CPALE AFAR (Advanced Financial Accounting and Reporting) Review

CPALE AFAR (Advanced Financial Accounting and Reporting) Review

AFAR is the second financial accounting subject on the CPALE: a 70-item, three-hour paper on the afternoon of Day 3, after FAR. AFAR covers the more advanced and specialized accounting topics: partnerships, corporations, business combinations, consolidation, foreign currency, government accounting, and not-for-profit organizations.

For BSA graduates, AFAR overlaps with the Advanced Accounting and Government Accounting courses.

This post is the topic-by-topic plan that the CPALE pillar guide hands off to.

Suggested practice mix

PRC doesn't publish item counts per topic. This is our suggested mix for a 70-item practice set, not an official breakdown:

Partnership accounting

Drill list:

• Partnership formation: contribution of cash, non-cash assets, liabilities
• Profit and loss distribution: ratio, capital balances, salaries + interest + bonus + ratio
• Withdrawal/admission of partners: bonus method vs goodwill method
• Partnership liquidation: lump-sum vs installment
• Cash priority schedule
• Statement of partnership liquidation

Practice profit-distribution problems under different profit-sharing arrangements.

Corporation accounting

• Share capital: par vs no-par, ordinary vs preference shares
• Issuance: cash, services, non-cash assets
• Treasury shares: cost method vs par value method
• Retained earnings: appropriation, dividends
• Cash dividends, stock dividends, property dividends
• Stock splits
• Liquidating dividends
• Quasi-reorganization
• Earnings per share (EPS) calculation: basic vs diluted

Business combinations (PFRS 3)

• Identification of acquirer
• Determination of acquisition date
• Recognition + measurement of identifiable assets and liabilities
• Goodwill calculation: consideration transferred + non-controlling interest + previously held interest LESS net identifiable assets
• Bargain purchase
• Contingent consideration
• Acquisition costs (expensed under PFRS 3)

Consolidated financial statements (PFRS 10)

The largest single AFAR block. Drill:

• Control assessment: power + exposure to variable returns + ability to use power to affect returns
• Non-controlling interest (NCI) measurement: fair value vs proportionate share
• Elimination entries:

- Investment in subsidiary against equity of subsidiary - Intercompany sales (upstream + downstream) - Intercompany profit on inventory - Intercompany profit on PPE - Dividends within group

Practice consolidation working papers with several intercompany transactions until the elimination logic is automatic.

Foreign currency (PAS 21)

• Functional currency vs presentation currency
• Spot rate vs forward rate vs average rate
• Initial recognition at spot rate
• Subsequent measurement: monetary items at closing rate; non-monetary at historical or fair value rate
• Foreign currency translation differences in OCI vs P&L
• Translation of foreign operations: assets/liabilities at closing rate, income/expenses at average rate

Branch and home office

• Branch books vs home office books
• Reciprocal accounts: Investment in Branch vs Home Office
• Reconciliation of reciprocal accounts (in-transit items)
• Combined financial statements
• Inter-branch transactions

Construction contracts (PFRS 15 long-term)

• Performance obligation satisfied over time vs at point in time
• Input vs output methods of measuring progress
• Cost-to-cost method (most common)
• Revenue recognition: progress × transaction price
• Loss recognition: full expected loss recognized immediately

Installment sales

• Cost recovery method
• Installment method
• Profit recognition pattern
• Repossession of merchandise

Government accounting

• Government Accounting Manual (GAM) for NGAs
• Books of accounts: Journal, Cash Receipts, Cash Disbursements, Check Disbursements, General Ledger, Subsidiary Ledger
• Receipts categorization: tax revenue, non-tax revenue, grants
• Disbursements: PS, MOOE, CO, FE
• Allotment vs obligation vs disbursement
• Notice of Cash Allocation (NCA)
• COA audit framework

Not-for-profit accounting

• Net asset classification: with donor restrictions vs without donor restrictions
• Contributions: unrestricted, temporarily restricted, permanently restricted
• Pledge revenue recognition
• Fund accounting basics

A 6-week AFAR drilling plan

Where Super Tutor fits

CPALE is coming soon to Super Tutor. There's no CPALE reviewer in the app yet. You can follow the CPALE exam page or see every exam Super Tutor covers now.

What to read next

The CPALE pillar guide covers the full review. The FAR review covers the other Day 3 subject, and the Auditing review covers audit.