The Uniform CPA exam is a standardized exam comprising of four parts that all CPA license applicants in all states and jurisdictions are required to pass with at least 75% each, regardless of the other state-specific requirements. If they fail to do so, they will not qualify to apply for CPA licensure. These must all be passed within an 18-month window, or the first section passed will expire when that timeframe is exceeded. These four parts are FAR, REG, BEC and AUD.

The FAR exam

The Financial Accounting and Reporting (FAR) exam is one of the four parts of the Uniform CPA exam. It tests the examinees knowledge and skills of financial accounting and reporting frameworks.

Structure of the FAR exam

The FAR exam is broken into two parts, each worth 50% of the exam. The first part consists of 66 multiple choice questions, while the second consists of 8 task-based simulations (TBS). The purpose of these questions is to assess your ability to remember and understand information, to apply the information that you have learned and your analytical skills. These are split over 5 segments:

  • Testlet 1 – 33 MCQ
  • Testlet 2 – 33 MCQ
  • Testlet 3 – 2 TBSs
  • Testlet 4 – 3 TBSs
  • Testlet 5 – 3 TBSs

FAR exam length

FAR is a four-hour long examination.

FAR exam study tips

The best way to study for Far is to try to cover all of the material at a reasonable pace and within study blocks that will allow you to maintain focus. There is no point in studying for five hours straight if you are just reading while nothing is going in. You should also make use of the resources that are available to you, such as the study plans and guides by Becker’s and Wiley, if you can afford it. Otherwise, there are also many cheaper options available, as well as free resources. Whichever option you choose though, be sure to summarize the notes and make index cards of the important definition or topics with which to revise later. If you have time, even read through the notes and cards as soon as you have finished compiling them, so that it sinks in more. Another benefit to summarizing the chapters of your chosen workbook, is that it forces you to engage with the information and to wrap your head around the concepts, instead of just reading them through. If there is a particular section that you are struggling with, then give it a break and go back to it. You could also then try a different approach, such as watching a lecture on it.

Additionally, another important aspect is to do as many multiple-choice questions (MCQs) as you can and to then take notes when you get the answers wrong. These will provide a twofold advantage; firstly, as they will help you with studying, as you can research and review the information that confused you in the MCQ and it will also help you to become familiar with the type of questions that are likely to appear in the exam. If you have the time, its best to go back and redo them until you get 100% on each set of MCQs. There are many free resources online to help you with this. If you are an auditory or visual learner, there are also excellent free YouTube channels that you can watch to review specific sections. These include Farhat’s Accounting Lectures and Edspira’s channel.

Obviously, different methods will work for different people. Some people struggle to listen to lectures and videos and find it easiest to skim through the reading material and then pound MCQs until the information finally starts clicking. Through each run-through, they will take note of what they found the most difficult and review those sections in preparation for their next study session.

Topics covered in the FAR exam

The purpose of the FAR exam section is to assess the skills and knowledge of the applicant regarding the financial accounting and reporting frameworks used by both public and private business entities, not-for-profit entities and state and local government entities.

Included within this are the standards and regulations issued by the:

  • Governmental Accounting Standards Board (GASB)
  • U.S Securities and Exchange Commission (U.S. SEC)
  • Financial Accounting Standards Board (FASB)
  • American Institute of Certified Public Accountants (AICPA)

Structure of the FAR exam

According to the AICPA’s CPA exam Blueprint effective from July 2021, the subjects are covered as follows:

Breaking Down the FAR Exam

Area I (25-35%)

Conceptual Framework, Standard-Setting and Financial Reporting – is evaluated through two tasks that are meant to encompass the disclosures for any topic that form part of the FASB Accounting Standards Codification. This includes the FASB Conceptual Framework, as well as their process setting and financial reporting topics.

It tests the following concepts (As per AICPA’s Blueprint):

  • Conceptual Framework and standard-setting for business adn non-business entities
    • Conceptual framework
    • Standard-setting process
  • General-purpose financial statements: for-profit business entities, balance sheet/ statement of financial position
    • Income statement/ statement of profit or loss
    • Statement of comprehensive income
    • Statement of changes in equity
    • Statement of cash flows
    • Notes to financial statements
    • Consolidated financial statements (including wholly owned subsidiaries and noncontrolling interests)
    • Discontinued operations
    • Going concern
  • General-purpose financial statements: nongovernmental, not-for-profit entities, statement of financial position
    • Statement of activities
    • Statement of cash flows
    • Notes to financial statements
  • Public company reporting topics (U.S. SEC reporting requirements, earnings per share and segment reporting)
  • Financial statements of employee benefit plans
  • Special purpose frameworks

Area II (30-40%)

Select Financial Statement Accounts – covers the financial accounting and reporting requirements in the FASB Accounting Standards Codification that are applicable to select financial statement accounts:

  • Cash and cash equivalents
  • Trade receivables
  • Inventory
  • Property, plant and equipment
  • Investments
    • Financial assets at fair value
    • Financial assets at amortized cost
    • Equity method investments
  • Intangible assets – goodwill and other
  • Payable and accrued liabilities
  • Long-term debt
    • Notes and bonds payable
    • Debt covenant compliance
  • Equity
  • Revenue recognition
  • Compensation and benefits
    • Compensated absences
    • Retirement benefits
    • Stock compensation (share-based payments)
  • Income taxes

Area III (20-30%)

Select transactions – covers the financial accounting and reporting requirements in the FASB Accounting Standards Codification that are applicable to select transactions:

  • Select transactions
    • Accounting changes and error corrections
    • Business combinations
    • Contingencies and commitments
    • Derivatives and edge accounting (e.g. swaps, options, forwards)
    • Foreign currency transactions and translation
    • Leases
    • Nonreciprocal transfers
    • Research and development costs
    • Software costs
    • Subsequent events
    • Fair value measurements
    • Differences between IFRS and U.S. GAAP

Area IV (5-15%)

State and Local Governments – covers GASB’s conceptual framework as well as the financial accounting and reporting requirements for state and local governments under the GASB standards and interpretations:

  • State and local government concepts
    • Conceptual framework
    • Measurement focus and basis of accounting
    • Purpose of funds
  • Format and content of the financial section of the comprehensive annual financial report (CAFR)
    • Government-wide financial statements
    • Government funds and financial statements
    • Proprietary funds financial statements
    • Fiduciary funds financial statements
    • Notes to financial statements
    • Management’s discussion and analysis
    • Budgetary comparison reporting
    • Required supplementary information (RSI) other than management’s discussion and analysis
    • Financial reporting entity, including blended and discrete component units
  • Deriving government-wide financial statements and reconciliation requirements
  • Typical items and specific types of transactions and events: measurement, valuation, calculation and presentation in governmental entity financial statements
    • Net position and components thereof
    • Fund balances and components thereof
    • Capital assets and infrastructure assets
    • General and proprietary long-term liabilities
    • Interfund activity, including transfers
    • Non-exchange revenue transactions
    • Expenditures and expenses
    • Special items
    • Budgetary accounting and encumbrances
    • Other financing sources and uses

Recommended study time for the FAR exam

The AIS-CPA suggests dedicating about 100-120 hours towards FAR. Generally, CPA exam takers seem to recommend dedicating at least 8 weeks towards studying for this part of the exam. During this time, you should try to put in at least 2 hours daily towards studying and practicing questions, which would amount to around 112 hours of study time.

How difficult is the FAR exam? 

Breaking Down the FAR Exam

The FAR exam is considered by most to be the most difficult section of the Uniform CPA exam. This is due to the volume of material that is covered by this section, as well as the consistently low pass rate that is usually less than those of the other sections. It is for this reason that many applicants choose to take this section first, namely that they are less likely to jeopardize their 18-month window should they fail this section, and secondly to get the most stressful section out the way. However, the AUD section is not that far behind, in terms of the pass rate, so passing FAR does not mean that it is alright to slack in your studies; you are only in the clear once all four sections are passed. Another reason why people choose to take FAR first is because some of the foundational material also carries over to other sections of the exam.

FAR study guides

There are many guides and resources available to help you study for the FAR exam. Some of these are online, while others are available in hardcopy, and there are also some that are free and others that are premium. Some examples are:

  • NASBA and AICPA’s free 6-month subscription to study material for the Uniform CPA exam.
  • If you can’t afford the Becker or Wiley courses, you can try to buy the study guides second-hand or even visit your library to see if they have copies there
  • Reddit user u/SwissArmy’s list of free FAR Study guide links