The first section of the CPA exam that I took was Financial Accounting and Reporting (FAR). This section is taken first more often than any of the other sections, for a couple of reasons. First, because the content seems the most familiar to the candidate, as it relates closely to so many of the classes necessary to get an Accounting degree. The other reason is because it is the biggest and most intimidating section.
The official description given to this section of the test is “The Financial Accounting and Reporting section tests knowledge and understanding of the financial reporting framework used by business enterprises, not-for-profit organizations, and governmental entities” according to AICPA. Based on that description, it covers everything learned in every financial and cost/managerial accounting class you took in school, as well as the governmental/non-profit accounting class you hopefully took. Governmental/non-profit is a pretty significant portion of the content covered (between 16% and 24%), so even though you probably only took one class on that topic, make sure to give that area the attention that it deserves.
As I mentioned, this is very often the first section a candidate takes because it is so big and scary. It is the perfect way to evaluate your preparation and see if you need to make any adjustments when studying for the other three sections. Also, your motivation and study discipline will be at their highest when you first start studying, so use that to your advantage and tackle the hardest part first.
Because you have 18 months to pass all four sections, if you don’t pass FAR on the first try, you can use what you learned from the experience to make sure you DO pass the other three sections. That leaves you with plenty of time to study some more and take FAR again within the 18 month window. If you pass FAR on the first try, congratulations! You have what is considered to be the hardest section out of the way.
Like I said in a previous post, students choose different methods to study for the CPA exam. One thing that will be common among all types, however, is practice problems – lots and lots of them. You will try them all the first time through. Reviewing your trouble areas, based on questions you missed, will tell you where to spend more time studying. This is something that the great website CPA Review For Free constantly reinforces – you can never do too many practice problems, but practice what you don’t know, not what you already know. You aren’t earning any more points by continuing to answer questions on topics you have mastered!
Topics covered in FAR include: comparisons between GAAP and IFRS, account classification, GL entries, financial calculations, reconciliation of GL to subsidiary ledgers, account reconciliations and analysis, consolidating and eliminating entries, financial statement preparation and analysis, financial ratios, SEC reporting, accounting estimates, and application of accounting principles.
The FAR section is 4 hours long. It consists of 3 multiple choice testlets, each containing 30 questions, and one testlet with 7 tasked based simulations. The difficulty of the questions in testlets 2 and 3 are based on how well you answered the questions in testlet 1. Don’t be discouraged by getting tough questions in the second and third testlets, that means you are getting questions right! The tasked based simulations are just what they sound like – short tasks where the same knowledge is required as in the multiple choice sections, but applied in a practical manner. They may ask you to calculate some figures, complete a reconciliation, or things of that type.
I agree with the general opinion that this section is a great place to start – use your fresh energy and motivation to get through the heavy amount of material. Remember – the biggest key to passing is practice!