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13 multiple-choice questions and 13 flashcards on Standard-setting, about 3% of the CPA FAR bank. Every one carries a written rationale.
Standard-setting is one of 6 chapters in CoStudy's CPA — Financial Accounting & Reporting (FAR) [Core] bank, and it holds 13 of the bank's 410 multiple-choice questions — roughly 3% of the total. That proportion is not arbitrary: chapters follow the certifying body's published exam outline, and the number of questions in each is set by that domain's published weight, so the share of your practice time this chapter takes matches the share of the real exam it accounts for.
Studying by chapter is worth doing once you have a diagnostic score. A single overall percentage tells you whether you are close; it does not tell you which domain is dragging. Working a weak chapter in isolation, and re-testing it in isolation, is the fastest way to move a score that has stalled — and it is why the mock exams in CoStudy report by domain rather than as one number.
9 questions drawn from this chapter, with the full rationale shown — the controlling principle behind the right answer, and why each wrong option tempts and fails.
Under ASU 2016-01, equity investments (excluding equity method) are measured at:
Answer: C — Fair value with changes recognized in net income each period
A) That was pre-2016 but no longer applies. B) The AFS-to-OCI category was eliminated for equity. C) Correct - FVTPL default under ASU 2016-01. D) Amortized cost applies only to held-to-maturity debt.
SEC Regulation S-X primarily governs:
Answer: B — The form and content of financial statements filed with the SEC, and the schedules
B) correct - Regulation S-X prescribes what financial statements and schedules a filing must contain and the form they take. A) Narrative items such as MD&A are the province of Regulation S-K. C) Non-GAAP reconciliation is governed by Regulation G. D) Blue-sky rules are state law, outside the SEC's own filing regulations.
Which of the following is a difference between U.S. GAAP and IFRS?
Answer: D — U.S. GAAP permits LIFO for inventory; IFRS prohibits LIFO for all firms
A) That reverses the direction; IFRS bans LIFO. B) IFRS 16 differs from ASC 842 on lessee classification. C) Revenue is largely converged. D) Correct - a well-known GAAP/IFRS divergence.
Which of the following is a special purpose framework (non-GAAP)?
Answer: C — Cash basis of accounting for individual and small business use
C) Correct - cash and modified cash basis, along with tax, regulatory, and contractual bases, are special purpose frameworks outside GAAP. A) Accrual is the GAAP basis itself. B) Investment company fair value accounting is specialized GAAP. D) GASB pronouncements are GAAP for governments.
The Private Company Council (PCC) may recommend accounting alternatives for:
Answer: C — Specific topics such as goodwill amortization or hedge accounting
C) Correct - the PCC works with the FASB on discrete alternatives where existing GAAP is unduly costly for private companies. A) Its remit is issue-by-issue, not a wholesale rewrite. B) Eligibility turns on private company status, not a revenue test. D) Public company matters are the FASB's own agenda.
State and local governments follow accounting standards issued by:
Answer: B — GASB (Governmental Accounting Standards Board)
A) FASB sets standards for private-sector nongovernmental entities. B) Correct - GASB governs state and local government reporting. C) IASB sets IFRS internationally. D) PCAOB writes audit standards, not accounting standards.
XBRL (eXtensible Business Reporting Language) tagging, as required in SEC filings, is BEST described as:
Answer: D — A standardized machine-readable tagging format for statement line items and disclosures
D) correct - XBRL attaches standardized tags to reported amounts and disclosures so filings can be extracted and compared electronically. A) Tagging is a data requirement, not an assurance product. B) XBRL is a format for reporting data, not a metric computed from it. C) The tagged content is the footnotes and statements; nothing is eliminated.
The AICPA CPA FAR exam blueprint allocates the largest weighting to:
Answer: D — Select balance sheet accounts and select transactions collectively
A) Conceptual framework is a smaller weighting. B) NFP is embedded within other areas. C) SLG is 5-15%. D) Correct - transactions and balance sheet accounts collectively dominate.
The FASB standard-setting process typically includes:
Answer: A — Discussion paper, exposure draft, public comment, and final ASU
A) Correct - FASB due process moves from agenda decision through public deliberation and comment to a final Accounting Standards Update. B) Public comment is a defining feature of due process. C) The SEC recognizes FASB as the standard setter but does not clear drafts. D) Congress does not vote on accounting standards.
4 cards from the 13 in this chapter.
FAR pass rate?
Around 40-45%. Considered hardest section by many.
Purpose of MD&A in an SEC filing?
Management's narrative on financial condition, results of operations, liquidity, capital resources, and known trends/uncertainties.
Qualitative characteristics of accounting info?
Fundamental: relevance + faithful representation. Enhancing: comparability, verifiability, timeliness, understandability.
Conceptual framework objectives?
Provide useful info to investors, lenders, creditors for decisions.
These are a sample. The full Standard-setting chapter runs 26 items with per-chapter progress tracking, on the web and in the iOS app.