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. 109 formulas across 3 topics, calibrated to the 2026 syllabus. Free forever, no signup required.

109 Formulas
3 Topics
2026 Syllabus
Free Forever

All CPA FAR Formulas

Financial Reporting 40 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.
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
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
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.
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.
Comprehensive Income decomposition
CI=NI+OCICI = NI + OCI — OCI items (PUFE): Pension adjustments, Unrealized G/L on AFS debt securities, Foreign currency translation, Effective portion of cash-flow hedges. Reported net of tax.
SEC Form 10-Q filing deadlines
Large accelerated & accelerated filers: 40 days after quarter-end. Non-accelerated filers: 45 days. Filed for Q1-Q3 only; Q4 results are reported in the annual 10-K.
NFP conditional vs unconditional contributions
Conditional = barrier (specified outcome/service level/match/outside event) + right of return → defer; cash received = Refundable Advance liability. Unconditional = no barrier → recognize revenue immediately. Recognize when ALL barriers overcome.
Book value per common share
BVPS=(CSE−PE−DA)/CSOBVPS = (CSE - PE - DA) / CSO — CSE = common stockholders' equity, PE = preferred equity, DA = dividends in arrears, CSO = common shares outstanding (issued − treasury)
Discontinued operations criteria
Held-for-sale (ALL required): 1) Mgmt commits to plan 2) Available for immediate sale as-is 3) Active buyer search 4) Sale probable within 1 yr 5) Marketed at reasonable price 6) Unlikely plan changes. Report net of tax below NI from continuing ops.
Cash to accrual basis conversion
Revenue: Accrual Rev=Cash Rev+ΔAR−ΔUnearnedAccrual\ Rev = Cash\ Rev + \Delta AR - \Delta Unearned. Expense: Accrual Exp=Cash Paid+ΔAP−ΔPrepaidAccrual\ Exp = Cash\ Paid + \Delta AP - \Delta Prepaid. Add increases in liabilities; subtract increases in assets.
DuPont decomposition (3-step)
ROE=NISales×SalesAvg Assets×Avg AssetsAvg EquityROE = \frac{NI}{Sales} \times \frac{Sales}{Avg\,Assets} \times \frac{Avg\,Assets}{Avg\,Equity} — Profit Margin × Asset Turnover × Equity Multiplier; isolates profitability, efficiency, and leverage drivers of ROE.
Foreign currency — direct vs indirect quotation
Direct=1/Indirect\text{Direct} = 1 / \text{Indirect}. Direct = domestic price per 1 foreign unit (e.g., $1.10/€1). Indirect = foreign units per 1 domestic unit (e.g., €0.91/$1). Reciprocals.
Diluted EPS — If-converted method (convertible preferred)
Diluted EPS=NI−Pref+PrefDivconvWAOCS+ShrFromConvDiluted\ EPS = \dfrac{NI - Pref + PrefDiv_{conv}}{WAOCS + ShrFromConv} — add back convertible preferred dividends to numerator; add converted common shares to denominator. Include only if dilutive; test each issue separately.
Profitability ratios suite
GM=(Sales−COGS)/SalesGM = (Sales - COGS)/Sales; PM=NI/SalesPM = NI/Sales; ROA=NI/Avg AssetsROA = NI/\text{Avg Assets}; ROE=NI/Avg EquityROE = NI/\text{Avg Equity} — NI = net income; use averages for balance-sheet denominators.
Stock dividend — small (<20-25%) treatment
DR Retained Earnings = FMV × shares; CR Common Stock = Par × shares; CR APIC = (FMV − Par) × shares. ΔRE=FMV×shares\Delta RE = FMV \times shares. FMV = fair market value at declaration; reduces RE at FMV.
Governmental fund types (GRaSPP)
GRaSPP = 1) General Fund 2) Special Revenue Fund 3) Debt Service Fund 4) Capital Projects Fund 5) Permanent Fund. All 5 use modified accrual basis + current financial resources measurement focus.
Foreign-currency transaction G/L matrix
FC strengthens: Asset→Gain, Liability→Loss. FC weakens: Asset→Loss, Liability→Gain. G/L=(Spotsettle−Spottxn)×FCG/L = (Spot_{settle} - Spot_{txn}) \times FC. Recognize at each B/S date and settlement; hits income (ASC 830).
Proprietary fund types and enterprise fund criteria
Proprietary funds: 1) Internal Service (internal customers, cost-reimbursement) 2) Enterprise (external customers). Enterprise REQUIRED if ANY: a) debt secured by fee revenue, b) law requires fees cover costs, c) pricing policy targets cost recovery.
Cumulative preferred dividends in arrears
Arrears=Shares×Par×Rate×Years UnpaidArrears = Shares \times Par \times Rate \times Years\ Unpaid — disclosed in notes (not a liability) until declared; reduces income available to common in EPS numerator: EPS=(NI−Prefcurrent+arrears)/WAOCSEPS = (NI - Pref_{current+arrears}) / WAOCS.
Segment reporting — quantitative thresholds
Reportable if ANY 10% test met: 1) Revenue ≥ 10% of combined revenue 2) |Profit or Loss| ≥ 10% of greater of |total profits| or |total losses| 3) Assets ≥ 10% of combined assets. 75% rule: reportable segments must cover ≥ 75% of consolidated external revenue.
Subsequent events — Type 1 vs Type 2
Type 1 (recognized): condition existed at B/S date → adjust F/S. Type 2 (nonrecognized): condition arose after B/S date → disclose only. Evaluation period: public = through F/S issued; private = through F/S available to be issued.
Stock dividend — large (≥20-25%) treatment
Treated like stock split. Journal: DR Retained Earnings (par × shares issued); CR Common Stock (par × shares issued). ΔRE=Par×Sharesissued\Delta RE = Par \times Shares_{issued}. FMV ignored. Total equity unchanged; no effect on EPS denominator until issued.
NFP donated services (SOME mnemonic)
Recognize donated services only if ALL SOME met: 1) Specialized skills required, 2) Otherwise needed by org (would purchase), 3) Measurable, 4) Easily valued at fair value. Else: no entry, footnote disclosure only. Dr Expense / Cr Contribution Revenue at FV.
Fiduciary fund types
Fiduciary funds (full accrual, economic resources): 1) Custodial — temporary catch-all custody 2) Investment Trust — external investment pools 3) Private-Purpose Trust — legally protected assets 4) Pension/OPEB Trust — employee benefits.
SEC Form 10-K filing deadlines
10-K deadlines: 1) Large Accelerated Filer (public float ≥ $700M) = 60 days 2) Accelerated Filer ($75M–$700M float, ≥ $100M revenue) = 75 days 3) Non-Accelerated Filer (< $75M float) = 90 days after fiscal year-end.
Diluted EPS — Treasury Stock Method (options/warrants)
ΔShares=N−(N×K/P)\Delta Shares = N - (N \times K / P); apply only if K<PK < P (in the money). Add ΔShares\Delta Shares to diluted EPS denominator. N = issued options/warrants, K = strike price, P = avg market price.
AR turnover and Days Sales in AR
AR Turnover=Net Credit SalesAvg Net AR\text{AR Turnover} = \dfrac{\text{Net Credit Sales}}{\text{Avg Net AR}}; Days Sales in AR=365AR Turnover\text{Days Sales in AR} = \dfrac{365}{\text{AR Turnover}} — higher turnover and fewer days = faster collection.
Operating cash flow ratio
OCF Ratio=CFO/Current LiabilitiesOCF\ Ratio = CFO / Current\ Liabilities — CFO = cash from operations (statement of cash flows); Current Liabilities = period-end balance. Measures near-term liquidity from actual cash, not accruals.
NFP cash and unconditional contribution recognition
Cash: recognize revenue at FV when received. Unconditional pledge: PledgeReceivable=∑CFt/(1+r)tPledgeReceivable = \sum CF_t / (1+r)^t — recognize at NPV when promise made; multi-year pledges discounted; accretion = contribution revenue.
AP turnover and Days Payable Outstanding (DPO)
AP Turnover=COGS/Avg AP\text{AP Turnover} = COGS / \text{Avg AP}; DPO=365/AP TurnoverDPO = 365 / \text{AP Turnover} — COGS = cost of goods sold, Avg AP = (beg AP + end AP)/2. Higher DPO = slower supplier payment (preserves cash, may strain relationships).
Cash Conversion Cycle (CCC)
CCC=DSO+DIO−DPOCCC = DSO + DIO - DPO — DSO = days sales outstanding (AR), DIO = days inventory outstanding, DPO = days payable outstanding. Measures days cash is tied up in operations; lower is better.
NFP three required financial statements + net asset classes
Required: 1) Statement of Financial Position 2) Statement of Activities 3) Statement of Cash Flows. Net asset classes: Without Donor Restrictions, With Donor Restrictions. Health/welfare NFPs add Statement of Functional Expenses.
Modified accrual revenue recognition rule
Modified accrual (governmental funds): 1) Revenue recognized when MEASURABLE and AVAILABLE 2) Available = collectible in current period or within 60 days after period end 3) Expenditures recorded when liability is incurred (not when paid).
Multi-step income statement structure
1) Net Sales − COGS = Gross Profit 2) Gross Profit − Operating Expenses = Operating Income 3) Operating Income ± Non-operating items = Pre-tax Income 4) Pre-tax Income − Tax = Net Income. Discontinued ops shown below NI, net of tax.
Government-wide vs fund-level financial statements
Government-wide: full accrual + economic resources; ALL assets/liabs incl. capital + LT debt. Governmental funds: modified accrual + current financial resources; NO capital assets, NO LT debt. MD&A required (RSI before statements).
Liquidity ratios — Current and Quick
Current=CA/CLCurrent = CA / CL; Quick=(Cash+ST Mkt Sec+Net AR)/CLQuick = (Cash + ST\ Mkt\ Sec + Net\ AR) / CL — CA = current assets, CL = current liabilities; Quick excludes inventory and prepaids.
Inventory turnover and Days in Inventory
Inv Turnover=COGSAvg Inventory\text{Inv Turnover} = \frac{COGS}{\text{Avg Inventory}}; Days in Inv=365Inv Turnover\text{Days in Inv} = \frac{365}{\text{Inv Turnover}} — Avg Inv = (Beg + End)/2; higher turnover = faster movement, lower obsolescence risk.
Diluted EPS — If-converted method (convertible bonds)
Diluted EPS=NI−Pref+Int(1−t)WAOCS+ConvSharesDiluted\ EPS = \dfrac{NI - Pref + Int(1-t)}{WAOCS + ConvShares} — Int = bond interest, t = tax rate, ConvShares = shares from conversion. Test each issue separately; include only if dilutive.
FC translation vs remeasurement method
Translation (functional=local): A/L current rate, equity historical, I/S avg; G/L→OCI. Remeasurement (functional=parent's): monetary current, non-monetary historical, COGS/dep historical, sales avg; G/L→NI.
Select Balance Sheet Accounts 39 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).
Bond effective-interest amortization
IntExp=BegCV×MktRateIntExp = BegCV \times MktRate; CashInt=Face×CouponCashInt = Face \times Coupon; Amort = |IntExp − CashInt|. Discount: IntExp > Cash, CV ↑. Premium: IntExp < Cash, CV ↓.
Pension Net Periodic Cost (SIRAGE)
NPPC=S+I−R+A+G+ENPPC = S + I - R + A + G + E — S=Service cost, I=Interest cost, R=Expected Return on plan assets, A=Amortization of prior service cost, G=amortization of Gains/Losses, E=amortization of Existing (transition) net obligation. Service + Interest hit operating; rest may flow through OCI.
Long-lived asset impairment — recoverability + measurement
Held-for-use: 1) Recoverability: if Undiscounted CF ≥ CV → no impairment; if < CV → fail. 2) Loss = CV − FV (often discounted CF). New basis depreciated, no restoration. Held-for-sale: Loss = CV − (FV − Cost to Sell); no depreciation; restoration allowed.
Cloud computing arrangements — 3 phases
1) Preliminary Project (requirements/vendor selection): EXPENSE. 2) Application Development (config/customization): CAPITALIZE impl costs; expense training & data conversion. 3) Post-Implementation (maintenance/support): EXPENSE. Amortize over hosting term.
Cash equivalents 90-day rule
Cash equivalent if BOTH: 1) Readily convertible to known cash amount 2) Original maturity ≤ 90 days from acquisition date. Qualifies: T-bills, money-market funds, commercial paper. Excludes: CDs > 90 days, equity securities.
Cost depletion (4-step)
1) Depletion Base = (Land + Development + Restoration) − Residual. 2) Rate=Base/Estimated Recoverable UnitsRate = Base / Estimated\ Recoverable\ Units. 3) Yearly Depletion = Rate × Units extracted. 4) COGS portion = Rate × Units sold; rest in inventory.
ARO accretion expense
Annual unwinding of discount on asset retirement obligation
Account
DR
CR
Beginning ARO × credit-adjusted risk-free rate
·
·
Same amount
Capitalized interest on self-constructed assets
Cap Int = min(Actual Int Incurred, Avoidable Int); Avoidable=AAE×rAvoidable = AAE \times r — AAE = avg accumulated expenditures (weighted by months/12), r = specific then weighted-avg rate. Conditions: expenditures made, activities ongoing, interest incurred.
Lower of Cost or Market (LIFO / retail method)
Market=middle(Ceiling,Replacement,Floor)Market = \text{middle}(Ceiling, Replacement, Floor); Ceiling = NRV = SP − cost to sell; Floor = NRV − normal profit. Inventory = min(Cost, Market). Applies to LIFO and retail method only.
Units-of-production depreciation
Dep/unit=(Cost−Salvage)/Total UnitsDep/unit = (Cost - Salvage) / Total\ Units; Year Dep=Dep/unit×Units ProducedYear\ Dep = Dep/unit \times Units\ Produced — usage-based; ignores time. Use when wear correlates with output (machines, vehicles by miles).
Stock issuance above par
DR Cash at issue price; CR Common Stock at par; CR APIC for the excess.
Account
DR
CR
Shares × Issue Price
·
·
Shares × Par Value
·
Plug (excess over par)
PP&E capitalization — land vs plant items
Land (not depreciated): purchase price, broker/title/legal fees, draining swamps, clearing/grading, mortgage & back-tax assumed, razing old buildings less salvage. Plant (depreciated): construction-period interest, architect fees, excavation/foundation.
Bond issuance at a premium
Market rate < coupon rate; cash proceeds exceed face value.
Account
DR
CR
PV @ market rate
·
·
Plug
·
Face Value
Double-declining balance depreciation
Dept=(Cost−AccDept−1)×(2/UL)Dep_t = (Cost - AccDep_{t-1}) \times (2 / UL) — UL = useful life in years; ignore salvage in formula but stop when book value = salvage. Front-loaded; no salvage subtraction up front.
Pension funding and net periodic cost
Single-period pension expense + funding. NPPC = SIRAGE total. Plug to Pension Asset/Liability.
Account
DR
CR
SIRAGE total
·
·
Plan contribution
·
Plug
Asset Retirement Obligation (ARO) initial recognition
ARO=PV(expected retirement cash outflows)ARO = PV(\text{expected retirement cash outflows}) at credit-adjusted risk-free rate. JE: DR Asset Retirement Cost (capitalized to PPE); CR ARO. ARC depreciated over useful life; ARO accreted to expense each period.
Periodic vs perpetual inventory
Periodic (count to get COGS): Buy DR Purchases; Sell DR Cash/AR, CR Sales (no COGS entry). Perpetual (real-time): Buy DR Inventory; Sell DR Cash/AR, CR Sales AND DR COGS, CR Inventory. COGSperiodic=BI+Purch−EICOGS_{periodic}=BI+Purch-EI.
Property dividend declaration (in-kind)
Remeasure asset to FMV at declaration; recognize gain/loss, then declare dividend at FMV.
Account
DR
CR
FMV − CV
·
·
FMV − CV
FMV of property
·
·
FMV of property
Lease liability formula (lessee)
LL=PV(REPORT)LL = PV(\text{REPORT}) — R=Required fixed pmts, E=Exercise of purchase option (rsbly certain), P=Purchase price at end, O=Only index/rate-variable pmts, R=Residual guarantees likely owed, T=Termination penalties. Discount: rate implicit, else IBR.
Finance lease — initial recognition (lessee, ASC 842)
OWNES met. ROU = LL + IDC + prepayments − incentives. Cash CR = net IDC + prepayments − incentives.
Account
DR
CR
LL + IDC + prepaid − incentives
·
·
PV of lease payments
·
IDC + prepaid − incentives
Dollar-value LIFO with price index
1) EI at base = EI at current ÷ current index. 2) Layer Δ at base = EI at base − prior EI at base. 3) New layer at current = layer Δ × current index. 4) DVL EI = base layer + Σ(prior layers at their indexes) + new layer at current.
ROU asset formula (lessee)
ROU=LL+IDC+Prepay−IncentivesROU = LL + IDC + Prepay - Incentives — LL = lease liability (PV of lease pmts), IDC = initial direct costs, Prepay = prepaid lease pmts, Incentives = lessor incentives received. ROU = LL if no IDC/prepay/incentives.
Composite (group) depreciation method
Annual Dep=∑(Depr Basei/ULi)\text{Annual Dep} = \sum(\text{Depr Base}_i / \text{UL}_i); Composite Life=∑Depr Base/Annual Dep\text{Composite Life} = \sum\text{Depr Base} / \text{Annual Dep}. Retirements: no G/L — Dr Cash & AD, Cr Asset.
Bank reconciliation (DO + BINS)
Bank: Balance + Deposits in Transit − Outstanding Checks = True Cash. Book: Balance + Bank collections + Interest − NSF − Service charges = True Cash. DO = bank-side adds/subtracts; BINS = book-side adjustments.
Factoring AR — with vs without recourse
Without recourse = true sale; derecognize AR. With recourse = sale only if ALL: 1) control surrenders 2) repurchase obligation reasonably estimable 3) no required repurchase. Else treat as secured borrowing (AR stays + record liability).
Lower of Cost or NRV (FIFO / Weighted Average)
NRV=SP−CTSNRV = SP - CTS; Inventory=min⁡(Cost,NRV)Inventory = \min(Cost, NRV) — SP = selling price, CTS = cost to complete & sell. If NRV < Cost, write down and recognize loss in COGS or separate line. Applies to FIFO and Weighted Avg (not LIFO).
Premium liability for sales coupons
Year-end accrual: outstanding coupons × per-premium cost.
Account
DR
CR
Outstanding Claims × Cost per Premium
·
·
Outstanding Claims × Cost per Premium
Treasury stock — par-value method buyback
Par method recognizes G/L at repurchase, unlike cost method
Account
DR
CR
Par × Shares
·
Original APIC per share × Shares
·
Plug
·
·
Repurchase Price
Discounting notes receivable (4-step)
1) MV=Face+InterestMV = Face + Interest 2) BD=DiscRate×MV×tBD = DiscRate \times MV \times t 3) Cash=MV−BDCash = MV - BD 4) IntInc/Exp=Cash−CVIntInc/Exp = Cash - CV. MV=maturity value, BD=bank discount, t=time to maturity, CV=carrying value.
Treasury stock — cost method buyback
DR Treasury Stock (contra-equity) at total cost; CR Cash. No G/L until reissue/retirement.
Account
DR
CR
Shares × Repurchase Price
·
·
Shares × Repurchase Price
Treasury stock retirement (cost method)
Reverses original issue (par + APIC) and removes treasury stock at cost; plug to RE if loss, APIC-T/S if gain.
Account
DR
CR
Par × shares retired
·
Original APIC per share × shares
·
Plug
·
·
Repurchase cost
·
Plug
Bond issuance at par
Market rate = coupon rate; no premium or discount.
Account
DR
CR
Face Value
·
·
Face Value
Operating lease — initial recognition (lessee, ASC 842)
OWNES NOT met. ROU = LL + IDC + prepaid − incentives. Single straight-line expense after.
Account
DR
CR
LL + IDC + prepaid − incentives
·
·
PV of lease payments
·
IDC + prepaid − incentives
Allowance for doubtful accounts — % of sales vs aging
% of sales (income-stmt): BDE=%×Credit SalesBDE = \%\times \text{Credit Sales} — ignores existing allowance. Aging/% of AR (balance-sheet): BDE=Est. Uncollectible−Existing Allowance CR BalBDE = \text{Est. Uncollectible} - \text{Existing Allowance CR Bal} (sets ending allowance to target).
Sales discount — gross vs net method
Gross: AR/Sales at full; if taken, Dr Sales Discount (contra-rev). Net: AR/Sales at full−disc; if NOT taken, Cr Sales Discount Forfeited (other rev). Net is theoretically purer.
Bond issuance at a discount
Market rate > coupon rate; cash proceeds < face value
Account
DR
CR
PV @ market rate
·
Plug
·
·
Face Value
Select Transactions 30 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.
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)
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.
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.
DTA vs DTL — 4-pattern table
Income: Book first → DTL (installment sales, equity earnings). Tax first → DTA (advance rent/interest taxed on receipt). Expense: Book first → DTA (bad debt, warranty). Tax first → DTL (accelerated tax depreciation, prepaid expenses).
Fair value valuation techniques (MIC)
MIC: 1) Market — prices from comparable transactions (Level 1/2 inputs). 2) Income — PV of future cash flows / earnings (DCF). 3) Cost — current replacement cost less obsolescence. Maximize observable inputs; minimize unobservable (Level 3).
Permanent vs temporary tax differences
PERMANENT (no DTA/DTL): muni interest, key-man life proceeds/premiums, fines, 50% meals, DRD, excess depletion. TEMPORARY (create DTA/DTL — reverses): depreciation, bad debt, warranty, prepaid, equity-method earnings.
Gain contingency rules
Gain contingencies: 1) NEVER accrue (conservatism principle). 2) Disclose in notes only if probable. 3) Recognize in income only when realized/legally certain. Examples: pending lawsuit win, expected insurance recovery > basis.
Intercompany bond extinguishment elimination
Sub bond constructively retired when parent buys it. Add CR Discount or DR Premium for any unamortized issue costs.
Account
DR
CR
Face Value
·
·
Parent's Carrying Value
·
Plug
Net Operating Loss (NOL) treatment
Post-2017 NOLs: 1) Indefinite carryforward, no carryback 2) Deduction limited to 80% of taxable income in CF year. Pre-2018 NOLs: 2-yr carryback / 20-yr CF, no 80% cap.
Fair value hierarchy — Levels 1, 2, 3
L1: quoted prices in active markets for identical assets/liabilities (most reliable). L2: observable inputs — quoted prices for similar items, inactive-market quotes, observable rates/spreads. L3: unobservable inputs — entity's own assumptions/internal models (least reliable).
Equity method — investment carrying value formula
End=Beg+(%×NI)−(%×Div)−AmortFV/CVEnd = Beg + (\%\times NI) - (\%\times Div) - Amort_{FV/CV} — Beg = beginning investment, % = ownership, NI = investee net income, Div = dividends received, Amort = FV/CV difference amortization (excl. goodwill).
Loss contingency thresholds (probable / RP / remote)
ASC 450: 1) Probable + estimable → accrue liability AND disclose 2) Reasonably possible → disclose only 3) Remote → no action (DOG exception: debt/other guarantees disclose). Range: accrue most likely; if none, accrue lowest end.
Error correction — prior period adjustment
Retrospective: 1) Restate prior periods presented 2) Adjust opening RE of earliest period presented (net of tax) for cumulative effect on periods not presented 3) Disclose error nature + effect per period. Errors: math, misapplied GAAP, oversight, non-GAAP→GAAP.
Intercompany inventory elimination (consolidating)
Eliminate full intercompany sale and any unrealized profit on goods still on hand at year-end.
Account
DR
CR
Full intercompany sales price
·
·
Intercompany COGS
·
Unrealized profit in ending inventory
Revenue — output method vs input method
Output: progress = value to customer (units delivered, milestones, surveys). Input: progress = entity's efforts (cost-to-cost = Costs incurred / Total est. costs, labor/machine hrs). Pick method that best depicts transfer of control (ASC 606-10-25-31).
Intraperiod tax allocation (IDA)
Allocate tax to: 1) Continuing ops (gross of tax) 2) Discontinued ops (net of tax) 3) Accounting principle change-retrospective (net of tax) 4) OCI items (each net of own tax). Mnemonic: IDA-OCI. Each item reported net of its own tax effect.
Revenue timing — over time vs point in time
Over time if ANY: 1) customer controls asset as created/enhanced, 2) customer simultaneously receives + consumes benefit, 3) no alternative use AND enforceable right to payment for work to date. Else point in time when control transfers.
Principal vs most advantageous market
1) Principal market = market with greatest volume/activity for the asset; its price = FV (even if another market is more favorable). 2) If no principal market, use Most Advantageous Market = highest price net of transaction costs.
Highest and best use (non-financial assets)
HBU = use maximizing FV, judged from market-participant view (not entity-specific). Must be: 1) physically possible, 2) legally permissible, 3) financially feasible. Compare in-use (with other assets) vs in-exchange (standalone); pick higher.
Change in accounting principle — retrospective treatment
Retrospective: 1) Adjust beginning R/E for cumulative effect (net of tax) to earliest period presented 2) Restate all prior periods shown 3) Disclose effect on income, EPS, R/E. Exceptions (prospective as estimate change): change TO LIFO; change in depreciation method.
Dividends-received deduction (DRD) tiered exclusions
Domestic C-corp shareholder DRD tiers: 1) <20% ownership → 50% DRD 2) 20%–<80% → 65% DRD 3) ≥80% (affiliated) → 100% DRD. Permanent difference (not temporary). Taxable portion = Dividend × (1 − DRD%).
Long-term contracts — % completion (cost-to-cost)
Progress=CostToDate/TotalEstCostProgress = CostToDate / TotalEstCost; RevRec=Progress×ContractPriceRevRec = Progress \times ContractPrice; GPRec=Progress×EstProfitGPRec = Progress \times EstProfit less prior. Loss contracts: recognize entire expected loss immediately.
DOG remote-disclosure exception
Disclose even if remote (DOG): D — Debt of others guaranteed; O — Obligations under standby letters of credit (commercial banks); G — Guarantees to repurchase receivables (AR) sold. Other remote contingencies: no disclosure.
Uncertain tax position — 2-step (more likely than not)
1) Recognition: recognize benefit only if MLTN (>50%) sustained on exam. 2) Measurement: largest amount cumulatively >50% likely realized. Fail Step 1: DR Tax Expense / CR Other Liabilities (UTP).
Consolidation adjustments (CARIN BIG)
Eliminate sub's: C-Common Stock, A-APIC, R-Retained Earnings, I-Investment in Sub; N-create NCI at FV. Then: B-adjust sub's Balance sheet to FV, I-record Identifiable Intangibles at FV, G-Goodwill as plug (or bargain-purchase gain if negative).
Revenue recognition 5-step model (I am a STAR)
ASC 606: 1) Identify Contract with customer. 2) Identify Performance obligations. 3) Determine Transaction price. 4) Allocate price to POs (relative standalone selling price). 5) Recognize revenue when/as each PO is satisfied (point-in-time or over time).
Change in accounting estimate — prospective treatment
Prospective only: 1) No restatement of prior periods 2) New estimate applied current period forward 3) Disclose effect on NI and EPS. Examples: useful life, salvage, ADA, warranty %. Change in depreciation method = estimate effected by change in principle (also prospective).
Change in reporting entity — retrospective restatement
Retrospective restatement: 1) Restate all prior periods presented as if new entity always existed 2) Adjust beginning RE of earliest period 3) Disclose effect on income, EPS, and retained earnings 4) Examples: change in consolidation scope, pooling-equivalent combinations.

Frequently Asked Questions

Is the CPA FAR formula sheet free?
Yes. The full CPA FAR formula sheet is free, with no signup, no email, and no credit card required. 109 formulas across 3 topics, all rendered with the same KaTeX math notation used in the FreeFellow study app.
Will there be a printable PDF version?
A printable PDF is rolling out shortly. In the meantime, the inline page below is print-friendly: most browsers print clean copies via the Print menu (the navigation, footer, and download CTA are hidden in print).
What's covered on the CPA FAR formula sheet?
Every formula is grouped by official syllabus topic, with the formula in math notation plus a one-line note on when to use it (or a watch-out from CAIA, CFA, or other prep-provider commentary). Coverage is calibrated to the 2026 syllabus and refreshed when the corpus changes.
What is FreeFellow's relationship with CPA?
No. FreeFellow is not affiliated with the CPA or any examination body. This is an independent study aid covering the published syllabus.
What else is free at FreeFellow for CPA FAR candidates?
The full question bank with detailed solutions, mixed practice, readiness tracking, lessons (where available), and the formula sheet are all free forever. Fellow ($59/quarter or $149/year per track) unlocks timed mock exams, spaced-repetition flashcards, performance analytics, AI essay grading, and a personalized study plan.
Practice CPA FAR questions free →

Formula sheets for other exams

Exam P Exam FM Exam FAM Exam SRM Exam ALTAM Exam ASTAM CFA Level I CFA Level II CFA L3 Portfolio Mgmt CFA L3 Private Wealth CFA L3 Private Markets CFP

About FreeFellow

FreeFellow is a free exam prep library for actuarial (SOA & CAS), CFA, CFP, CPA, CAIA, GARP FRM, IRS Enrolled Agent, IMA CMA, and FINRA / NASAA securities licensing candidates. The entire question bank, written solutions, and lessons are free for every candidate, with no trial period and no credit card. Lessons include narrated audio, and every constructed-response item has a copy-to-AI prompt builder so candidates can paste their answer into their own ChatGPT or Claude for self-graded feedback; Fellow members get instant AI grading on essays against the official rubric (currently CFA Level III, expanding to other essay-bearing sections).

The 70% you need to pass (question bank, written solutions, lessons, formula sheet, mixed practice, readiness tracking) is free forever, with no trial period and no credit card. Become a Fellow ($59/quarter or $149/year per track) to unlock mock exams, flashcards with spaced repetition, performance analytics, AI essay grading, and a personalized study plan.