In January 2011, the CPA exam underwent its largest transformation since it was converted from a paper and pencil exam to computer-based in 2004. Some of the most significant changes include:
Financial Accounting and Reporting:
- Introduction of International Financial Reporting Standards (IFRS) topic questions.
Auditing and Attestation:
- Introduction of International Auditing Standard (IAS) topic questions.
Business Environment and Concepts:
- Question format changes, including the addition of simulations/written communications.
Although all of these changes are significant, the introduction of new international standards is arguably the most relevant in today’s society. IFRS has been a hot topic for the Securities and Exchange Commission (SEC) for years. Numerous countries around the world have already begun to require, allow, or are in the process of converging their national accounting standards with IFRS. The purpose of this move towards IFRS is to create a single set of accounting standards for the world.
While the United States has not adopted IFRS yet, plans have been discussed for years to implement a timeline for this convergence. In 2008, the SEC issued a proposed roadmap that outlined the timeline. Originally, some larger companies would have been required to adopt the new standards as early as 2014. This timeline has since been superseded by the SEC’s Work Plan. Under this plan, IFRS will not be adopted earlier than 2015. While there are many similarities, a few differing points of interest between IFRS and U.S. GAAP include: revenue recognition, fair value measurements, presentation of other comprehensive income, pre-operating and pre-opening cost reporting, and the disallowed use of LIFO for inventory valuation.
Although this new standard might not be in effect quite yet, it is clear why this topic has started to be introduced in the CPA exam. Convergence of the international and U.S. standards is on the horizon, and CPAs need to possess the required knowledge to assist their clients with this difficult transition. Knowledge of IFRS is thought to be a requirement for CPAs to help protect the interest of the public.
For the 2011 testing year, the majority of the CPA exam’s new questions will focus on the differences between IFRS and U.S. GAAP. CPA exam study courses, such as Becker, have begun to implement tools, such as tables, of the most significant differences between U.S. GAAP and IFRS at the end of each of their sections. The AICPA has indicated that implementation of international standards will be a gradual process. For first-time test-takers, these new topics may not pose much threat. For individuals retaking these exams, however, they must not overlook this new material. Ensure that you set aside enough time to review the new material, and be sure to utilize the new study tools to ensure a passing score.
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