CPA Exam Changes
CPA Exam Changes
Each year, the AICPA approves various changes and updates to the CPA Exam, altering pre-existing sections, adding new topics and occasionally removing older ones. Read through the timeline below to learn about Exam changes through the years. Subscribe to our newsletter to ensure you stay on top of all of the latest changes to the CPA Exam.
2019 CPA Exam Changes:
Top 2 Changes to the 2019 CPA Exam
Learn about the top 2 changes to the 2019 CPA Exam and how our patent pending SmartPath Predictive Technology will help you pass faster than ever before.
Hello and welcome. My name is Roger Philipp of Roger CPA Review. Today I wanna talk about the top two changes to the CPA Exam in 2019.
As we all know, the new year is quickly approaching. We've been working hard to ensure that our 2019 course materials reflect the updates to the CPA Exam provided to us by the AICPA. While there are not structural changes on the exam, there are major content changes happening on the FAR and REG exams that are going into effect January 1st, 2019.
In Financial, Accounting, and Reporting, or in FAR, the big area that changed is leases. In 2016, the FASB issued ASC 842, which updated the accounting treatment of the leases. The goal was to provide more transparency and comparability among companies regarding lease assets and liabilities. To help ensure the transition, the Board allowed entities to adopt both the new lease standard and it wasn't gonna hit the exam or isn't until January 2019, which is now quickly approaching. Some of the changes include balance sheet recognition. Operating leases lasting over 12 months now must be reported on the balance sheet. So before we had what we called an off-balance sheet risk, now they have to be listed in the balance sheet. The new standard creates transparency for investors regarding a company's financial leverage and earnings. With financial statement disclosures, ASC 842 has much more stringent disclosure requirements for both quantitative and qualitative financial statement disclosures. The increased requirements may require companies to improve or implement new systems, procedures, and controls to provide the required disclosure. Lease qualification, long-term leases are now reported on the balance sheet. Short-term leases of 12 months or less are still allowed to be excluded from the balance sheet, but you could include them if you so desire. The new standard dictates that if the lessee does not have the right to control the use of the asset, then the transaction may not qualify as a lease. So that deals with control, so you've got to have the control. With lease payments there is a new revised definition of indirect costs resulting in fewer allowed capitalized costs. Executory costs, like property taxes, insurance, will now be included in lease payments. Regarding a sale leaseback transaction, so you sell it and then you immediately lease it back, to qualify as a sale, the transfer of the asset must adhere to the revenue recognition requirements in ASC 606, which deals with revenue from customers with contracts. When the transaction does not qualify as a sale, it is classified as a financing transaction, so kinda like you borrow the money in more of what we call a note payable.
So what does all of this mean for you? Well, since several bright-line tests have been removed, the update also requires that more judgment be applied. Because we used to have these four criteria for a capital lease, now we call it a finance lease. Now there's five criteria. Things like specialized nature, a purchase option, title transfer, but here is an area where it kinda got a little gray. The term, it says it has to be a major part of the lease, used to say 75%. Payment, substantially all, which used to be 90% of the fair market value. So that's where the bright-line tests kinda come in. So what you're gonna see is you're gonna need more of what we call brain power when addressing these questions on the CPA Exam once these changes go into effect on January 1st, 2019.
Now let's talk a little bit about regulation changes, especially in the area of taxation. This is probably the biggest change that everyone is talking about to the CPA Exam, especially in Regulation. And this is due to what we call the TCJA, which is the Tax Cut Job Acts of 2017. This significantly changed and updated the tax code, which impacts all the sections of tax, which accounts for most as up to 85% of the Regulation exam. This is the section we highly recommend that you take this year in 2018, as it will require you to relearn all that great stuff that you studied in school about taxes, whether it was in university or whether you've been working in the real world, it'll all change.
Here are some, just a few of the examples of the changes.
- There's an increase in the Section 179 deduction. So we talk about deductions for depreciation and bonus depreciation. Used to be about half a million, now it went up to a million, starts to phase out at $2.5 million.
- Increased standard deduction, but the elimination of the personal exemption. So no more personal exemption, dependency exemptions, but your standard deduction is $12,000. Married, filing joint, double or $24,000. Might be a good reason to get married.
- New limitations on property and state taxes, as well as local taxes and also mortgage interest. So your property and state tax and all those are limited to $10,000 max. Your mortgage interest used to be a million one. They dropped it down to $750,000.
- There's also a new deduction of up to 20% for owners of certain pass-through entities, like S-corps, partnerships, and so on. It's called a QBI deduction, or a Qualified Business Income Deduction, which is really nice.
- If we increase the charitable contribution, so if you donate cash, you could instead of 50% of AGI, they increased it to 60% of AGI.
- Entertainment expenses are now disallowed. So we used to do meals and entertainment. Now it's just meals, no more entertainment.
- The new corporate tax rate, a flat tax rate, it went from 35% down to 21%, which is helpful. And that whole purpose was to bring corporations back in the United States. Increased gross receipts test, which allows more entities now to use the cash basis or cash method of accounting. Used to be at $10 million, they increased to $25 million.
So in conclusion, you can see that the CPA Exam content updates to these two areas will be significant. If you need help working these exams into your busy schedule, our new SmartPath Predictive Technology is the most effective way to maximize your study time. Well, it's a data-driven platform that tells you exactly where and how to focus your efforts. It takes the guesswork out of CPA Exam preparation. It's helping candidates pass the exam faster than ever before. They're more effective, they're more efficient. No matter when you decide to take the exam, we have your back and we'll guide you on the SmartPath to CPA Exam success.
Thank you and good luck in your studies.
The new year will be here before you know it, and our team has been hard at work ensuring our 2019 course materials address the new updates provided to us by the AICPA. These updates will address two types of changes: Alterations to the AICPA Blueprints and content updates resulting from changes to authoritative guidance.
Auditing and Attestation (AUD)
Blueprints: The 2019 AUD Blueprints do not include any additional or eliminated content areas. However, there have been revisions to add more detail on professional skepticism. Updates do not change the nature or scope of content eligible on testing for AUD.
- Added references to professional skepticism in the section introduction:
- Professional skepticism reflects an iterative process that includes a questioning mind and a critical assessment of audit evidence. It is essential to the practice of public accounting and the work of newly licensed CPAs.
- Added a Topic in Area I, Group B titled “Professional skepticism and professional judgment” with the following remembering and understanding task statements:
- Understand the concepts of professional skepticism and professional judgment.
- Understand personal bias and other impediments to acting with professional skepticism, such as threats, incentives and judgment-making shortcuts.
- Added an analysis representative task statement in Area III, Group A – Performing Further Procedures and Obtaining Evidence - Understanding sufficient appropriate evidence, as follows:
- Investigate evidence that either contradicts or corroborates management explanations, expectations and other hypotheses throughout an audit or non-audit engagement.
- Revised the analysis representative task statement in Area III, Group C, Topic 3 – Performing Further Procedures and Obtaining Evidence – Performing specific procedures to obtain evidence - Inquiry of management and others, as follows:
- Analyze responses obtained during structured or informal interviews with management and others, including those in non-financial roles, and ask relevant and effective follow-up questions to understand their perspectives and motivations in an audit or non-audit engagement.
- Added an analysis representative task statement in Area III, Group C, Topic 6 – Performing Further Procedures and Obtaining Evidence – Performing specific procedures to obtain evidence - All other procedures, as follows:
- Modify planned procedures based upon new information, such as inconsistent explanations, new evidence and environmental cues, to achieve audit objectives in an audit of an issuer or a nonissuer.
Content: The AUD section of the Exam will see some slight adjustments in content for 2019, including:
- PCAOB release 2017-001, The Auditor’s Report on an Audit of Financial Statements when the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards—Eligible for testing Q3 2018 (except for critical audit matters, which is eligible for testing in Q3 of 2019).
- SSARS No. 24, Omnibus Statement on Standards for Accounting and Review Services —2018—Eligible for testing in Q3 2019.
- Government Auditing Standards—2018 Revision (Yellow Book)—Updates related to performance audits are eligible for testing in Q3 of 2019 (Updates related to financial audits, attestation engagements, and reviews of financial statements are eligible for testing in Q3 of 2020).
Find out everything you need to know about the 2019 CPA Exam
Business Environment and Concepts (BEC)
Blueprints: No updates to the BEC Blueprint for January 1, 2019. Currently evaluating Area IV, Information Technology, of the BEC Blueprint.
Content: There are no new content updates to BEC for January 1, 2019. However, some topics are being monitored by the AICPA.
- COSO Enterprise Risk Management–Integrating with Strategy and Performance: Compendium of Examples
- Issued June 11, 2018
- SOC2®Reporting on an Examination of Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality, or Privacy
- Issued March 13, 2018
- Revisions to Dodd-Frank
- COSO Enterprise Risk Management: Applying enterprise risk management to environmental, social and governance-related risks
- Comment period closed June 30, 2018
- Sustainability Accounting Standards Board (SASB) Exposure Drafts of the standards
- Comment period closed January 31, 2018
- SOC for Vendor Supply Chains
- Under development
- Technology topics
- Artificial intelligence, automation, and machine learning
- Blockchain and cryptocurrencies
- Cloud computing
- Data analytics
Financial Accounting and Reporting (FAR)
- Added a Topic titled “Notes to the financial statements” to Area I, Group C – Conceptual Framework, Standard-Setting and Financial Reporting - General-purpose financial statements: nongovernmental, not-for-profit entities with the following application task statement:
- Adjust the notes to the financial statements to correct identified errors and omissions.
- This update is in response to ASU 2016-14: Presentation of Financial Statements of Not-for-Profit Entities, which becomes eligible for testing on January 1, 2019.
Content: The most prominent change to the FAR Exam in 2019 is to the highly tested topic, Leases (ASU 2016-02, 2018-01, 2018-10, 2018-11, and IFRS 16). You’ve probably already heard about it since the standards have been out since 2016, but just in case you haven’t, you might like to know that “off-balance sheet financing” has been eliminated. Operating leases must now be recognized by the lessee on the balance sheet (except for short-term leases of 12 months or less). Previously, only capital leases (now called “finance leases”) were recognized on the balance sheet. It’s important to note that IFRS 16 is slightly different in that it essentially considers all leases to be finance leases unless they are worth $5,000 or less.
You might also note that several bright-line tests have been removed and more judgement is now required, making the standard slightly more difficult to apply. For example, there is no more “bargain purchase option” for purposes of determining whether a lease is a finance lease. A purchase option must now be “reasonably certain to be exercised”; i.e., it no longer really matters whether it is a bargain or not.
In addition to this major lease accounting makeover, there are a few other minor modifications that are testable beginning Q1 of 2019:
- ASU 2017-06: Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting
- ASU 2017-08: Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities
- ASU 2017-11: Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I -Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception
- ASU 2017-12: Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
- ASU 2018-02: Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
- ASU 2018-03: Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
- ASU 2018-04: Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273
- ASU 2018-05: Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118
- ASU 2018-07: Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
- ASU 2018-08: Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made
- ASU 2018-09: Codification Improvements—Eligible for testing in Q2 of 2019
- Statement No. 84 –Fiduciary Activities
- Statement No. 88 -Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements
- Revised existing analysis task statement in Area III, Group B - Federal Taxation of Property Transactions - Cost recovery (depreciation, depletion and amortization) to read as follows:
- Compare the tax benefits of the different expensing options for tax depreciation for federal income tax purposes.
- Added an application representative task statement in Area IV, Group C – Federal Taxation of Individuals (including tax preparation and planning strategies) - Adjustments and deductions to arrive at adjusted gross income and taxable income, as follows:
- Calculate the qualifying business income (QBI) deduction for federal income tax purposes.
- Removed reference to personal exemptions from Group F of Area IV, Federal Taxation of Individuals (including tax preparation and planning strategies) - Filing status and exemptions, deleted two task statements on personal exemptions, and added the following remembering and understanding task statement:
- Recall relationships meeting the definition of dependent for purposes of determining taxpayer filing status.
- Removed references to alternative minimum tax for C Corporations and removed task statements focused solely on testing alternative minimum tax for C Corporations in Area V, Group C, Topic 1 – Federal Taxation of Entities (including tax preparation and planning strategies) - C Corporations - Computations of taxable income, revising existing task statements as follows:
- Calculate the credits allowable as a reduction of tax for a C corporation.
- Analyze the impact of net operating and/or capital losses during tax planning for a C corporation.
- Added remembering and understanding representative task statements in Area V, Group C, Topic 5 – Federal Taxation of Entities (including tax preparation and planning strategies) - C Corporations - Multijurisdictional tax issues (including consideration of local, state and international tax issues), as follows:
- Identify situations where the base erosion and anti-abuse tax (BEAT) would apply.
- Identify factors that would qualify income as Foreign Derived Intangible Income (FDII).
- Define the components of Global Intangible Low-Taxed Income (GILTI).
- Revised the 2nd application representative task statement in Area V, Group E, Topic 7 – Federal Taxation of Entities (including tax preparation and planning strategies) - Partnerships - Ownership changes, as follows:
- Calculate the revised basis of partnership assets due to a transfer of a partnership interest for federal income tax purposes.
Content: Most of the 2019 REG Exam changes are due to tax reform. The Tax Cuts and Jobs Act of 2017 (TCJA) has impacted all tax sections, which can account for as much as 85% of the REG Exam. To get an idea of how extensive the changes are, we have provided a PARTIAL list of some of the most important changes:
- P.L. 115-97: An Act to provide for reconciliation to titles II and V of the concurrent resolution on the budget for fiscal year 2018
- Commonly referred to as the “Tax Cuts and Jobs Act”
- Most significant overhaul of the U.S. tax code since the Tax Reform Act of 1986.
- Impacts individual taxation, entity taxation (C corporations, S corporations, partnerships, limited liability companies, tax-exempt entities), and international taxation.
- Taxation of Property Transactions (Area III of Blueprint—12-22%)
- Section 179 deduction increased.
- Definition of qualified real property eligible for Sec. 179 expensing is expanded.
- Bonus depreciation is increased and expanded until being phased out again starting in 2023.
- Required use of 150% declining balance depreciation method is repealed.
- Straight-line recovery periods for qualified improvement property and residential rental property changed.
- Gross-receipts test increased for purposes of UNICAP.
- New Section 1031 like-kind exchange limitations.
- Individual Taxation (Area IV of Blueprint— 15-25%)
- Increased standard deductions.
- No personal exemptions.
- Increased child tax credit and new “family tax credit” provision for other dependents.
- AMT exemptions increased.
- New limitation on state and local taxes.
- New mortgage interest limit.
- Home equity deduction disallowed, unless certain requirements are met.
- Pease limitation on overall itemized deductions suspended.
- New 20% deduction for owners of certain pass-through entities.
- Kiddie tax rates changed.
- Alimony deduction/inclusion repealed, with exceptions.
- Moving expenses deduction/exclusion suspended for most.
- No casualty losses deductions, with exceptions.
- 2% Misc. itemized deductions suspended.
- Taxation of qualified gains/dividends changed.
- New rules allowing limited distributions from 529 plans for elementary/secondary school expenses.
- New exclusion for death/disability for student loan discharges.
- Expanded deductions allowed for wagering losses.
- Cash charitable contribution limitation increased.
- Most entertainment expenses are disallowed.
- NOL carryback provisions were repealed; may carry NOLs forward indefinitely.
- Entity Taxation (Area V of Blueprint—28-38%)
- Gross receipts test increased to allow more taxpayers to use cash method of accounting.
- Inventories need not be accounted for under Section 471 if increased gross receipts test is met.
- Corporate graduated tax rates reduced to flat 21% rate.
- Corporate AMT is repealed.
- New business interest deduction limitation.
- Deduction for qualified transportation fringe benefits generally no longer allowed.
- Revised “covered employees” definition for purposes of limitation on compensation paid to such employees of public corporations.
- New limitation on accumulated earnings credit for certain controlled corporations.
- Dividends received deduction percentages reduced to reflect lower corporate income tax rates.
- Domestic production activities deduction is repealed.
- New international tax rules.
2018 CPA Exam Changes:
The CPA Exam underwent several changes in 2018—from the content tested, to the Exam software user interface design, to an upgrade of the computer monitors in which the Exam was delivered. These changes, while impactful to candidates, were much less alarming than the CPA Exam changes we saw in 2017, and in most cases actually improved the testing experience.
2018 CPA Exam Content Changes
All content changes were broken into two types of changes:
- Updates to the representative tasks mapped out in the AICPA Blueprints
- Content changes based on alterations to authoritative guidance
Auditing and Attestation (AUD)
Blueprints: The 2018 AUD Blueprints did not include any additional or eliminated content areas. However, there has been revisions to one of the content groups, as well as 12 representative tasks to reflect terminology updates in SAS 130, An Audit of Internal Control Over Financial Reporting.
Content: The AUD Exam included some key changes for 2018 that CPA candidates took notice of. Please note that some of these updates didn't go live until Q3 2018:
- SAS 132, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern (AU-C 570) — Eligible for testing Q1
- SAS 133, Auditor Involvement With Exempt Offering Documents (Amends AU-C 560 and 925) — Eligible for testing Q3
Business Environment and Concepts (BEC)
Blueprints: There are no changes to the representative tasks laid out in the blueprints
Content: While there are no real changes to the BEC content, there will be some shifts in focus:
Information Technology (IT)
In the past, the BEC Exam has generally tested on what computers do, however, in 2018 there was a shift to emphasizing how CPAs use computers.
Also new to IT was a list of updated vocabulary terms that appeared in 2018. While these terms have been used in the tech world and the accounting profession for many years, they were new to the CPA Exam. The “new” terms included:
- Artificial intelligence and machine learning
- Big data, data analytics, and data visualizations
- Blockchain and cryptocurrencies (e.g., bitcoin)
- Cloud operations and data storage
- Digital business models
In September of 2017, changes were issued to the COSO Enterprise Risk Management framework. These changes will not be eligible for testing until Q2 of 2018 (April 1, 2018).
Financial Accounting and Reporting (FAR)
Blueprints: In alignment with the authoritative literature updates for nongovernmental and not-for-profit organizations (NGNPO), Area I, C, 4 (Statement of Functional Expenses) and similar tasks have been removed from the FAR Blueprints for 2018.
Note: The terms “unrestricted,” “temporarily restricted,” and “permanently restricted” have been removed from any representative NGNPO related tasks.
Content: FAR will underwent the most significant changes in 2018, with the most prominent alterations to Revenue Recognition. Here is the full list of updates, all that were eligible for testing Q1 of 2018:
- Revenue Recognition (ASU 2014-09, 2015-14, 2016-08, 2016-10, 2016-12, 2017-05, 2017-10)
- Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01)
- Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities (ASU 2016-14)
- Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15)
- Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01)
- Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory (ASU 2016-16)
- Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18)
- Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07)
- Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2017-09)
Note: Candidates may be aware of recent changes to the lease guidance (Topic 842, ASU 2016-02). These will not be eligible for testing in 2018.
The change in Revenue Recognition on the CPA Exam was a response to the shift in our economy in the way businesses account for revenue. Where we used to have a society that mainly produced tangible goods and provided services under simple arrangements, today’s businesses provide more intangible products and services, such as information, software, etc... To account for this shift, FASB issued new standard streamlined processes, changing the guidelines by which a company recognizes revenue. This change also aligned US GAAP more closely with the international accounting standards.
Blueprints: Very minor updates to the blueprint wording was made for the REG Exam. This included the addition of “Treasury Regulations” to the list of references, and the removal of the words “and Regulations”.
Content: A new tax bill was passed by congress. All Regulation course materials were aligned with the new tax bill. We also recommended sitting for REG prior to December 10, 2018, before the changes went into effect. To stay abreast of the most up-to-date changes on the CPA Exam, please subscribe to our blog.
2018 CPA Exam User Experience Changes
Launched April 1st, 2018 (Q2), the AICPA issued a series of changes that improved the Exam-taking experience for candidates.
Redesign of the User Experience
The actual look and feel of the software in which the Exam was delivered underwent a complete interface update, giving the CPA Exam a sleek, modernized design. There are new layouts, colors, fonts, buttons, and functionality that candidates became familiar with before the intended April 1st rollout. As such, the AICPA made available a sample example prior to the launch so that candidates could familiarize themselves accordingly.
Incorporation of Microsoft Excel
As part of the User Experience update, the AIPCA retired its current, generic spreadsheet tool, and replaced it with Microsoft Excel. This was a welcomed change, as Excel is the most widely used spreadsheet tool within the accounting profession and college accounting program curriculum. In other words, the majority of candidates were already familiar with this tool prior to taking the CPA Exam. And if they weren't, preparing for the Exam provided a great opportunity to learn this essential program before it entering into the field. It is, however, important to note that candidates were not tested on their Excel abilities. It was simply an included tool to aid in answering Exam questions.
Upgraded computer monitors at testing sites
Beginning in 2018 at Prometric Testing Centers, CPA candidates were administered the CPA Exam on computers upgraded to include 23-inch HD monitors. This change gave candidates the opportunity to view multiple Exam elements simultaneously, and was especially beneficial while answering multifaceted problems, such as Document Review Simulations.
2017 CPA Exam Changes
The 2017 version of the CPA Exam launched April 1, 2017.
The AICPA began research and development for the 2017 version of the Exam in 2013, aiming to ensure that the content and structure were still relevant—and most importantly— reliable measures of the knowledge and skills required to protect public interest as a CPA. The comprehensive research, known as the Practice Analysis, was initiated by market demand for a “higher-order” skillset that CPA Exam candidates need to demonstrate in order to execute CPA job responsibilities effectively. As a result of a multi-year effort consisting of collaboration with the profession’s key stakeholders - including Roger CPA Review - the AICPA Board of Examiners adjusted the content, skill level, question type, question weight and structure, and time allotment of the CPA Exam.
HOW HAVE THE CHANGES BEEN DETERMINED?
The updated version of the CPA Exam was the result of a comprehensive practice analysis, based on extensive research, with the end goal of determining the knowledge and skills required of newly licensed CPAs. The practice analysis took place in 2013 – 2015 and was multifaceted to ensure the CPA Exam remains relevant to the profession. The research conducted through the Practice Analysis informed the 2017 version of the CPA Exam.
CPA EXAM CONTENT CHANGES
While the subject matter of the 2017 CPA Exam remained the same, the primary change to the Exam was the increase in the degree - or skill level - at which that subject matter was tested.
The purpose of the CPA Exam content changes was to ensure that the CPA Exam content tests the skills that newly licensed CPAs must know to continue to protect the public interest, including:
- Critical thinking, problem solving, analytical ability, and professional skepticism
- Effective communication skills
- Well-developed research skills
- A strong understanding of the business environment and processes
- Ethics and professional responsibilities
INCREASE FOCUS ON HIGHER ORDER SKILLS
To ensure they test higher order skills, the AICPA adopted a skill level framework based on the modified Bloom’s Taxonomy of Educational Objectives.
The previous version of the CPA Exam contained content primarily designed with the following learning framework: Remembering, Understanding, and Application. With the 2017 CPA Exam, more emphasis was on assessing higher-order skillsets: Application, Analysis, and Evaluation.
We see the assessment of higher-order skillsets within the context of questions.
- Remembering & Understanding: Identify, Classify, Recall, Explain, Categorize, Clarify, Compare, Define
- Application: Calculate, Implement, Test, Represent, Prepare, Use, Execute, Carry Out
- Analysis: Reconcile, Deconstruct, Validate, Deduce, Imply, Integrate, Distinguish, Organize
- Evaluation: Justify, Critique, Conclude, Judge, Detect, Verify, Recommend, Assess
INCREASE SKILL LEVEL TESTED ON EXAM SECTIONS
The previous version of the CPA Exam equally assesses Remembering and Understanding and Application level skills in all four Exam sections. In the 2017 CPA Exam, there was a distinct shift to test higher order skills - Analysis and Evaluation – as demonstrated in the pie charts below.
AUD is the only section in the 2017 CPA Exam in which the Evaluation skill is assessed.
CSO VS BLUEPRINT
CSOs – or Content Specification Outlines – are released by the AICPA each year to identify the extent of the technical content to be tested on each of the four sections of the CPA Exam.
With the 2017 CPA Exam changes, the AICPA replaced CSOs with Blueprints. According to the AICPA, the purpose of the blueprint is to:
- Provide assurance that the Exam is properly designed to test such knowledge, skills and tasks.
- Assist candidates in preparing for the Exam by delineating the knowledge and skills that may be tested.
- Apprise educators about the knowledge and skills candidates will need to function as newly licensed CPAs.
- Guide the development of Exam questions
SKILL LEVELS ASSESSED BY QUESTION TYPE
The chart below shows the increased caliber of skill levels assessed by question-type for the 2017 CPA Exam.
|Current CPA Exam||2017 CPA Exam|
|Multiple Choice Questions (MCQ)||Remembering & Understanding||Remembering & Understanding Application|
|Task Based Simulations (TBS)||Application||Application|
CPA EXAM STRUCTURE CHANGES
INCREASING TASK-BASED SIMULATIONS & DECREASING MULTIPLE CHOICE QUESTIONS
The 2017 CPA Exam included an increase in the amount of Task Based Simulations in all sections, including the addition of TBS to the BEC section. Outlined in the table below, BEC included four to five simulations. AUD, FAR and REG each included eight to nine TBSs.
|Multiple Choice Questions||Task-Based Simulations||Written Communication|
On the previous version of the Exam, candidates typically alloted 10 to 20 minutes on each TBS. On the 2017 CPA Exam, candidates had to spend 15 to 30 minutes to complete each TBS, which also tested higher order skills - Analysis and Evaluation.
While the number of TBSs increased, the number of MCQs decreased for all sections except for the REG Exam, which slightly increased. This is a direct correlation to adding more TBSs to the Exam since TBSs require more time to answer and will be testing higher order skills.
Document Review Simulations
The AICPA also announced a new type of TBS called Document Review Simulation (DRS), which was tested on the AUD, REG and FAR Exam sections. This was the only significant CPA Exam change that affected the Exam prior to Q2 of 2017. DRSs test candidates’ Application skills, and evolve to test Evaluation and Analysis.
The purpose of these simulation questions was to increase the authenticity of the CPA Exam by testing real-life tasks performed by CPAs. In short, candidates were required to reference documents, such as legal letters, phone conversation transcripts, and authoritative literature to discern what is and is not important. Click here to learn more about DRSs.
INCREASE TIME ALLOCATION & ADJUST SCORING WEIGHTS:
The chart below shows the changes in question type on the 2017 CPA Exam.
In the previous version of the CPA Exam, Multiple Choice Questions (MCQs) comprised 60% of the scoring weight in AUD, FAR and REG, with the balance of scoring weight attributed to TBSs. MCQs comprised 85% of the scoring weight in BEC, with the remaining 15% of the scoring weight attributed to Written Communication. Because of the increase in TBSs to assess higher order skills, the scoring weight of multiple choice questions and TBSs is now approximately 50 percent each in AUD, FAR and REG. BEC has a score weighting of 50% MCQs, 15% Written Communication and 35% Task Based Simulations.
TIME ALLOCATION CHANGES
The amount of time test takers receive for each section of the CPA Exam changed for the first time since 2011. Business Environments and Concepts (BEC) and Regulation (REG) sections of the CPA Exam increased by one hour to account for increased Task Based Simulations (TBS) and the higher level skills being assessed.
Additionally, As a result of the 2017 Exam increased focus on testing higher order skills, students received a 10-15 minute break during each Exam section. The breaks didn't count against candidates’ testing time, as compared to the previous Exam, in which breaks counted against testing time.
15 MINUTE BREAK
The new Exam included a standardized 15-minute break in each section that didn't count against the candidate’s time. Because the Exam tests at higher skill levels, essentially requiring more brainpower, breaks were added to allow test-takers a moment to recollect themselves before continuing with the Exam.
CPA Candidates saw a direct cost increase of $20 for the BEC and REG portions of the CPA Exam, as a result in the increased testing time from three to four hours.
TIMELINE FOR THE FINAL VERSION OF THE NEXT CPA EXAM
- January 2014 – September 1, 2015 - Members of the following groups were interviewed, surveyed, invited to focus groups, and to comment. Information from this group was combined with the practice analysis.
- Newly licensed CPAs
- Direct and indirect supervisors of newly licensed CPAs
- CPAs in business and industry
- Academics, including Roger CPA Review
- Standard setters
- Training directors
- Boards of accountancy executive directors and members
- September 1, 2015 - Exposure Draft
- The AICPA distributed an exposure draft: a final proposal for the next version of the Exam for review by state boards of accountancy, standards setters, regulators, public accounting firms, academics, and state CPA societies.
- The exposure draft was made available to the entire profession, with special distribution to the boards of accountancy, standard setters, regulators, public accounting firms, academics, and state CPA societies.
- The exposure draft contained blueprints, structure, design, and administration of the next CPA Exam.
- Comments from this final round of external review were used to finish the design of the next version of the CPA Exam before its announcement in 2016.
- September 1 – November 30, 2015 - Exposure Draft – Comments Period.
- Q2 2016 – Public Announcement - Next version of the CPA Exam announced.
- Q3 2016 – Document Review Simulations added to the CPA Exam
- Q2 2017 – New version of the CPA Exam launched.
- 2018 – AICPA Proprietary Test Drive Launched (A new testing interface utilizing Excel, audio, and video to be launched in 2018).
- Free Webcast: 2017 CPA Exam Changes
- Free eBook: The 2017 CPA Exam Changes
- How will the 2017 CPA Exam Affect You?
- The 2017 CPA Exam Changes: 10 things you need to know
- Why the 2017 CPA Exam is testing higher order skills
- The CPA Exam is changing sooner than 2017 (the addition of DRSs July, 2016)
- Why the 2017 CPA Exam changes are making CPA Exam resources in the classroom more important than ever
- Breaks added to 2017 CPA Exam
2016 CPA Exam Changes
The most significant change to hit the CPA Exam in 2016 was the introduction of a new type of task-based simulation, called Document Review Simulations, which were added to the AUD, FAR, and REG Exam sections on July 1, 2016. Click here to find out more about the Document Review Simulations, what they test, and why they were added to the Exam.
Other than the addition of DRSs, the AICPA had few plans for changing the 2016 CPA Exam in light of the significant changes to the 2017 Exam. Most of the content changes on the 2016 Exam were a result of recent Accounting Standard Updates issued by the FASB which became testable in the Financial Accounting and Reporting section of the Exam during 2016. Auditing and Attestation and Regulation underwent minor changes while Business Environment and Concepts did not change at all in 2016.
FINANCIAL ACCOUNTING & REPORTING (FAR)
- Due to Accounting Standards Update 2015-01 issued by the FASB in January 2015, which eliminated the concept of extraordinary and unusual items from U.S. GAAP, ‘Going Concern’ replaced ‘Extraordinary and Unusual Items’ in the Specific Transactions, Events and Disclosures area of the FAR Content Specification Outline (CSO). The AICPA explicitly stated the elimination of extraordinary and unusual items would not become effective on the Exam until Q1 2016.
- Accountings Standards Update 2015-03, issued in April 2015, simplified the presentation of debt issuance costs, which we refered to as bond issuance costs or BIC. BIC is reported as a deferred charge in the asset section of the balance sheet and gets amortized separately on the income statement. Under the revised standard, BIC is treated similarly to a discount or premium and is reported as an adjustment to the carrying value of the liability. The AICPA explicitly stated this change to the accounting for BIC would not become effective on the Exam until Q1 2016.
- Accountings Standards Update 2015-05, issued in April 2015, concerns the accounting treatment of cloud computing expenses. This change was testable on the Exam possibly as early as Q4 2015. When an entity enters into a cloud computing arrangement, an analysis is performed to determine whether some or all of the arrangement represents a software license. If the entire arrangement, such as a platform-as-a-service arrangement, is considered a software license, then its entire cost to include the present value of future payments is treated as an intangible and accounted for similarly to other license. If the arrangement does not include a software license, the entire amount is treated as a service contract with the expense recognized in the period in which the benefit is derived. If the arrangement is a combination of both software license and service contract, the total cost will be allocated between the software license and the service contract.
AUDITING AND ATTESTATION (AUD)
- ‘Applicable financial reporting framework’ replaced ‘generally accepted accounting principles (GAAP) or other comprehensive basis of accounting (OCBOA)’ in the Accounting and Review Services area of the AUD Content Specification Outline (CSO). Therefore, a slight change in mindset is required, wherein a candidate should consider departures from the applicable financial reporting framework, with less emphasis on whether the applicable financial reporting framework is GAAP or OCBOA.
- The CSO reference OMB Circular A-133 was superseded by OMB Audit Requirements for Federal Awards (2 CFR 200).
- The SSARS 21 updates [link to https://www.rogercpareview.com/blog/ssars-no-21-and-cpa-exam], which most notably created the financial statement preparation engagement, appeared on the Exam more frequently in 2016, though they became testable starting in Q3 2015.
- The 2016 REG update didn't represent any changes to the rules and concepts tested on the Exam. The update consisted of a few revisions to numerical thresholds indexed for inflation, with allowances made for tax law provisions that are currently expired.
- For 2016, the AICPA expanded upon the Impact of Multijurisdictional Tax Issues on Federal Taxation topic in the Federal Tax Process, Procedures, Accounting, and Planning area of the REG Content Specification Outline (CSO). The topic now includes the following two subtopics:
- General concepts of state and local tax (non-state specific – for example – nexus and apportionment)
- U.S. taxation of multinational transactions
BUSINESS ENVIRONMENT AND CONCEPTS (BEC)
The AICPA reported no planned updates for the BEC Exam in 2016.
2015 CPA Exam Changes
Most of the 2015 CPA Exam changes appeared on the Financial Accounting and Reporting (FAR) Exam. Auditing and Attestation (AUD) had some changes, however, none that were a large impact on the Exam during the four 2015 testing windows. Regulation (REG) and Business Environment and Concepts (BEC) content went through very minor changes with all of the heavily-tested information remaining the same.
Financial Accounting & Reporting (FAR)
- The AICPA has indicated that understanding the differences between the following Special Purpose Frameworks would not be tested.
- General Accepted Accounting Principles (GAAP)
- International Financial Reporting Standards (IFRS)
- Tax basis of accounting
- Cash basis of accounting
- The FASB modified certain rules to address the needs of smaller companies. There are three specific areas that were pertinent during the 2015 testing windows. The new “Small GAAP” approaches to the following topics were developed to simplify the procedure and reduce the cost of accounting for a smaller operation.
- A new approach was developed for accounting for interest swaps. As a little reminder, interest swaps are derivatives that companies use to “swap” a loan that bears interest at a variable rate into a fixed rate loan.
- A new, simpler, approach was developed for accounting for goodwill. The new approach reduced the cost of testing for impairment and eventually eliminated goodwill from the small company’s financial statements.
- A new approach was developed for lease accounting for “Small GAAP” companies. While publicly held companies were required to perform an extensive analysis to determine if the lessor should be included in the financial statements of the lessee as a variable interest entity (VIE), nonpublic companies are now allowed to avoid analyzing a relationship with the lessor that is related and simply account for the lease by applying lease accounting.
- The AICPA worked on a major update to revenue recognition standards that had a large impact on both the accounting community and the CPA Exam. New International Financial Reporting Standards (IFRS) went into effect as part of the 2015 CPA Exam. However, General Accepted Accounting Principles (GAAP) were fully updated in 2017. Though the IFRS change is significant, it meant much more and was more heavily tested once GAAP was updated. For the 2015 Exam, it was important to be familiar with the updated IFRS rules; however, this update was not as major as the other two FAR updates described above.
Auditing and Attestation (AUD)
- A minor update to auditor responsibilities was a part of the 2015 Exam. According to the new standards, the auditor has additional responsibilities in relation to required supplementary information that accompanies a set of audited financial statements.
- A minor update to external auditor’s ability to use client’s internal auditor was a part of the 2015 Exam. This AICPA update further signified that if analysis and decision information is obtained from the internal auditor, the ultimate evaluation of all information, at every step, is the responsibility of the external auditor.
- A larger update for the AUD Exam related to the less stringent compilation and review engagements that may be requested if an audit is not required. Minor changes to how compilation and review services are performed and the associated reports were a part of this update. Perhaps the most significant change was the introduction of the accountant’s ability to also assist their clients in preparation of financial statements. Whereas before an accountant could not submit financial statements without providing at least a compilation report, a new set of standards allows the accountant to assist with preparation of financial statements as a nonattest service.
- The 2015 REG update did not represent any changes to the rules and concepts tested on the Exam. The update consisted of a few revisions to numerical thresholds and percentages associated with the passing of the Affordable Care Act and elimination of expiring tax law provisions.
Business Environment and Concepts (BEC)
- The only potentially significant change to BEC resulted from provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that went into effect and was tested during the 2015 testing windows. Sections of Dodd-Frank are already tested as part of the Regulation Exam. However, the sections tested on the BEC Exam concentrated on the topic of corporate governance, thus testing a more specific set of laws.
2014 CPA Exam Changes
Auditing and Attestation:
As of January 1, 2014, the Clarified U.S Auditing Standards (AU-C) replaced the AU standards (pre-clarified standards) on the CPA Exam. The Clarity Project was created in an effort to streamline auditing standards content, and to merge U.S. standards with international standards. These changes to standards and terminology affected the following areas within Audit Reports:
- Unmodified Report (formerly Unqualified Report) for non-public companies/non-issuers, and Report for public companies (issuers), are now similar to the old Audit Report (3 paragraphs).
- Extra paragraphs are now called Emphasis-of-Matter and Other Matter paragraphs (previously called explanatory paragraphs).
- Each portion of the report will require its own Subheading.
- Division of Responsibility is now called Group Financial Statements.
- Qualified opinions are now called Modified opinions (Qualified except for, Disclaimer, and Adverse).
Other AUD Updates:
- Slight revision to Governmental Auditing Standards (Yellow Book)
- Updates on US standards vs. International AUD standards
- PCAOB Auditing Standards (AS-16) regarding communications with Audit Committees became effective.
- American Taxpayer Relief Act of 2012 was fully integrated into the REG section.
- The Surtax on Unearned Income that resulted from the institution of the Patient Protection and Affordable Care Act (PPACA) was added.
- Adjustments were made to the Treasury Circular 230.
- Adjustments were made to the Federal Security Regulations as a result of the JOBS Act and Dodd Frank Rules enactments.
- Expanded information on the COSO's Internal Control Integrated Framework, which codifies 17 Principles of Internal Control, has been included.
- Dodd Frank Rule adjustments have been incorporated.
- Adjustments made to Governmental Accounting Chapter have been added due to updated GASB Statements.
- Terminology changes were made in the Equity section, changing Net Assets to Net Position.
2013 CPA Exam Changes:
The Clarity Project (Begins Q3 2013): The Clarity Project was created in an effort to streamline auditing standards content, and to converge U.S. standard with international standards. These changes to standards and terminology will predominantly affect the following areas within Audit Reports:
- Unmodified report (old name was unqualified report) for Non-public companies/non-issuers
- Report for Public companies (issuers) is similar to old Audit report – (3 paragraphs)
- Extra paragraphs are now called Emphasis-of-Matter and Other Matter paragraphs (previously called explanatory paragraphs)
- Each portion of the report will require its own Subheading
- Division of Responsibility now called Group Financial Statements
- Qualified opinions now called Modified opinions (Qualified except for, Disclaimer and Adverse)
Other AUD Updates:
- Changes to the Accounting and Auditing Pronouncements took effect on July 1, 2013
- Ethics and Independence
- A Firm's System of Quality Control
- Updates on US standards vs. International AUD standards
- Big changes due to the ASB Clarity Project took effect on January 1, 2013 in the accounting industry; however, these changes were not reflected on the CPA Exam until Q3 2013
- The 2013 REG Exam included the JOBS act as it relates to the SEC regulations Updates due to the Bush Tax cuts are still TBD, so Roger CPA Review provided updates regarding this change as they developed
- American Taxpayer Relief Act of 2012
- Expanded information on the COSO's Internal Control integrated framework Dodd Frank Rule adjustments have also been incorporated
- GASB 65, 66, 67, 68 had made many adjustments to the Government section
2011 CPA Exam Changes
FAR, AUD, REG and BEC - Allotted Test Time
- Allotted test times changed for all four testing sections of the CPA Exam: FAR and REG remained 3 hours, but AUD lost 30 minutes for an allotted test time of 4 hours. BEC gained 30 minutes for an allotted test time of 3 hours.
Exam Scoring Weights
- Score weighting changed for the AUD, REG, and FAR sections. Multiple choice questions moved from 70% to 60%, simulation questions from 20% to 40%, and all written communication questions starting at 10% weight were moved completely into BEC with 15% weight. Multiple choice questions in BEC changed from 100% weight to 85% weight.