Free CPA BAR (Business Analysis & Reporting) Formula Sheet (2026)

Every CPA BAR formula you need on the test, grouped by topic and rendered with full math notation. 61 formulas across 3 topics, calibrated to the 2026 syllabus. Free forever, no signup required.

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All CPA BAR Formulas

Business Analysis 30 items
Economic value added (EVA)
EVA=NOPAT−(WACC×Invested Capital)\text{EVA} = \text{NOPAT} - (\text{WACC} \times \text{Invested Capital})
NOPAT\text{NOPAT} = Net Operating Profit After Tax. Positive EVA = value creation.
Sales volume variance
Sales Volume Variance=(Actual Units−Budgeted Units)×Budgeted CM per Unit\text{Sales Volume Variance} = (\text{Actual Units} - \text{Budgeted Units}) \times \text{Budgeted CM per Unit}
Favorable if actual units > budgeted units.
Direct labor variances
Rate Var=(AR−SR)×AH\text{Rate Var} = (AR - SR) \times AH
Efficiency Var=(AH−SHallowed)×SR\text{Efficiency Var} = (AH - SH_{allowed}) \times SR
AR/SR=actual/standard rate; AH/SH=actual/standard hours.
CAPM cost of equity
re=rf+β(rm−rf)r_e = r_f + \beta(r_m - r_f)
Used to estimate required return on equity for WACC. β\beta reflects systematic risk of the firm/division.
Degree of operating leverage (DOL) and financial leverage (DFL)
DOL=%ΔEBIT%ΔSales=CMEBITDOL = \frac{\%\Delta EBIT}{\%\Delta Sales} = \frac{CM}{EBIT}
DFL=%ΔEPS%ΔEBIT=EBITEBIT−IDFL = \frac{\%\Delta EPS}{\%\Delta EBIT} = \frac{EBIT}{EBIT - I}
DCL = DOL × DFL.
Operating Income vs Free Cash Flow forecasting
OI=Sales−OpExOI = Sales - OpEx; FCFF=OI×(1−t)+D&A−CapEx−ΔNWCFCFF = OI \times (1-t) + D\&A - CapEx - \Delta NWC
t = tax rate, D&A = depreciation/amortization, ΔNWC = change in net working capital. Used in DCF valuation.
Activity-Based Costing (ABC) — overhead rate
Activity Rate=Est. OH Costactivity/Est. Activity DriverActivity\ Rate = Est.\ OH\ Cost_{activity} / Est.\ Activity\ Driver; Costproduct=Activity Rate×Driver ConsumedCost_{product} = Activity\ Rate \times Driver\ Consumed
traces OH to specific drivers; better than plant-wide for diverse product lines.
Economic Order Quantity (EOQ)
EOQ=2DSHEOQ = \sqrt{\dfrac{2DS}{H}}
D = annual demand (units), S = cost per order, H = carrying cost per unit/yr. Minimizes total ordering + carrying cost; assumes constant demand, constant lead time, no stockouts.
Process costing — equivalent units (FIFO)
EUFIFO=(BegWIP×%ToComplete)+StartedAndCompleted+(EndWIP×%Complete)EU_{FIFO} = (BegWIP \times \%ToComplete) + StartedAndCompleted + (EndWIP \times \%Complete)
separates prior-period beginning WIP work from current-period effort, yielding a pure current-period cost per equivalent unit.
Reorder Point (with safety stock)
ROP=(LT×DU)+SSROP = (LT \times DU) + SS
LT = lead time, DU = daily usage (LT×DU = expected usage during lead time), SS = safety stock buffering demand/lead-time variability.
Profitability Index (PI)
PI=PVfuture CF/Initial Investment=1+(NPV/Initial Investment)PI = PV_{future\ CF} / Initial\ Investment = 1 + (NPV / Initial\ Investment)
accept if PI ≥ 1; rank projects by PI under capital rationing.
Cost of equity — Dividend Discount Model (Gordon Growth)
Re=D1P0+gR_e = \dfrac{D_1}{P_0} + g
D1 = next year's expected dividend, P0 = current stock price, g = constant perpetual dividend growth rate. Assumes g < Re.
Discounted Payback Period
DPB=years until ∑CFt(1+r)t≥C0DPB = \text{years until } \sum \frac{CF_t}{(1+r)^t} \geq C_0
CFtCF_t = cash flow in year t, r = discount rate, C0C_0 = initial investment. Ignores CFs after payback.
CVP — Target profit units
Q=(FC+TP)/CMuQ = (FC + TP) / CM_u; $ sales: (FC+TP)/CM%(FC + TP)/CM\%. After-tax: TPpre=TPpost/(1−t)TP_{pre} = TP_{post}/(1-t). FC = fixed costs, TP = target profit, CMuCM_u = CM/unit, CM% = CM ratio, t = tax rate.
Variable Overhead spending and efficiency variances
Spending=AVOH−(AH×SR)Spending = AVOH - (AH \times SR); Efficiency=(AH−SH)×SREfficiency = (AH - SH) \times SR
AVOH = actual VOH, AH = actual hours, SH = standard hours allowed, SR = standard VOH rate.
Process costing — equivalent units (weighted-average)
EU=UC+(EWIP×%C)EU = UC + (EWIP \times \%C)
EU = equivalent units, UC = units completed & transferred out, EWIP = ending WIP units, %C = % complete in EWIP. Beg WIP costs lumped with current-period costs (no separation).
Net Present Value (NPV)
NPV=∑t=1nCFt(1+r)t−C0NPV = \sum_{t=1}^{n} \frac{CF_t}{(1+r)^t} - C_0
CFtCF_t = cash flow in period t, r = required return/WACC, C0C_0 = initial outlay. Accept project if NPV ≥ 0.
Internal Rate of Return (IRR)
IRR = discount rate where NPV = 0: ∑t=0nCFt(1+IRR)t=0\sum_{t=0}^{n} \frac{CF_t}{(1+IRR)^t} = 0. Accept project if IRR ≥ hurdle rate. Assumes cash flows reinvested at IRR (often unrealistic vs. NPV's WACC assumption).
Modified Internal Rate of Return (MIRR)
MIRR=(TVinflows/PVoutflows)1/n−1MIRR = (TV_{inflows} / PV_{outflows})^{1/n} - 1
TV = terminal value of inflows reinvested at cost of capital, PV = present value of outflows, n = project life. Avoids IRR's multiple-rate problem.
Margin of Safety
MoS=Actual Sales−BE SalesMoS = Actual\ Sales - BE\ Sales; MoS%=MoS/Actual SalesMoS\% = MoS / Actual\ Sales
BE = break-even; shows how far sales can fall before hitting break-even.
Cost of debt and cost of preferred equity
Kd=YTM×(1−T)K_d = YTM \times (1 - T); Kp=Dp/PnetK_p = D_p / P_{net}
YTM = yield to maturity, T = tax rate, DpD_p = annual preferred dividend, PnetP_{net} = net issue price (no tax adj; pref divs not deductible)
Cost-Volume-Profit (CVP) — Break-Even in units
BEunits=FC/(P−V)BE_{units} = FC / (P - V)
FC = total fixed costs, P = selling price/unit, V = variable cost/unit; denominator is contribution margin per unit. Assumes linear cost/revenue within relevant range.
Fixed Overhead budget and volume variances
Budget Var=Actual FOH−Budgeted FOH\text{Budget Var} = \text{Actual FOH} - \text{Budgeted FOH}; Volume Var=Budgeted FOH−Applied FOH\text{Volume Var} = \text{Budgeted FOH} - \text{Applied FOH}, where Applied FOH = Std Hours Allowed × Std FOH Rate. Volume var = under/over capacity utilization.
Return on Investment (ROI)
ROI=Operating IncomeAvg Operating Assets=Margin×TurnoverROI = \frac{Operating\ Income}{Avg\ Operating\ Assets} = Margin \times Turnover; Margin = Op Inc/Sales, Turnover = Sales/Avg Op Assets. Used for divisional performance.
High-Low method (cost estimation)
VC/unit=(High Cost−Low Cost)/(High Act−Low Act)VC/unit = (High\ Cost - Low\ Cost)/(High\ Act - Low\ Act); FC=Total Cost−(VC/unit×Activity)FC = Total\ Cost - (VC/unit \times Activity). Uses only extreme observations, sensitive to outliers.
Weighted Average Cost of Capital (WACC)
WACC=(E/V)⋅Re+(D/V)⋅Rd⋅(1−t)WACC = (E/V) \cdot R_e + (D/V) \cdot R_d \cdot (1 - t)
E = mkt value equity, D = mkt value debt, V = E + D, ReR_e = cost of equity, RdR_d = pretax cost of debt, t = tax rate
Cost-Volume-Profit (CVP) — Break-Even in dollars
BE$=Fixed CostsCM RatioBE_\$ = \dfrac{Fixed\ Costs}{CM\ Ratio}, where CM Ratio=Sales−Variable CostsSalesCM\ Ratio = \dfrac{Sales - Variable\ Costs}{Sales}. Use when product mix or per-unit data unavailable.
Direct Materials price and quantity variances
DM Price Var=(AP−SP)×AQpDM\ Price\ Var = (AP - SP) \times AQ_p; DM Qty Var=(AQu−SQ)×SPDM\ Qty\ Var = (AQ_u - SQ) \times SP
AP/SP = actual/standard price, AQpAQ_p = actual qty purchased, AQuAQ_u = actual qty used, SQ = standard qty allowed; negative = favorable.
Payback Period
Payback=Initial Investment/Annual Cash FlowPayback = Initial\ Investment / Annual\ Cash\ Flow (uniform CF); else count years until cumulative CF ≥ initial investment. Ignores TVM and post-payback cash flows; liquidity proxy only.
Residual Income (RI)
RI=Operating Income−(Required Rate of Return×Avg Operating Assets)RI = Operating\ Income - (Required\ Rate\ of\ Return \times Avg\ Operating\ Assets)
positive RI means division earned above its cost of capital; avoids ROI's underinvestment problem.
Technical Accounting and Reporting 16 items
Software costs — capitalize vs expense (internal-use)
Internal-use software (ASC 350-40): 1) Preliminary stage = expense. 2) Application Development = capitalize direct costs (coding, config, testing); expense training. 3) Post-Implementation = expense. Amortize capitalized cost straight-line over useful life.
Franchise revenue recognition
1) Initial fee: recognize when performance obligations satisfied (training, site selection substantially performed). 2) Continuing royalties: recognize over time as franchisee operates (sales-based royalty exception). 3) Pre-opening services: recognize as each PO is met.
Non-controlling interest — full vs partial goodwill
Full (US GAAP req'd): GW=(FVconsid+FVNCI)−FVnet assetsGW = (FV_{consid} + FV_{NCI}) - FV_{net\,assets}; NCI at FV. Partial (IFRS only): GW=FVconsid−%parent×FVnet assetsGW = FV_{consid} - \%_{parent} \times FV_{net\,assets}; NCI = %_{NCI} × FV net assets.
Derivative — cash flow hedge
Hedges forecasted txn. 1) Effective portion of FV change → OCI (deferred) 2) Reclassify from AOCI → NI when hedged item affects earnings 3) Ineffective portion → NI immediately 4) Requires formal designation + effectiveness testing.
Derivative — fair value hedge
FV hedge: 1) Hedged item ΔFV → Net Income (adjust carrying amount). 2) Derivative ΔFV → Net Income. 3) Net P&L impact = ineffective portion only (effective portions offset in NI).
Acquisition method — goodwill calculation
GW=CT+FVNCI+FVPHI−FVINAGW = CT + FV_{NCI} + FV_{PHI} - FV_{INA}
CT = consideration transferred, FVNCIFV_{NCI} = FV of noncontrolling interest, FVPHIFV_{PHI} = acquisition-date FV of previously held interest, FVINAFV_{INA} = FV of identifiable net assets. If negative → bargain purchase gain to NI.
Software revenue recognition (post-ASC 606)
ASC 606 software: 1) Identify POs: license, implementation, PCS, training. 2) License = functional (point-in-time at delivery) or symbolic/access (over time). 3) Allocate price by relative SSP. 4) PCS recognized ratably over support period.
IFRS vs GAAP — inventory and impairment
IFRS: LIFO prohibited (FIFO/WA only); inventory at lower of cost or NRV; impairment reversal allowed (except goodwill). GAAP: LIFO permitted (uses LCM with ceiling/floor); FIFO/WA uses LCNRV; NO impairment reversal.
Stock-based compensation — fair-value method
Comp Expenseperiod=(Total Grant-Date FV÷Vesting Period)Comp\ Expense_{period} = (Total\ Grant\text{-}Date\ FV \div Vesting\ Period)
FV from option-pricing model (Black-Scholes/binomial) at grant; not remeasured for stock-price changes; true-up only for forfeitures.
Foreign currency translation — Cumulative Translation Adjustment (CTA)
CTA=Σ (AssetsCR−LiabCR)−EquityHR−NIARCTA = \Sigma\,(Assets_{CR} - Liab_{CR}) - Equity_{HR} - NI_{AR}
CR=current rate, HR=historical rate, AR=avg rate. Recorded in OCI/Equity; reclassified to NI upon sale or substantial liquidation of foreign sub.
R&D costs — capitalize vs expense
ASC 730 default: expense as incurred. Capitalize when: 1) tangible asset with alternative future use (capitalize, then depreciate to R&D); 2) software costs after technological feasibility (ASC 985-20); 3) IPR&D in business combination (indefinite-life intangible until project completes).
Long-term construction — completed-contract method (rare under ASC 606)
Defer all revenue & profit until completion: 1) During: Revenue=0, Profit=0Revenue=0,\ Profit=0; accumulate CIP & billings 2) At completion: Profit=Contract Price−Total CostsProfit=Contract\ Price-Total\ Costs 3) Losses: recognize immediately when probable. ASC 606: only if control transfers at a point in time.
Software costs — capitalize vs expense (sale to others)
Pre-tech feasibility: expense as R&D. Post-tech feasibility (working model): capitalize. Post-release: amortize at greater of (a) SL over economic life or (b) Current Rev/Total Expected RevCurrent\ Rev / Total\ Expected\ Rev.
Derivative — net investment hedge (foreign subsidiary)
Effective portion → OCI (Cumulative Translation Adjustment); Ineffective portion → NI. ΔFVhedge=EffectiveOCI/CTA+IneffectiveNI\Delta FV_{hedge} = Effective_{OCI/CTA} + Ineffective_{NI}. Released to NI on sale/substantial liquidation of foreign sub.
Long-term construction contract — % completion (cost-to-cost)
%Comp=CostsToDate/TotalEstCost\%Comp = CostsToDate / TotalEstCost; Rev=%Comp×PriceRev = \%Comp \times Price; GP=%Comp×EstProfitGP = \%Comp \times EstProfit. Any expected total loss recognized in full immediately.
Convertible debt — bifurcation (post-ASU 2020-06)
Single-instrument: 1) Record full proceeds as debt at face. 2) Amortize using stated rate (no BCF, no cash-conversion bifurcation). 3) Bifurcate ONLY if conversion feature is a derivative under ASC 815 or substantial premium exists. Eff: PBE 2022, others 2024.
State and Local Governments 15 items
Governmental fund balance equation
Fund Balance=Assets+Deferred Outflows−Liabilities−Deferred Inflows\text{Fund Balance} = \text{Assets} + \text{Deferred Outflows} - \text{Liabilities} - \text{Deferred Inflows}
Fund balance classifications (lowest to highest restriction): Nonspendable, Restricted, Committed, Assigned, Unassigned.
Government-wide net position
Net Position=Assets+Def. Outflows−Liab.−Def. Inflows\text{Net Position} = \text{Assets} + \text{Def. Outflows} - \text{Liab.} - \text{Def. Inflows}
Categories: Net investment in capital assets; Restricted; Unrestricted.
Full accrual basis (economic resources focus).
Modified accrual revenue recognition
Revenues recognized when measurable AND available.
Available = collectible within current period or within 60 days after year-end (commonly).
Expenditures recognized when liability incurred (except debt service, long-term liabilities).
Government-wide vs fund-level reconciliation
GW Net Position = Fund Balance + Capital Assets (net of A/D) − LT Debt + Deferred Inflows/Outflows adj + ISF Net Position. Converts modified accrual (current resources) to full accrual (economic resources). Shown at bottom of fund B/S and Stmt of Rev/Exp/Changes.
Five governmental fund types (GRaSPP)
GRaSPP (modified accrual, current financial resources): 1) General: ordinary ops 2) Special Revenue: earmarked 3) Debt Service: LT debt P&I 4) Capital Projects: major construction 5) Permanent: corpus restricted, only income spendable.
Four fiduciary fund types (PAPI)
PAPI fiduciary funds: 1) Pension (and OPEB) trust 2) Agency/Custodial (temporary holdings for others) 3) Private-purpose trust (non-investment assets for individuals/private orgs) 4) Investment trust (external pools). All use full accrual + economic resources measurement.
Fund balance classifications (NRSCAU)
Governmental fund balance hierarchy: 1) **N**onspendable (inventory, prepaids, permanent fund principal); 2) **R**estricted (external constraints); 3) **C**ommitted (highest-level formal vote); 4) **A**ssigned (intended use, lower-level); 5) **U**nassigned (residual; only General Fund can be positive).
Property tax revenue (modified accrual)
Revenue=Levy−Uncollectible Allowance−Deferred InflowsRevenue = Levy - Uncollectible\ Allowance - Deferred\ Inflows. Recognize when LEVIED if measurable AND available (collectible within current period or ≤60 days after year-end). Collections >60 days post year-end = Deferred Inflows of Resources.
MD&A required content (GASB 34)
MD&A (RSI, before basic F/S): 1) brief F/S overview 2) condensed prior-year comparison 3) analysis of overall financial position & results 4) discussion of significant variations 5) capital asset & long-term debt activity 6) currently known facts/decisions affecting future.
Two proprietary fund types (SE)
Proprietary funds (full accrual, economic resources): 1) Internal Service Fund: serves internal govt customers on cost-reimbursement basis. 2) Enterprise Fund: serves external customers; required if debt is fee-secured, fees legally recover costs, or pricing targets cost recovery.
NFP vs governmental — when which framework applies
GASB if ANY: 1) majority of governing body appointed by govt 2) unilateral dissolution with assets to govt 3) power to enact/enforce a tax levy. Else FASB ASC 958 (NFP). Most public hospitals/universities/museums = GASB.
Encumbrance accounting (governmental funds only)
PO issued: DR Encumbrances / CR Reserve for Encumbrances. Goods received: 1) DR Reserve for Encumbrances / CR Encumbrances 2) DR Expenditures / CR Vouchers Payable. Year-end open encumbrances reduce unassigned fund balance.
Capital lease (government) — JE at inception
Fund level (modified accrual): DR Expenditure–Capital Outlay =PV= PV of min lease payments; CR Other Financing Source–Lease =PV= PV. Government-wide: DR Capital Asset; CR Lease Liability (ASC 842/GASB 87). Reconciled in gov't-wide statements.
Special items vs extraordinary items (governmental)
Special: unusual OR infrequent AND within mgmt control (e.g., land sale gain). Extraordinary: unusual AND infrequent AND outside mgmt control (e.g., natural disaster). Both shown separately at bottom of gov-wide Statement of Activities (GASB 34).
Component units — discretely vs blended presentation
Discrete: separate column on gov-wide F/S (default). Blended if ANY: 1) governing body substantively the same; 2) services almost exclusively to primary gov; 3) debt expected to be repaid by primary gov.
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