Free CPA FAR (Financial Accounting & Reporting) Formula Sheet (2026)

Every CPA FAR formula you need on the test, grouped by topic, rendered with full math notation. 28 formulas across 3 topics, calibrated to the 2026 syllabus. Free forever, no signup required.

28 Formulas
3 Topics
2026 Syllabus
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All CPA FAR Formulas

Financial Reporting 14 items
Basic EPS
Basic EPS=Net Income−Preferred DividendsWeighted Avg Common Shares Outstanding\text{Basic EPS} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Weighted Avg Common Shares Outstanding}}
Stock dividends and splits applied retroactively to all prior periods.
Diluted EPS: numerator and denominator
Diluted EPS=NI−Pref Div+Int Savings (net tax)WA Shares+Dilutive Shares\text{Diluted EPS} = \frac{NI - \text{Pref Div} + \text{Int Savings (net tax)}}{\text{WA Shares} + \text{Dilutive Shares}}
Numerator adds back after-tax interest on convertibles. Denominator adds options, convertibles, contingent shares.
Treasury stock method (diluted EPS options)
Incremental Shares=Options Outstanding−Options×Exercise PriceAverage Market Price\text{Incremental Shares} = \text{Options Outstanding} - \frac{\text{Options} \times \text{Exercise Price}}{\text{Average Market Price}}
Only dilutive if exercise price < average market price. Assumes proceeds from exercise are used to buy back shares at average market price.
Anti-dilution rule (diluted EPS)
Include a potential share in diluted EPS ONLY if it decreases EPS. Test each security separately, most dilutive first; exclude anti-dilutive. In a net loss year, all potential shares are anti-dilutive, so diluted EPS = basic EPS.
Net periodic pension cost (NPPC)
NPPC=Service Cost+Interest Cost−Expected Return on Plan Assets+Amortization of Prior Service Cost±Amortization of Net Gain/Loss\text{NPPC} = \text{Service Cost} + \text{Interest Cost} - \text{Expected Return on Plan Assets} + \text{Amortization of Prior Service Cost} \pm \text{Amortization of Net Gain/Loss}
ASC 715; only service cost is presented in operating income; other components in non-operating.
Indirect method: operating cash flows
Start: Net Income
+ Depreciation and amortization
+ Loss/(Gain) on asset disposal
+ Decrease/(Increase) in current assets
+ Increase/(Decrease) in current liabilities
= Cash from Operations
Deferred tax asset / liability recognition
DTA=Deductible Temporary Difference×Tax Rate\text{DTA} = \text{Deductible Temporary Difference} \times \text{Tax Rate}
DTL=Taxable Temporary Difference×Tax Rate\text{DTL} = \text{Taxable Temporary Difference} \times \text{Tax Rate}
DTA: future deductible → tax benefit. DTL: future taxable → tax obligation. Measure at enacted future rate.
Revenue recognition 5-step model (ASC 606)
Step 1: Identify the contract.
Step 2: Identify performance obligations.
Step 3: Determine transaction price.
Step 4: Allocate transaction price (relative standalone selling price).
Step 5: Recognize revenue when/as each performance obligation is satisfied.
Fair value hierarchy (ASC 820)
Level 1: Quoted prices in active markets for identical assets/liabilities.
Level 2: Observable inputs other than Level 1 (comparable assets, yield curves).
Level 3: Unobservable inputs (management assumptions, DCF models).
Use highest level available.
Current ratio and quick ratio
Current Ratio=Current AssetsCurrent Liabilities\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}
Quick Ratio=Cash+Marketable Securities+Net A/RCurrent Liabilities\text{Quick Ratio} = \frac{\text{Cash} + \text{Marketable Securities} + \text{Net A/R}}{\text{Current Liabilities}}
Quick ratio excludes inventory and prepaid expenses.
Comprehensive income and OCI mnemonic (PUFE)
Comprehensive Income=NI+OCI\text{Comprehensive Income} = NI + OCI
OCI items (PUFE):
P: Pension adjustments
U: Unrealized G/L on AFS debt
F: FX translation
E: Effective portion of CF hedge
Cash flow hedge: effective vs. ineffective portion
Effective portion → OCI until forecast transaction hits earnings (then reclass).
Ineffective portion → immediately to NI.
ASU 2017-12: highly effective hedge defers entire FV change in OCI; no separate ineffectiveness measurement.
Debt-to-equity and times interest earned
D/E=Total LiabilitiesTotal Stockholders’ Equity\text{D/E} = \frac{\text{Total Liabilities}}{\text{Total Stockholders' Equity}}
TIE=EBITInterest Expense\text{TIE} = \frac{\text{EBIT}}{\text{Interest Expense}}
Higher TIE → greater ability to service debt.
Retained earnings rollforward
Ending RE=Beginning RE+Net Income−Dividends Declared±Prior Period Adjustments\text{Ending RE} = \text{Beginning RE} + \text{Net Income} - \text{Dividends Declared} \pm \text{Prior Period Adjustments}
Prior period error corrections go directly to beginning RE (net of tax), not through income statement.
Select Balance Sheet Accounts 3 items
FIFO vs. weighted average inventory cost
FIFO COGS=oldest costs used first\text{FIFO COGS} = \text{oldest costs used first}
WA Cost per Unit=Total Cost of Goods AvailableTotal Units Available\text{WA Cost per Unit} = \frac{\text{Total Cost of Goods Available}}{\text{Total Units Available}}
WA COGS=WA Cost per Unit×Units Sold\text{WA COGS} = \text{WA Cost per Unit} \times \text{Units Sold}
LIFO reserve and LIFO effect
LIFO Reserve=FIFO Inventory−LIFO Inventory\text{LIFO Reserve} = \text{FIFO Inventory} - \text{LIFO Inventory}
LIFO Effect=ΔLIFO Reserve\text{LIFO Effect} = \Delta \text{LIFO Reserve} (change during period = extra COGS under LIFO vs. FIFO)
Convert LIFO to FIFO: add LIFO reserve to inventory; reduce COGS by LIFO effect.
Bad debt expense (allowance method)
Bad Debt Expense=Estimated Uncollectible−Existing Credit Balance in Allowance\text{Bad Debt Expense} = \text{Estimated Uncollectible} - \text{Existing Credit Balance in Allowance}
Alternatively: % of sales method sets allowance credit directly equal to % × credit sales (no adjustment for existing balance).
Select Transactions 11 items
Straight-line depreciation
SL Depreciation=Cost−SalvageUseful Life\text{SL Depreciation} = \frac{\text{Cost} - \text{Salvage}}{\text{Useful Life}}
Constant expense each period; most common method.
Double-declining balance depreciation
DDB Rate=2Useful Life\text{DDB Rate} = \frac{2}{\text{Useful Life}}
DDB Expense=DDB Rate×Book Value (beginning of period)\text{DDB Expense} = \text{DDB Rate} \times \text{Book Value (beginning of period)}
No salvage value in calculation; switch to SL when SL gives higher expense.
Sum-of-years'-digits (SYD) depreciation
SYD=n(n+1)2\text{SYD} = \frac{n(n+1)}{2}
SYD Expenset=n−t+1SYD×(Cost−Salvage)\text{SYD Expense}_t = \frac{n - t + 1}{\text{SYD}} \times (\text{Cost} - \text{Salvage})
nn = useful life, tt = year number.
Finance lease criteria mnemonic (ASC 842 OWNES)
Finance if ANY ONE met (OWNES):
O: Ownership transfer
W: Written purchase option (reasonably certain)
N: Net term ≥75%\geq 75\% economic life
E: Economic PV ≥90%\geq 90\% FV
S: Specialized (no alt use)
Finance vs. operating lease: 75% and 90% bright lines
Under ASC 842, the 75% economic-life and 90% FV tests are NOT strict bright lines (they were under ASC 840). Both are "one reasonable approach"; evaluate substance near thresholds, not mechanical cutoff.
Lessee ROU asset (finance/operating)
ROU Asset=Lease Liability+Initial Direct Costs+Prepaid Lease Payments−Lease Incentives Received\text{ROU Asset} = \text{Lease Liability} + \text{Initial Direct Costs} + \text{Prepaid Lease Payments} - \text{Lease Incentives Received}
Lease liability = PV of future lease payments (using implicit or incremental borrowing rate).
Bond effective interest method
Interest Expense=Carrying Value×Market Rate at Issuance\text{Interest Expense} = \text{Carrying Value} \times \text{Market Rate at Issuance}
Amortization=Interest Expense−Coupon Payment\text{Amortization} = \text{Interest Expense} - \text{Coupon Payment}
Carrying value adjusts each period; ensures effective yield remains constant.
Goodwill impairment test
Step 1 (optional qualitative): is FV < CV more likely than not?
Step 2: Loss=CVRU−FVRU\text{Loss} = CV_{RU} - FV_{RU}
Loss capped at goodwill CV; write down goodwill only.
Percentage-of-completion method
Revenue Recognized=Costs Incurred to DateTotal Estimated Costs×Contract Price\text{Revenue Recognized} = \frac{\text{Costs Incurred to Date}}{\text{Total Estimated Costs}} \times \text{Contract Price}
If estimated total costs exceed contract price, recognize entire expected loss immediately.
Installment sale gross profit percentage
GP%=Gross ProfitSelling Price\text{GP\%} = \frac{\text{Gross Profit}}{\text{Selling Price}}
Recognized GP=Cash Collected×GP%\text{Recognized GP} = \text{Cash Collected} \times \text{GP\%}
Deferred gross profit on balance sheet = remaining uncollected balance × GP%.
Equity method: carrying value
Carrying Value=Acquisition Cost+Share of Investee Net Income−Share of Investee Dividends±Share of OCI\text{Carrying Value} = \text{Acquisition Cost} + \text{Share of Investee Net Income} - \text{Share of Investee Dividends} \pm \text{Share of OCI}
Used when investor has significant influence (generally 20–50% ownership).

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