CPA Canada Core 1 cheat sheet

Revenue recognition (IFRS 15): five-step model - identify contract, identify performance obligations, determine transaction price, allocate price to obligations, recognize revenue when/as each obligation is satisfied (point in time or over time).

Lease classification (IFRS 16): lessee recognizes right-of-use asset and lease liability for all leases >12 months unless low-value; lessor classifies as finance lease if risks and rewards substantially transferred (ownership transfer, bargain purchase, term major part of economic life, PV of payments ≈ fair value, specialized asset).

Impairment (IAS 36): compare carrying amount to recoverable amount (higher of fair value less costs of disposal and value in use); recognize loss in P&L unless asset carried at revalued amount; reversal allowed for non-goodwill assets if indicators reverse.

Financial instruments (IFRS 9): classify debt at amortized cost if business model hold-to-collect and SPPI; FVOCI if hold-to-collect-and-sell and SPPI; otherwise FVTPL. Equity investments default FVTPL unless irrevocable FVOCI election.

Consolidation (IFRS 10): control = power over investee, exposure to variable returns, ability to use power to affect returns; consolidate subsidiaries; use uniform accounting policies; eliminate intragroup balances, income, and expenses.

Foreign currency (IAS 21): functional currency is primary economic environment; translate foreign operations' assets/liabilities at closing rate, income/expenses at transaction-date rate (average permitted), equity at historical; exchange differences to OCI.

Provisions and contingencies (IAS 37): recognize provision when present obligation from past event, probable outflow, reliable estimate; measure best estimate; discount if time value material; contingent assets not recognized, disclose if probable.

EPS (IAS 33): basic = profit attributable to ordinary shareholders / weighted-average ordinary shares; diluted adjusts numerator and denominator for dilutive potential ordinary shares (options, convertibles) using treasury stock method or if-converted method.

COSO ERM (2017): five components - governance and culture, strategy and objective-setting, performance, review and revision, information/communication/reporting; risk appetite aligns strategy with risk.

COSO Internal Control (2013): five components - control environment, risk assessment, control activities, information and communication, monitoring activities; 17 principles; assess entity-level and transaction-level controls.

Porter's Five Forces: threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, intensity of rivalry; use to assess industry attractiveness and competitive position.

SWOT analysis: internal strengths and weaknesses, external opportunities and threats; pair with TOWS matrix to generate SO, ST, WO, WT strategies.

Agency theory and governance: separation of ownership and control creates agency costs; mitigate via board independence, audit committee, compensation alignment, and transparent disclosure.

Board committees: audit committee (financial reporting oversight, external auditor independence, internal controls), compensation committee (executive pay linked to performance), nominating/governance committee (board composition, succession).

Stakeholder vs shareholder primacy: stakeholder model considers employees, customers, suppliers, communities; shareholder primacy maximizes shareholder value; disclosure of material ESG factors increasingly expected.

Balanced scorecard (Kaplan & Norton): four perspectives - financial, customer, internal business process, learning and growth; translate strategy into objectives, measures, targets, initiatives; leading vs lagging indicators.

CVP analysis: contribution margin = sales − variable costs; contribution margin ratio = CM / sales; break-even units = fixed costs / CM per unit; break-even sales = fixed costs / CM ratio; target profit units = (fixed costs + target profit) / CM per unit.

Relevant costing: include only future costs that differ between alternatives; exclude sunk costs and allocated fixed costs that do not change; opportunity cost is relevant.

Absorption vs variable costing: absorption includes fixed manufacturing overhead in product cost; variable costing expenses fixed overhead as period cost; difference in operating income = change in inventory units × fixed overhead rate per unit.

Standard costing variances: material price = (AP − SP) × AQ purchased; material quantity = (AQ used − SQ allowed) × SP; labour rate = (AR − SR) × AH; labour efficiency = (AH − SH) × SR; overhead variances split into spending and efficiency/volume.

Transfer pricing: minimum transfer price = variable cost + opportunity cost per unit (if capacity constrained); general rule = outlay cost + opportunity cost; negotiate or use market price when available.

Relevant decision rules: accept special order if incremental revenue > incremental costs and no impact on regular sales; make vs buy - compare avoidable fixed costs plus purchase price to internal variable and fixed costs; keep or drop - drop if avoidable costs > lost contribution margin.

Budgeting: master budget sequence - sales budget → production budget → direct materials, direct labour, overhead → cash budget → budgeted financial statements; production units = sales + desired ending inventory − beginning inventory.

Performance measurement: ROI = operating income / average operating assets; residual income = operating income − (required rate × average operating assets); residual income encourages investment if return > required rate; ROI can lead to underinvestment.

Audit risk model: audit risk = inherent risk × control risk × detection risk; detection risk is inverse to substantive testing; higher assessed risks require more reliable, extensive, or timely audit evidence.

Materiality: determine overall materiality (e.g., 5% of profit before tax, 1% of revenue, 1% of total assets); performance materiality lower than overall; trivial threshold for accumulating misstatements; revise if needed.

Audit opinion types: unmodified, qualified (material but not pervasive), adverse (material and pervasive), disclaimer (inability to obtain sufficient appropriate evidence, material and pervasive); include key audit matters for listed entities.

Independence (CPA Code): auditor must be independent in mind and appearance; prohibitions include financial interests, loans, close family relationships, and providing certain non-assurance services to audit clients (e.g., bookkeeping, management functions) unless safeguards reduce threat to acceptable level.

Fraud risk: professional skepticism; presume revenue recognition fraud risk; management override of controls; required procedures include journal entry testing, accounting estimates review, and significant unusual transactions; document fraud discussion.

Internal control audit (AS 2201 / CAS 265): obtain understanding of entity-level controls; test operating effectiveness if relying; report significant deficiencies and material weaknesses in writing to management and those charged with governance.

Subsequent events: perform procedures up to date of auditor's report; if facts discovered after report date but before issuance, consider whether financial statements need amendment; dual-date or re-date report as appropriate.

Ethical threats (CPA Code): self-interest, self-review, advocacy, familiarity, intimidation; apply conceptual framework - identify, evaluate, address; safeguards include education, review, rotation, independent quality review; document conclusions.