CPA FAR cheat sheet

General-purpose financial reporting provides information useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity.

Fundamental qualitative characteristics are relevance and faithful representation; enhancing characteristics are comparability, verifiability, timeliness, and understandability.

Accrual accounting recognizes revenues when earned and expenses when incurred, regardless of cash receipt or payment timing.

Balance sheet equation: Assets = Liabilities + Equity. Ending retained earnings = beginning retained earnings + net income - dividends declared.

Comprehensive income = net income + other comprehensive income. OCI includes certain unrealized gains and losses, pension adjustments, foreign currency translation, and cash flow hedges.

Statement of cash flows classifies cash flows as operating, investing, or financing; under US GAAP, interest paid, interest received, and dividends received are generally operating, while dividends paid are financing.

Revenue recognition five-step model: identify the contract, identify performance obligations, determine the transaction price, allocate the price, and recognize revenue when or as obligations are satisfied.

Basic EPS = (net income - preferred dividends) / weighted-average common shares outstanding. Diluted EPS reflects dilutive potential common shares using the if-converted or treasury stock method.

A segment is reportable if its revenue, profit or loss, or assets are at least 10% of the combined amount; reportable segments must account for at least 75% of external revenue.

Lessee finance lease criteria: ownership transfers, purchase option reasonably certain to be exercised, lease term is a major part of asset life, present value of payments is substantially all fair value, or the asset is specialized.

Finance lease: recognize a right-of-use asset and lease liability at the present value of lease payments; recognize interest on the liability and amortization of the right-of-use asset.

Operating lease: recognize a single total lease cost on a straight-line basis over the lease term, with the lease liability accreted and the right-of-use asset adjusted.

Bond price equals the present value of principal plus the present value of coupon payments at the market rate; coupon rate above market produces a premium, and coupon rate below market produces a discount.

Effective interest method: interest expense = beginning carrying amount × market rate; amortization = interest expense - cash interest paid.

A deferred tax liability arises from taxable temporary differences; a deferred tax asset arises from deductible temporary differences and may require a valuation allowance.

Equity-classified stock compensation is measured at grant-date fair value and recognized as compensation cost over the requisite service period, usually the vesting period.

Accrue a loss contingency when the loss is probable and reasonably estimable; disclose a loss that is reasonably possible but not probable; do not recognize gain contingencies before realization.

Fair value hierarchy: Level 1 uses quoted prices for identical assets in active markets; Level 2 uses observable inputs other than Level 1; Level 3 uses unobservable inputs.

Governmental fund types are general, special revenue, debt service, capital projects, and permanent funds; they use modified accrual accounting and a current financial resources measurement focus.

Proprietary fund types are enterprise and internal service funds; they use accrual accounting and an economic resources measurement focus.

Fiduciary funds include pension and OPEB trust funds, investment trust funds, private-purpose trust funds, and custodial funds; fiduciary activities are excluded from government-wide statements.

Modified accrual recognizes revenues when measurable and available and expenditures when the related liability is incurred.

Government-wide statements use accrual accounting and report governmental activities and business-type activities; internal service funds are generally reported within governmental activities.

Fund balance classifications are nonspendable, restricted, committed, assigned, and unassigned; committed amounts require formal action by the government's highest decision-making authority.

The General Fund is always reported as a major fund. Other governmental and enterprise funds are major if they meet the 10% fund-type test and the 5% combined governmental-and-enterprise test for assets, liabilities, revenues, or expenditures/expenses.

A budgetary comparison schedule is required for the General Fund and each major special revenue fund with a legally adopted budget; it compares original budget, final budget, and actual amounts.