PART IV: AREA III – SELECT TRANSACTIONS

In this section

• Chapter 18: Accounting Changes and Error Corrections
  • Changes in Accounting Principle vs. Changes in Estimates
    Learn the essential distinctions between changes in accounting principles and changes in estimates, including real-world examples, best practices, and IFRS comparison, to excel in the FAR CPA exam.
  • Retrospective vs. Prospective Applications
    Explore the fundamentals of retrospective restatement and prospective approaches to accounting changes, including illustrative examples, diagrams, practical guidance, and case studies.
  • Error Corrections, Prior-Period Adjustments
    Learn the comprehensive steps for correcting previously issued financial statements, adjusting retained earnings, and applying retrospective approaches for comparative reporting.
• Chapter 19: Contingencies and Commitments
  • Loss Contingencies and Gain Contingencies
    Explore the fundamentals of accounting for loss and gain contingencies under U.S. GAAP, the thresholds for accrual and disclosure, and the conservative treatment of uncertain gains.
  • Legal Claims, Potential Liabilities, Warranties, Guarantees
    Comprehensive guidance on the accounting for legal claims, potential liabilities, product warranties, and guarantees under U.S. GAAP. Includes real-world examples, decision-process diagrams, and best practices for practitioners preparing for the CPA FAR Examination.
  • Commitments (Operating Leases, Purchase Obligations)
    A comprehensive guide to recognizing and disclosing major long-term purchase commitments and operating leases under the legacy U.S. GAAP (ASC 840), complete with examples, visuals, and best practices.
  • Going Concern (ASC 205‑40: Evaluation and Disclosure)
    Comprehensive coverage of management’s evaluation period, substantial doubt criteria, mitigating factors, and required disclosures for going concern under ASC 205-40. Explore key steps, examples, diagrams, and best practices to ensure accurate financial reporting.
• Chapter 20: Revenue Recognition
  • Five-Step Model (Identify Contract, Performance Obligations, etc.)
    Comprehensive guide to the five-step revenue recognition model under ASC 606, covering contract identification, performance obligations, transaction price determination, allocation, and revenue recognition with practical examples, diagrams, and best practices.
  • Principal vs. Agent, Variable Consideration
    Explore how to determine whether an entity acts as a principal or agent under ASC 606, including real-world scenarios (e.g., travel booking and consignment) and best practices for accounting for variable consideration.
  • Contract Costs, Licenses, Nonrefundable Fees
    Discover how to capitalize incremental contract acquisition costs, navigate licensing arrangements, and address nonrefundable fees under ASC 606, complete with practical insights and examples.
  • Presentation and Disclosure for Revenue Recognition
    A comprehensive exploration of revenue recognition presentation requirements, focusing on contract asset/liability classification, rollforwards, and major judgments in measuring revenue under ASC 606.
• Chapter 21: Accounting for Income Taxes
  • Current Tax Expense/Benefit, Deferred Tax Assets/Liabilities
    Discover how to calculate and present current tax expense, deferred tax assets, and deferred tax liabilities, with practical insights on book vs. tax differences and intangible amortization.
  • Valuation Allowances, NOLs, Intraperiod Tax Allocation
    Explore the measurement of valuation allowances on deferred tax assets, the handling of net operating loss carryforwards, and the principles of intraperiod tax allocation for income taxes under U.S. GAAP.
  • Uncertain Tax Positions, Disclosures
    Explore the essentials of uncertain tax positions, including the two-step recognition and measurement approach, the 'more likely than not' threshold, and required footnote disclosures under U.S. GAAP.
• Chapter 22: Fair Value Measurement
  • Definition of Fair Value, Valuation Approaches (Market, Cost, Income)
    A detailed guide to fair value measurement under U.S. GAAP (ASC 820), including Market, Cost, and Income Approaches, highest and best use concept, and practical examples for CPA exam readiness.
  • Fair Value Hierarchy (Levels 1, 2, 3)
    A deep dive into ASC 820's fair value hierarchy, exploring Level 1, Level 2, and Level 3 inputs, key disclosures, and reclassification procedures.
  • Required Disclosures
    Explore essential fair value measurement disclosure requirements under U.S. GAAP and IFRS, including sample footnotes, hierarchy transfers, and sensitivity analyses.
• Chapter 23: Leases
  • Lessee Accounting (Finance vs. Operating)
    Learn how to classify leases as either finance or operating under ASC 842. Explore the five classification criteria, initial measurement of the right-of-use (ROU) asset, lease liability, and best practices for accurate and transparent financial reporting.
  • Lessor Accounting (Sales-Type, Direct Financing, Operating)
    Explore how lessors account for sales-type, direct financing, and operating leases under U.S. GAAP, focusing on revenue recognition, interest income, and key differences in asset treatment.
  • Sale-Leaseback Transactions
    Explore the intricacies of sale-leaseback transactions under U.S. GAAP and IFRS, including determining if a sale has occurred, timing of gain recognition, and the consequences of failed sales leading to financing arrangements.
  • Lease Disclosures
    Explore comprehensive guidance on lease disclosures, covering key quantitative and qualitative requirements under current accounting standards, including maturity analyses, discount rates, and variable lease payments.
• Chapter 24: Subsequent Events
  • Recognized vs. Nonrecognized Subsequent Events
    Discover the differences between recognized and nonrecognized subsequent events in financial reporting, including their impact on financial statements, disclosure requirements, real-world examples, and best practices for accurate and compliant reporting.
  • Disclosure Requirements and Periods Covered
    Subsequent Events in U.S. GAAP: Key Differences Between Public and Private Entities, Reissuance Considerations, and Timely Disclosures
  • Impact on Financial Statements vs. Notes Disclosure
    Understand the pivotal difference between recognized (adjusting) and nonrecognized (disclosure-only) subsequent events. Learn how each type impacts financial statements, discover best practices, and avoid common pitfalls.