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
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?
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.
The FAR blueprint, area by area
Pinnacle runs on a syllabus graph — named areas with explicit prerequisites, each one mapped against the AICPA's Uniform CPA Examination Blueprints effective January 2026. It is the same map the free diagnostic reasons over, not a marketing summary of it. These are the eight confirmed FAR areas, and what each one covers:
Financial Statement Accounts
Preparing the general-purpose statements — balance sheet, income statement including discontinued operations, comprehensive income, changes in equity, cash flows by the indirect method — and the notes, adjusted to correct identified errors and omissions. Also here: equity transactions from stock dividends to treasury stock, accounting changes versus error corrections with prospective versus retrospective application, and subsequent events.
Assets & Inventory
The asset side in detail: cash with bank reconciliations, trade receivables with credit-loss allowances and transfers — factoring, assignment, pledging — inventory costing and lower-of-cost tests, property, plant and equipment with impairment and held-for-sale classification, investments at fair value, amortised cost or under the equity method, intangibles including cloud computing arrangements, and fair value measurement: techniques, the hierarchy, and market participant assumptions.
Liabilities & Leases
Payables and accrued liabilities including asset retirement obligations; notes and bonds payable — discounts, premiums, issuance costs, modification versus extinguishment, troubled debt restructurings — and covenant compliance calculations; contingencies and commitments; income tax accounting with deferred taxes, the valuation allowance and the provision; and lessee accounting for right-of-use assets and lease liabilities.
Revenue Recognition
The five-step model from identifying the contract to recognising revenue, with journal entries and contract costs. For nongovernmental not-for-profits: conditional versus unconditional promises to give, agency transfers, contributed services, and measuring contributions of financial and nonfinancial assets.
Consolidated Financial Statements
Preparing consolidated statements from the separate statements of a parent and its subsidiaries — eliminating intra-entity transactions and balances, presenting noncontrolling interests, correcting errors, and reconciling consolidated amounts to underlying source data.
Not-for-Profit Reporting
ASC 958: net assets with and without donor restrictions; the statement of financial position, statement of activities and statement of functional expenses; contribution revenue with restricted contributions and their release; agency transactions; endowments including underwater endowments; and the not-for-profit statement of cash flows.
State & Local Government Concepts
The measurement focus and basis of accounting for fund and government-wide reporting — modified accrual and current financial resources for governmental funds, full accrual and economic resources government-wide — and determining the appropriate fund or funds a government should use.
Public Company Reporting & Special Purpose Frameworks
Forms 10-Q, 10-K and 8-K and their key items; basic and diluted EPS with options, preferred stock and convertibles; special purpose frameworks — cash, modified cash and income tax basis statements and their conversion to accrual; and the ratio toolkit: profitability, liquidity and solvency ratios, performance metrics from EBITDA to dividend payout, and budget-to-actual variances.
Every practice question in the bank is tagged to one of these blueprint areas — which is how the diagnostic can name the specific concept underneath a wrong answer, not just the area it sat in.
Area names follow the AICPA's published Uniform CPA Examination Blueprints (effective January 2026), referenced for accuracy. Pinnacle is an independent adaptive learning platform. CPA is a professional designation administered by US state boards of accountancy. Pinnacle is not affiliated with, endorsed by, or connected to the AICPA, NASBA, or any US state board of accountancy.