CPALE FAR (Financial Accounting and Reporting) Review

CPALE FAR (Financial Accounting and Reporting) Review

FAR is the foundation accounting subject on the CPALE, a 70-item, three-hour paper on the morning of Day 3. The items cover the full PFRS framework — financial statement preparation, asset/liability/equity recognition and measurement, revenue recognition, lease accounting, financial instruments, and the supporting conceptual framework.

For BSA graduates, FAR overlaps directly with the Intermediate Accounting and Advanced Financial Accounting courses taken across multiple semesters. The trap is the scope updates — PFRS 15 (Revenue), PFRS 16 (Leases), and PFRS 9 (Financial Instruments) replaced older standards and are now full scope. Reviewers using older textbooks miss this.

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:

Conceptual framework + financial statements

Drill list:

• Objectives of financial reporting
• Qualitative characteristics: relevance + faithful representation; comparability, verifiability, timeliness, understandability
• Elements of financial statements: assets, liabilities, equity, income, expenses
• Recognition and measurement principles
• Going concern, accrual basis, materiality
• Components of complete financial statements (PAS 1)
• Statement of financial position (classified vs unclassified)
• Statement of profit or loss + OCI (single vs two-statement)
• Statement of changes in equity
• Statement of cash flows (PAS 7) — direct vs indirect methods, classification of cash flows

Cash and receivables

• Cash equivalents definition (3-month criterion)
• Bank reconciliation: outstanding checks, deposits in transit, NSF, bank credits
• Petty cash, imprest system
• Trade vs non-trade receivables
• Allowance for doubtful accounts: percentage-of-sales, percentage-of-receivables, aging
• Notes receivable: face value, present value, discounting
• Loans receivable measurement under PFRS 9 (amortized cost basis)

Inventories (PAS 2)

• Cost formulas: FIFO, weighted average (LIFO not permitted under PFRS)
• Lower of cost and NRV
• NRV calculation
• Inventory write-down and reversal
• Cost components: purchase + conversion + other costs
• Specific identification

PPE, investment property, biological assets

PPE (PAS 16):

• Initial measurement: cost + directly attributable + decommissioning
• Subsequent measurement: cost model vs revaluation model
• Depreciation: straight-line, double-declining, sum-of-years-digits, units-of-production
• Component depreciation
• Derecognition

Investment property (PAS 40):

• Definition: held for rental or capital appreciation
• Cost model vs fair value model
• Transfers between categories

Biological assets (PAS 41):

• Fair value less costs to sell
• Bearer plants now under PAS 16

Intangible assets + impairment

Intangibles (PAS 38):

• Recognition criteria: identifiable, controlled, future economic benefits
• Internally generated: research costs expensed, development costs capitalized if criteria met
• Useful life: finite (amortized) vs indefinite (tested annually)

Impairment (PAS 36):

• Indicators of impairment
• Recoverable amount = higher of FVLCS and value in use
• Cash-generating units (CGUs)
• Goodwill impairment

Liabilities and provisions

Provisions (PAS 37):

• Recognition: present obligation + probable outflow + reliable estimate
• Best estimate
• Discounting if material
• Contingent liabilities (disclosed only if not remote)

Bonds payable:

• Issued at premium, discount, par
• Effective interest method amortization
• Bond retirement: gain/loss

Leases (PFRS 16) — the big shift

Lessee accounting:

• Recognize right-of-use asset + lease liability for ALL leases (with short-term + low-value exemptions)
• Initial measurement: PV of lease payments
• Subsequent: depreciate ROU asset; amortize liability with effective interest
• ROU asset on balance sheet vs old PAS 17 operating-lease off-balance-sheet treatment

Lessor accounting:

• Operating vs finance lease classification (lessor side unchanged from PAS 17)

Expect lessee accounting under PFRS 16. If your reviewer predates it, supplement with current material.

Income taxes (PAS 12)

• Current tax vs deferred tax
• Temporary differences: taxable vs deductible
• Deferred tax assets vs liabilities
• Recognition of DTA: probable future taxable profit
• Tax rate reconciliation

Employee benefits (PAS 19)

• Short-term benefits
• Post-employment benefits: defined contribution vs defined benefit
• Defined benefit plan accounting: service cost, net interest, remeasurements
• Termination benefits

Financial instruments (PFRS 9)

The replacement for PAS 39. Drill:

• Classification of financial assets: amortized cost, FVOCI, FVTPL
• Solely Payments of Principal and Interest (SPPI) test
• Business model test
• Impairment: expected credit loss (ECL) model — replaces incurred-loss
• Hedge accounting (basics)

Revenue (PFRS 15) — five-step model

1. Identify the contract
2. Identify performance obligations
3. Determine transaction price
4. Allocate transaction price to performance obligations
5. Recognize revenue when (or as) the entity satisfies a performance obligation

Drill the five-step model on multiple-performance-obligation scenarios. Bundled software + support, mobile phone + airtime, construction + warranty.

A 6-week FAR drilling plan

Within the 6-month CPALE review, allocate 6 weeks of focused FAR attention.

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 AFAR review covers the advanced financial accounting subject, and the Auditing review covers audit.