
Private Company Council 206
Select Financial Statement Accounts 211
Cash and Cash Equivalents 212
Cash 212
Bank Reconciliations 215
Receivables 218
Accounts Receivable - Accounting and Reporting 218
Uncollectible - Direct Write-Off and Allowance 221
Allowance for Uncollectible 223
Notes Receivable 227
Criteria for Sale of Receivables 231
Factoring, Assignment, and Pledging 234
Notes Receivable - Impairment 237
Inventory 239
Introduction to Inventory 239
Periodic Inventory System and Cost-Flow Assumption 243
Perpetual Inventory System and Cost-Flow Assumption 250
Comparison: FIFO, LIFO, and Weighted Average 254
Dollar-Value LIFO 257
Gross Margin and Relative Sales Value Method 261
Retail Inventory Method 264
Dollar-Value LIFO Retail 269
Subsequent Measurement of Inventory 271
Inventory Errors 275
Losses on Purchase Commitments 277
Property, Plant, and Equipment 279
Categories and Presentation 279
Capitalized Costs 280
Valuation 282
Interest Capitalization Basics 285
Interest Capitalization Limits 288
Post-Acquisition Expenditures 293
Non-Accelerated Depreciation Methods 295
Accelerated Depreciation Methods 298
Natural Resources 302
Impairment - Assets for Use and Assets Held-for-Sale 306
Nonmonetary Exchange 310
Commercial Substance 310
No Commercial Substance 313
Investments 316
Introduction - Equity and Debt Investments 316
Investments in Equity Securities 321
Equity Investments at Fair Value 321
Equity Investments at Cost 325
Equity Investments Using Equity Method Accounting 328
Investments in Debt Securities 336
Debt Investments at Fair Value 336
Debt Investments at Amortized Cost 346
Investor Stock Dividends, Splits, and Rights 349
Comparison and Transfers of Investments 352
Intangible Assets - Goodwill and Other 360
Introduction to Intangible Assets 360
Goodwill 366
Research and Development Costs 370
Software Costs 373
Payables and Accrued Liabilities 378
Introduction to Current Liabilities 378
Specific Current Liabilities 381
Payroll and Compensated Absences 383
Asset Retirement Obligations (AROs) and Environmental Liabilities 387
Contingencies, Commitments, and Guarantees 390
Contingent Liability Principles 390
Examples of Contingent Liabilities 393
Financial Liabilities and Long-Term Debt 396
Notes Payable 396
Bonds Payable 402
Bond Accounting Principles 402
Bond Complications 406
Bond Fair Value Option 409
Modification and Debt Retirement 412
Refinancing Short-Term Obligations 412
Debt Retirement 414
Troubled Debt 416
Debt Covenant Compliance 421
Distinguishing Liabilities from Equity 426
Equity 430
Owners’ Equity Basics 430
Stock Issuance 438
Preferred Stock 443
Treasury Stock 446
Dividends 451
Stock Dividends and Splits 455
Dividend Allocation 458
Stock Rights, Retained Earnings 461
Book Value per Share 466
Select Transactions 471
Revenue Recognition 472
Five Steps of Revenue Recognition 472
Determining Transaction Price 477
Allocating Transaction Price 482
Special Issues in Revenue Recognition 485
Contract Modifications and Other Considerations 491
Accounting for Construction Contracts 499
Share-Based Payments 505
Stock Options 505
Stock Awards 513
Stock Appreciation Rights 517
Income Taxes 520
Income Tax Basics 520
Permanent Differences 523
Temporary Differences 525
Tax Accrual Entry 531
Tax Allocation Process 535
Valuation Allowance for Deferred Tax Assets 539
Uncertain Tax Positions 541
Net Operating Losses 544
Accounting Changes and Error Corrections 549
Types of Changes and Accounting Approaches 549
Retrospective Application 553
Prospective Application 556
Accounting Errors - Restatement 558
Business Combinations 562
Introduction to Business Combinations 562
Acquisition Method of Accounting 567
Introduction to the Acquisition Method of Accounting 567
Determining the Cost of the Business Acquired 571
Recognizing/Measuring Assets, Liabilities, and Noncontrolling Interest 575
Recognizing/Measuring Goodwill or Bargain Purchase 580
Post-Acquisition Issues 583
Disclosure Requirements - Acquisition Method 587
Recording Business Combinations 590
Financial Instruments 601
Financial Instruments Introduction 601
Financial Instruments Disclosures 604
Derivatives and Hedging 607
Derivatives Introduction 607
Hedging Introduction 613
Fair Value Hedges 618
Cash-Flow Hedges 620
Foreign Currency Hedges 622
Effectiveness and Disclosure 624
Foreign Currency Denominated Transactions 628
Introduction and Definitions 628
Import Transactions 633
Export Transactions 636
Foreign Currency Hedges 639
Introduction to Forward and Option Contracts 639
Natural (Economic) Hedge 644
Hedging Forecasted Transactions and Firm Commitment 647
Hedging Asset/Liability, Available-for-Sale, or Foreign Operations 650
Speculation and Summary 653
Conversion of Foreign Financial Statements 655
Introduction to Conversion of Foreign Financial Statements 655
Conversion Using Translation 657
Conversion Using Remeasurement 660
Remeasurement and Translation 664
Leases 665
Background, Short-Term Leases, and Operating Leases 665
Finance Lease Basics 671
Finance Leases - Lessee 676
Sales-Type Leases - Lessor 682
Direct Financing Leases - Lessor 687
Sale-Leasebacks and Disclosures 692
Additional Aspects of Leases 697
Not-for-Profit Organizations 702
Introduction to Types of Not-for-Profit Entities and Standard Setting 702
Financial Reporting 704
Donations, Pledges, Contributions, and Net Assets 713
Special Issues - Recent Developments 720
Special Industries: Healthcare and Colleges 724
Healthcare Organizations 724
Colleges and Universities 730
State and Local Governments 735
State and Local Government Concepts 736
Introduction to Governmental Organizations 736
GASB Concepts Statements 739
Fund Accounting 745
Measurement Focus Basis of Accounting 752
Budgetary Accounting 757
Encumbrance Accounting 760
Deferred Outflows and Deferred Inflows of Resources 765
Net Position and Fund Balance 771
Governmental Funds 775
Proprietary Funds 792
Fiduciary Funds 797
Format and Content of Annual Comprehensive Financial Report (ACFR) 817
The Annual Comprehensive Financial Report 817
Determining the Financial Reporting Entity 832
Major Funds and Fund-Level Reporting 836
Deriving Government-Wide Financial Statements and Reconciliation Requirements 838
Typical Items and Specific Types of Transactions and Events 844
Interfund Transactions, Construction Projects, and Infrastructure 844
Long-Term Liabilities Other Than Bonded Debt 849
Terminology and Nonexchange Transactions 857
Special Items - Recent Developments 867
Index 871
