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9781394155620

Wiley's CPA 2023 Study Guide: Financial Accounting and Reporting

by Unknown
  • ISBN13:

    9781394155620

  • ISBN10:

    139415562X

  • Edition: 1st
  • Format: Paperback
  • Copyright: 2022-11-08
  • Publisher: Wiley

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Summary

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

Supplemental Materials

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