CA ANZ Core 3: FAR study guide
CA ANZ Core 3: FAR · Work through your exam, one topic at a time.
Core 3: Financial Accounting and Reporting (FAR) is one of the technical modules in the CA ANZ CA Program, the qualification pathway that candidates complete on the way to Chartered Accountants Australia and New Zealand membership. It suits graduates and early-career accountants who already understand double-entry bookkeeping and basic financial statements and now need to apply Australian Accounting Standards to realistic, judgement-heavy scenarios. The CA ANZ Core 3: FAR study guide has 10 sections and about 3,664 words.
01Conceptual Framework and the Financial Reporting Environment
The Conceptual Framework is the constitution of financial reporting: it defines the objective (providing financial information useful to existing and potential investors, lenders and other creditors in making resource-allocation decisions), the qualitative characteristics, the elements, and the recognition and derecognition criteria. Candidates must be able to move fluently between the objective, the fundamental characteristics (relevance and faithful representation), the enhancing characteristics (comparability, verifiability, timeliness, understandability) and the cost constraint.
389 words, about 2 min02Presentation of Financial Statements and Disclosure Requirements
IAS 1 governs the structure of a complete set of financial statements: a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity, a statement of cash flows, notes comprising significant accounting policies and other explanatory information, and comparative information. Candidates must know the minimum line items on the face of each statement, the requirement to present a classified statement of financial position (current/non-current) unless a liquidity presentation is more relevant, and the current/non-current criteria: an asset is current if realised in the normal operating cycle, held primarily for trading, expected to be realised within twelve months, or cash/cash equivalents unrestricted.
402 words, about 2 min03Revenue Recognition and Contracts with Customers
IFRS 15 uses a five-step model: identify the contract with a customer; identify the performance obligations; determine the transaction price; allocate the transaction price to the performance obligations; and recognise revenue when (or as) each obligation is satisfied. Candidates must understand the criteria for a contract to exist (approval, identifiable rights, payment terms, commercial substance, and probable collection), and the distinction between a performance obligation satisfied at a point in time versus over time.
373 words, about 2 min04Property, Plant and Equipment, Intangibles and Impairment
IAS 16 requires PPE to be recognised at cost, then measured under either the cost model or the revaluation model. Cost includes purchase price, directly attributable costs to bring the asset to the location and condition for intended use, and estimated dismantling costs.
378 words, about 2 min05Leases
IFRS 16 requires lessees to recognise a right-of-use asset and a lease liability for almost all leases, with limited recognition exemptions for short-term leases (12 months or less) and low-value assets. The lease liability is the present value of lease payments not paid at the commencement date, discounted at the interest rate implicit in the lease or, if not readily determinable, the lessee's incremental borrowing rate.
354 words, about 2 min06Financial Instruments and Fair Value Measurement
IFRS 9 covers classification and measurement, impairment and hedge accounting. Financial assets are classified by the entity's business model and the contractual cash flow characteristics: amortised cost if held to collect and cash flows are solely payments of principal and interest (SPPI); fair value through OCI if held to collect and sell and SPPI; otherwise fair value through profit or loss.
383 words, about 2 min07Provisions, Contingent Liabilities and Employee Benefits
IAS 37 requires a provision where there is a present obligation from a past event, probable outflow of economic benefits, and a reliable estimate. Provisions are measured at the best estimate of the expenditure required to settle the obligation, discounted where the effect is material, and reviewed at each reporting date.
345 words, about 2 min08Business Combinations and Consolidation
IFRS 3 requires the acquisition method: identify the acquirer, determine the acquisition date, recognise and measure identifiable assets acquired and liabilities assumed at fair value, and recognise goodwill or a gain from a bargain purchase. Goodwill is the excess of consideration transferred plus non-controlling interest plus previously held equity interest over the net fair value of identifiable assets and liabilities.
345 words, about 2 min09Income Taxes and Foreign Currency Translation
IAS 12 uses the balance sheet approach: recognise deferred tax on temporary differences between the carrying amount and tax base of assets and liabilities, using the tax rates expected to apply when the difference reverses. Deferred tax liabilities arise for taxable temporary differences; deferred tax assets for deductible temporary differences and unused tax losses, recognised only where it is probable that taxable profit will be available.
359 words, about 2 min10Analysis and Interpretation of Financial Statements
This domain tests the ability to compute and interpret ratios and to explain what they reveal about profitability, liquidity, solvency and efficiency. Candidates must know the main families: profitability (gross margin, operating margin, net margin, return on assets, return on equity), liquidity (current ratio, quick ratio, cash ratio), solvency (debt-to-equity, interest cover, gearing), efficiency (inventory turnover, receivables days, payables days, asset turnover) and investor ratios (earnings per share, price-earnings, dividend payout).
336 words, about 2 min