To become a certified public accountant, you have to meet all of the CPA requirements in your state. This means you have to pass the notoriously difficult CPA exam.
Understanding how to study for the CPA exam is easier if you have a handle on how this exam is formatted can go a long way in helping you learn the right material to ace the test.
There are four sections of the CPA exam: AUD, BEC, FAR, and REG. Each section includes both multiple-choice questions and task-based simulations.
FAR stands for Financial Accounting and Reporting. This section assesses knowledge about financial accounting and reporting frameworks. These frameworks are stipulated by a number of regulatory agencies, including the U.S. Securities and Exchange Commission and the American Institute of Certified Public Accountants (AICPA).
The FAR section of the CPA exam is organized into four key areas that you’ll need to study for. This will involve task-based simulations as well as multiple-choice questions.
The FAR exam has the lowest average CPA exam pass rate out of all four sections.
Here’s what you can expect from the FAR section, and how you can get an edge in studying for it. (Also, check out our post on FAR CPA exam tips for more guidance on how to study for this section.)
FAR content
How hard is the CPA exam? Very. And the FAR exam is a big part of that.
There are four areas to the FAR portion of the CPA exam. Each of these areas has a certain score allocated.
You will have to do well in all four areas, but they are weighted differently to impact your final score. Here are the four areas, a summary of content from the AICPA blueprint, and what percentage of the grade they comprise:
Area 1: Conceptual framework, standard-setting, and financial reporting
This area comprises 25-35% of your score. Area 1 covers topics such as:
- General financial statements about for-profit and not-for-profit entities
- Employee benefit plans
- Public company disclosures such as earnings per share and segment reporting
- Special purpose frameworks for financial statements
Area 2: Select financial statement accounts
This area comprises 30-40% of your score. Area 2 covers topics such as:
- Differences between for-profit and not-for-profit entities and reporting
- FASB accounting standards codification for financial statement accounts
Area 3: Select transactions
This area comprises 20-30% of your score. Area 3 will cover topics such as:
- FASB accounting standards codification for select transaction
- A separate testing group called, “Differences between IFRS and U.S. GAAP”
Area 4: State and local government
This area comprises 5-15% of your score. Area 4 will cover topics such as:
- GASB’s conceptual framework
- Accounting and reporting requirements for state and local governments
FAR CPA exam format and structure
The FAR section of the CPA exam will assess four core skills: remembering the information, applying information, analysis, and evaluation.
Three of these skills are weighted unequally by the construction of the exam itself. How you perform, in addition to what you know, will contribute to your final grade.
These areas and their corresponding allocation are as follows:
- Remembering and understanding = 10-20%
- Application = 50-60%
- Analysis = 25-35%
- Evaluation = Unweighted
You can see that your ability to apply knowledge is weighted heavily.
The test presents multiple-choice questions and task-based simulations, both of which you’ll want to practice extensively prior to the exam. Your success will depend not only on what you know, but on your test-taking skills and your understanding of what kinds of questions the test will ask you.
Representative tasks
You will need to demonstrate your competence and understanding through representative tasks, which assess your ability to both recall and apply the accounting concepts you’ve been studying. These tasks are designed to accurately measure your ability.
A CPA review course will have plenty of practice tasks that cover the full range of content in all four areas of the FAR exam.
Below are some examples of what these tasks you may look like:
In Area 1 of the FAR CPA exam, you will be required to answer questions and perform tasks related to things such as income statements, correcting discrepancies, and preparing financial statement note disclosures.
In Area 2 of the FAR CPA exam, you will have to address content that includes assets that qualify for reporting in financial statements, identifying equity methods, and preparing journal entries for investments.
In Area 3 of the FAR CPA exam, you will calculate transaction gains and losses in foreign currencies, adjust financial statements, interpret agreements and contracts and prepare journal entries that record identifiable net assets.
In Area 4 of the FAR CPA exam, you will prepare statements about government financials, funds and recordings.
FAR multiple-choice questions
Along with representative tasks, the FAR segment of the CPA exam also features multiple-choice questions. These are found in the first two of the five testlets in the FAR exam.
After the first testlet, you have the option to take a 15-minute break. Then, you will take the second testlet.
- Testlet #1: 33 multiple-choice questions
- Testlet #2: 33 multiple-choice questions
These testlets are designed to assess your knowledge, through a series of questions with slowly increased difficulty.
After you answer the first set of questions, set to a medium difficulty, you will progress to a second set of questions. This second set is either a higher or lower difficulty, depending on how well you performed in the first set.
Testlet #1 = Medium Difficulty.
Do Well:
Testlet #2 = Harder
Do Poorly:
Testlet #2 = Easier
Harder questions have a higher score. For every hard question you answer correctly, you will increase your final score by a higher margin than correctly answering the easier questions.
FAR task-based simulations
The last three of the five testlets on the FAR portion of the exam have task-based simulations. Here is how they are broken down:
Testlet #3: 2 task-based simulations
Testlet #4: 3 task-based simulations
Testlet #5: 3 task-based simulations
Task-based simulations may be fill-in-the-blank or matching questions. You will also have to answer a research question and cite an authoritative source.
For the most part, these simulations are computer-graded. You may also have to complete a journal entry or perform a task in response to a simulated case study.
FAR CPA exam time management
Time management is going to be a crucial factor in your success on the FAR exam.
You’re given a total of four hours to complete it, plus an additional 15 minutes for tasks that aren’t part of the test, namely:
- Five minutes for welcome and to enter your launch code
- Five minutes on a confidentiality section
- Five minutes on a survey
You will also have a 15-minute standardized break partway through the exam.
Knowing the FAR format enables you to better determine how much time you should allocate to each section.
Here’s a quick overview of the order in which the test is administered.
- 10 minutes total for the non-test screens: welcome and confidentiality
- First multiple-choice question testlet
Optional break while timer runs - Second multiple-choice question testlet
Optional break while timer runs - First task-based simulation testlet
- Standardized break, paused timer
- Second task-based simulation testlet
Optional break while timer runs - Third task-based simulation testlet
- Five-minute survey, not included in test-taking time
So how long will each section take? How long should you spend on each?
Here are some informed estimates you can use as a guideline.
Multiple-choice questions: approximately half of the test, or two hours. You will need to complete each multiple-choice question in a little over one minute.
Task-based simulations: approximately two hours in total. You will need to complete each task-based simulation in a little over 22 minutes.
How is FAR weighted and graded?
The CPA exam is scored on a 100 point scale. You need a collective score of 75 or higher to pass.
Questions in every section are weighted differently from one another, depending on their difficulty. Because of the varying difficulty, and the fact that you won’t know which questions are meant to be harder versus easier, you won’t be able to accurately predict your score while you’re progressing through the test.
You can learn more about the structure and scoring of the CPA exam on the AICPA website.
Here’s what you can do to maximize your score on the FAR section of the CPA exam.
- Use a CPA exam guide to study and prepare well.
- Get more difficult questions, which are weighted to give you a higher score. You can do this by mastering a multiple-choice question bank and being as prepared as possible.
- Practice simulations so that you have ample knowledge that you can efficiently and accurately apply to the scenarios.
FAR pass rate
Is FAR CPA hard?
The short answer is yes.
Many people who have taken the test feel that FAR is the most difficult section.
2019 pass rates seem to back up this assertion. FAR has the lowest pass rate of any section of the CPA exam:
| Section | Q1 | Q2 | Q3 | Q4 | Cumulative |
|---|---|---|---|---|---|
| AUD | 48.56% | 55.11% | 51.94% | 47.88% | 51.01% |
| BEC | 58.00% | 59.74% | 63.04% | 58.61% | 59.98% |
| FAR | 44.43% | 49.37% | 50.29% | 40.57% | 46.31% |
| REG | 50.23% | 58.66% | 58.41% | 55.89% | 56.34% |
Candidates who are unable to pass the FAR section, or any section, will receive a candidate performance report from the AICPA. This gives insight into how and why they didn’t make it.
If you don’t pass the first time, this report can help you identify what you should focus on when you study for the retest.
How do I best prepare for FAR?
You will have to take all four sections of the CPA exam within 18 months of your test date. Because of this, you can’t focus on only one section for your entire study. That being said, you do need to make sure you spend enough time on each section.
To best prepare for the FAR portion of the exam, you should rigorously study multiple-choice question banks and practice task-based simulations. You will need to use a CPA exam review that provides thorough materials for each of the four areas of the FAR test.
It’s also important that you take practice tests to establish your timing strategy and become comfortable with the style of the exam.
You can go here to view an AICPA FAR sample test.
FAQs about FAR CPA
You may have additional questions about the FAR section of the CPA exam. Here are some answers.
What is on the FAR CPA exam?
The FAR portion of the CPA exam covers:
1. Calculation and Identification of Miscellaneous Items Listed in Financial Statements
Examples: Receivables, Payables, Liabilities, Bonds, Cash and Marketable Securities, and Revenue Recognition
2. Calculation and Transaction Identification
Examples: Extraordinary Items, Contingent Liabilities, Business Combinations and Discontinued Operations
3. Standards and Concepts regarding Financial Statements
Examples: Presentation of Financial Statements such as Balance Sheet, Cashflow, P&L and Financial Statement Notes
4. Accounting and Reporting for Non-Profit and Non-Governmental Organizations
Examples: Concepts of Fund Accounting and Financial Statements comprising Government Entities
5. Accounting and Reporting for Governmental Bodies
Examples: Budgetary Processes, Concepts of Fund Accounting and Financial Statements comprising Government Entities
Is FAR the hardest CPA exam?
FAR has the lowest pass rates of any section of the CPA exam. It covers a wide range of concepts and is considered the hardest part of the test.
How can I pass the FAR CPA exam?
The FAR section of the CPA exam is extremely detailed and will require significant study. You will need to memorize many facts and be able to apply them to simulated scenarios. It’s essential that you shore up all four of the areas that will be assessed:
- Remembering and understanding
- Application
- Analysis
- Evaluation
You will probably benefit most from a structured CPA exam review, which you can purchase online. This will give you formal training in how to prepare for the test.
How Is CPA FAR graded?
The FAR portion of the CPA exam utilizes psychometric scoring. This is a graded system where questions are weighted differently. As you pass through the multiple-choice question and task-based simulation testlets, they will progress in difficulty according to how well you do.
Harder questions are preferable because they are worth far more than easier questions. It won’t be possible to gauge how well you are doing, because questions are not scored on a 1:1 basis. Your only assurance is to prepare as well as possible so that you can pass the test.
What is a CPA passing score?
The CPA is a weighted exam in which you are scored on a hundred-point scale. You must receive a score of 75 or higher to pass.
Is the CPA exam curved?
The CPA exam is not graded on a curve. The testing experience itself is curved, which means that each test taker may have a slightly different set of questions based on their performance. You take the exam in testlets. These vary in difficulty, becoming harder the better you do. Harder questions are worth more. The final score of the CPA exam will reflect your answers and the score itself will not be curved.
Can I receive partial credit on Task-Based Simulations (TBSs)?
Yes, it is possible to receive partial credit for answering portions of a simulation. Task-based simulations are designed to reflect your ability to apply knowledge in real world scenarios. If you do this correctly, you will receive credit.