In the coming year, candidates preparing for the Certified Public Accountant (CPA) Exam can expect new content and concepts to be tested in the Regulation (REG) and Financial Accounting and Reporting (FAR) sections. Here's a breakdown of the key updates:
Regulation (REG) Updates
Bankruptcy Code Adjustments (R8 Modules 1 and 2):
- Every third year after 1998, certain dollar amounts under the Bankruptcy Code undergo inflation-based adjustments.
- This year, there was a 6.218 percent increase in adjusted amounts.
- Notable adjustments include thresholds for means-testing under Chapter 13, the amount needed to involuntarily petition a person into bankruptcy, and wages/benefits due to an employee.
Regulation Crowdfunding (R8 Module 3):
Adjustments were made to dollar amounts under Regulation Crowdfunding, impacting investor income or net worth limits and investment caps.
- Investors with income/net worth less than $107,000 may now invest the greater of $2,200 or 5 percent of the lesser of their annual income or net worth.
- Financial disclosure figures under the Regulation were also updated.
FICA (R8 Module 4):
- Employee income subject to FICA experienced an inflation-based adjustment, rising from $128,400 to $132,900.
Financial Accounting and Reporting (FAR) Updates
ASU 2017-14, Intangibles – Goodwill and Other (F4 Module 8)
- Simplifies the goodwill impairment testing process by eliminating step two of the test.
- Goodwill impairment is now calculated by comparing the carrying value of a reporting unit (including goodwill) to the fair value of the reporting unit. No impairment if fair value exceeds carrying value.
ASU 2016-13, Financial Instruments – Credit Losses (F4 Module 1)
- Implements the Current Expected Credit Loss model (CECL) for measuring credit losses on financial instruments.
- Requires available-for-sale and held-to-maturity debt securities to be reported at the net amount expected to be collected.
- Credit losses recorded as a current period expense on the income statement.
- Changes in expected credit losses reflected on the income statement when estimates change.
GASB 87, Leases (F9 Modules 3 – 6, F10 Module 1)
- Addresses lease accounting and reporting in government, introducing distinctions between short-term leases, contracts that transfer ownership, and other leases.
- Leases are treated differently based on their nature, with accounting complexities arising from two different bases of accounting in government.
GASB 89, Accounting for Interest Cost Incurred before the End of a Construction Period (F10 Module 4)
- Simplifies the treatment of construction period interest in governmental accounting.
- Construction period interest is now consistently treated as a period cost, either as an expenditure or expense, in the period incurred for both governmental and business-type activities.
These updates reflect the dynamic nature of the accounting profession and emphasize the importance of staying abreast of regulatory changes for CPA exam preparation. Candidates are encouraged to incorporate these new concepts into their study plans for success on the exam.