Iran CPA Exam cheat sheet

Iranian entities apply IFRS as endorsed by the Iranian Accounting Standards Board (organizational standards); the conceptual framework defines assets as present economic resources controlled from past events.

Revenue under IFRS 15 uses the five-step model: identify contract, identify performance obligations, determine transaction price, allocate price, recognize when control transfers (point in time or over time).

Lease accounting under IFRS 16: lessee recognizes a right-of-use asset and lease liability at present value of lease payments; short-term and low-value leases may use the recognition exemption.

Impairment under IAS 36: compare carrying amount with recoverable amount (higher of fair value less costs of disposal and value in use); reverse impairment for non-goodwill assets when indicators change.

IAS 12 deferred tax: use the balance sheet liability method; recognize deferred tax on temporary differences at the tax rate expected to apply when the asset is realized or liability settled.

IAS 19 defined benefit obligation: measure using the projected unit credit method, discount at high-quality corporate bond yield, and recognize remeasurements in OCI, not profit or loss.

Consolidation under IFRS 10 requires control: power over the investee, exposure to variable returns, and ability to use power to affect those returns; non-controlling interests presented within equity.

IAS 7 statement of cash flows classifies interest paid and dividends paid as financing or operating consistently; interest and dividends received are usually investing for non-financial entities.

ISA 200 requires reasonable assurance that financial statements are free from material misstatement; audit risk = inherent risk × control risk × detection risk.

Materiality under ISA 320: determine overall materiality (common benchmarks: 5% of profit before tax, 1% of total assets, 0.5–1% of revenue) and performance materiality below it.

ISA 315 requires understanding the entity and its environment, including internal control, to identify and assess risks of material misstatement at the assertion level.

ISA 500 audit evidence must be sufficient (quantity) and appropriate (relevance and reliability); external evidence is generally more reliable than internal evidence.

ISA 700 auditor's report: opinion section, basis for opinion, key audit matters (for listed entities), responsibilities of management and auditor, and other reporting responsibilities.

ISA 570 going concern: evaluate management's assessment for at least 12 months from the reporting date; disclose material uncertainty or modify the opinion if doubt remains unresolved.

ISA 240 fraud: presume risks of fraud in revenue recognition; obtain written representations and design procedures to address management override of controls.

Sampling under ISA 530: sampling risk is the risk the auditor's conclusion differs from a 100% examination; non-sampling risk arises from human error or inappropriate procedures.

Iranian corporate income tax under the Direct Taxes Act (DTA) applies a flat 25% rate to taxable income of legal entities; taxable income = recognized revenue less deductible expenses.

Article 105 DTA: legal entities must file annual corporate tax returns within four months after the end of the fiscal year and pay tax due; late filing triggers penalties.

Article 169 DTA: taxpayers must maintain books and records; failure to keep statutory books may lead to assessment based on presumptive (علیالرأس) methods.

Value Added Tax (VAT) in Iran is governed by the VAT Act; the standard rate is 10% (as amended), with exemptions for specified goods and services such as basic food and medicine.

VAT returns are generally filed monthly or quarterly depending on turnover thresholds; input VAT credits are offset against output VAT, with excess carried forward.

Withholding tax: payments to foreign persons for royalties, technical services, and similar items are subject to withholding under DTA provisions; domestic salary tax is withheld monthly under Article 86.

Article 143 DTA: fixed assets depreciation is generally computed on a straight-line basis over useful lives set by the Iranian National Tax Administration (INTA).

Tax incentives: Article 132 DTA exempts a portion of manufacturing and mining income (commonly 100% for qualifying activities in less-developed regions), subject to INTA conditions.

Iranian Commercial Code Article 20: a merchant (تاجر) is a person who engages in commercial transactions as a habitual profession; commercial acts are listed in Article 2.

Commercial companies under the Commercial Code include joint stock (سهامی), limited liability (با مسئولیت محدود), general partnership, limited partnership, and proportional (نسبی) companies.

Joint stock companies (شرکت سهامی) require a minimum of three shareholders and a board of directors; public joint stock companies must register with the Securities and Exchange Organization (SEO).

Civil Code Article 10: contracts are binding on the parties; Article 190 sets conditions for validity of a transaction (capacity, mutual consent, specific subject matter, legitimate purpose).

Civil Code distinguishes void (باطل) from voidable (غیرنافذ) transactions; void transactions produce no legal effect, while voidable ones are effective until annulled.

Tax dispute resolution: taxpayers may object to assessments before the tax dispute resolution board (هیئت حل اختلاف مالیاتی) and appeal to the high tax council within statutory deadlines.

Statute of limitations under the DTA: generally five years from the end of the fiscal year for assessment, subject to extension where fraud or incomplete records are found.

Civil Code Article 219: contracts must be performed in good faith; Article 230 provides for damages for breach; force majeure excuses performance under Article 227.

Contribution margin = sales revenue − variable costs; contribution margin ratio = contribution margin ÷ sales; break-even point (units) = fixed costs ÷ contribution margin per unit.

Break-even point in sales value = fixed costs ÷ contribution margin ratio; margin of safety = (actual sales − break-even sales) ÷ actual sales.

Absorption costing includes fixed manufacturing overhead in product cost; variable costing expenses fixed overhead in the period, causing profit differences equal to fixed overhead in inventory change.

Job order costing accumulates costs by job using a predetermined overhead rate = estimated overhead ÷ estimated allocation base (e.g., direct labor hours).

Process costing: equivalent units under weighted-average = units completed + ending work-in-process × percentage complete; cost per equivalent unit = total costs ÷ equivalent units.

Standard costing variances: material price variance = (standard price − actual price) × actual quantity; material usage variance = (standard quantity − actual quantity) × standard price.

Activity-based costing assigns overhead to products based on activities and cost drivers, reducing distortion from a single volume-based allocation base.

Relevant costing: include only future differential costs and revenues; ignore sunk costs and allocated fixed costs that do not change with the decision.

Weighted average cost of capital (WACC) = (E/V) × Re + (D/V) × Rd × (1 − tax rate), where E is equity, D is debt, and V = E + D.

Capital asset pricing model: Re = Rf + β × (Rm − Rf); beta measures systematic risk; unsystematic risk is diversifiable and not priced.

Net present value = present value of cash inflows − initial investment; accept projects with positive NPV; IRR is the discount rate making NPV = 0.

Payback period = time to recover initial investment from cumulative cash flows; discounted payback uses discounted cash flows and ignores cash flows after the cutoff.

Dividend valuation: Gordon growth model P0 = D1 ÷ (r − g), where D1 = next dividend, r = required return, and g = constant growth rate.

Working capital management: cash conversion cycle = days inventory outstanding + days sales outstanding − days payables outstanding.

Leverage: degree of operating leverage = contribution margin ÷ EBIT; degree of financial leverage = EBIT ÷ (EBIT − interest); combined leverage is their product.

Capital structure under Modigliani–Miller: without taxes, firm value is independent of leverage; with taxes, debt creates a tax shield equal to tax rate × debt value.

COSO internal control framework: five components - control environment, risk assessment, control activities, information and communication, and monitoring activities.

Segregation of duties in an AIS separates authorization, custody of assets, and record keeping to reduce the risk of fraud and error.

Input controls include edit checks (validity, range, format, check digit), batch totals, and reconciliation of source documents to input records.

Processing controls include run-to-run totals, control totals, and exception reports; output controls include distribution logs and report reconciliation.

General IT controls cover access management, change management, backup and recovery, and IT operations; application controls are transaction-specific.

ERP systems integrate accounting modules (general ledger, AP, AR, fixed assets) with a shared database, creating a single source of truth but concentrating access risk.

Audit trails in an AIS must log user ID, timestamp, and transaction details; immutable logs support forensic investigation and regulatory compliance.

Data analytics for audit: CAATs such as ACL or IDEA enable full-population testing, duplicate detection, and Benford's law analysis on journal entries.

IFRS 15 five-step revenue model: identify contract, identify performance obligations, determine transaction price, allocate price to obligations, recognize revenue when control transfers.

IFRS 16 lessee: recognize right-of-use asset and lease liability at present value of lease payments; exemptions exist for short-term and low-value leases.

IAS 36 impairment: recoverable amount is the higher of fair value less costs of disposal and value in use; goodwill impairment is not reversed.

IAS 12 deferred tax uses the balance sheet liability method on temporary differences at the expected future tax rate.

IFRS 10 control requires power over the investee, exposure to variable returns, and ability to use power to affect returns.

Audit risk model: audit risk = inherent risk × control risk × detection risk; higher assessed risks require lower detection risk and more substantive testing.

ISA 320 materiality benchmarks: commonly 5% of profit before tax, 1% of total assets, or 0.5–1% of revenue; performance materiality is set below overall materiality.

ISA 700 auditor's report includes the opinion, basis for opinion, key audit matters for listed entities, and responsibilities sections.

ISA 570 going concern: assess management's evaluation covering at least 12 months from the reporting date and modify the opinion if doubt is unresolved.

Iranian corporate income tax rate under the Direct Taxes Act is a flat 25% on taxable income of legal entities.

Article 105 DTA: annual corporate tax returns are due within four months after fiscal year-end; late filing triggers penalties.

VAT standard rate in Iran is 10% under the VAT Act, with exemptions for specified basic goods and services.

Article 143 DTA: fixed asset depreciation is generally straight-line over useful lives determined by the Iranian National Tax Administration.

Iranian Commercial Code Article 20 defines a merchant as one who habitually engages in commercial transactions; Article 2 lists commercial acts.

Joint stock companies (شرکت سهامی) require at least three shareholders; public joint stock companies register with the Securities and Exchange Organization.

Civil Code Article 190 validity conditions: capacity, mutual consent, specific subject matter, and legitimate purpose.

Taxpayers may object to assessments before the tax dispute resolution board and appeal to the high tax council within statutory deadlines.

Break-even units = fixed costs ÷ contribution margin per unit; break-even sales value = fixed costs ÷ contribution margin ratio.

Contribution margin = sales − variable costs; contribution margin ratio = contribution margin ÷ sales.

Weighted-average equivalent units = units completed + ending WIP × percentage complete; cost per equivalent unit = total costs ÷ equivalent units.

Material price variance = (standard price − actual price) × actual quantity; usage variance = (standard quantity − actual quantity) × standard price.

WACC = (E/V) × Re + (D/V) × Rd × (1 − tax rate), where V = E + D.

CAPM: Re = Rf + β × (Rm − Rf); beta measures systematic risk, which is not diversifiable.

NPV = present value of cash inflows − initial investment; accept positive-NPV projects; IRR sets NPV to zero.

Cash conversion cycle = days inventory outstanding + days sales outstanding − days payables outstanding.

COSO internal control components: control environment, risk assessment, control activities, information and communication, and monitoring activities.

Segregation of duties separates authorization, custody of assets, and record keeping within an accounting information system.

Input controls include edit checks (validity, range, format, check digit), batch totals, and source-document reconciliation.

General IT controls cover access management, change management, backup and recovery, and IT operations across systems.