What CPA Financial Accounting and Reporting actually tests
FAR is a Core section (required for every candidate):
| Area | What it covers |
|---|---|
| Conceptual Framework & Statements | FASB Concepts Statements, income statement, balance sheet, cash flows |
| Revenue Recognition | ASC 606 five-step model, variable consideration |
| Leases | ASC 842 — lessee and lessor accounting |
| Financial Instruments | ASC 320/321/326/815 — classification, CECL impairment, hedging |
| Business Combinations & Consolidation | ASC 805 acquisition method, ASC 810 VIE model, NCI |
| Income Taxes & Pensions | ASC 740 deferred tax, ASC 715 pension accounting |
| EPS & Segment Reporting | ASC 260 basic/diluted EPS, ASC 280 segments |
| Governmental & Not-for-Profit | GASB 34 fund accounting, ASC 958 net assets |
Why EPS is a high-value formula to have automatic
Basic EPS looks simple, but FAR tests it inside larger scenarios — preferred dividends, treasury stock transactions mid-year, or as a stepping stone to diluted EPS. Getting the basic calculation instant frees up working memory for the more complex adjustments layered on top in a real question.
Sample question: Basic EPS
Financial Accounting and Reporting · Medium difficulty
A company has net income of $500,000 and preferred dividends of $50,000. Weighted average common shares outstanding are 100,000. What is basic EPS?
A. $4.00
B. $4.50
C. $5.00
D. $5.50
The correct answer is B — $4.50.
Basic EPS = (Net income − Preferred dividends) / Weighted average common shares = ($500,000 − $50,000) / 100,000 = $450,000 / 100,000 = $4.50. Preferred dividends are subtracted first because that income belongs to preferred shareholders, not common shareholders — a step it's easy to forget under time pressure.
Basic EPS = (Net income − Preferred dividends) / Weighted average common shares = ($500,000 − $50,000) / 100,000 = $450,000 / 100,000 = $4.50. Preferred dividends are subtracted first because that income belongs to preferred shareholders, not common shareholders — a step it's easy to forget under time pressure.