2019 CPA Exam Changes

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.

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.


We understand the importance of providing students with everything they need to successfully prepare for and take the CPA Exam. Our expert team of CPAs has been hard at work ensuring our 2019 course materials address the July 2019 CPA Exam changes that are eligible for testing on July 1, 2019. Our course will be updated by June 11, 2019 to accommodate these July 1st revisions.

The updates in our course software will not only prepare students for the changes to come, but also give them the confidence and resources they need on Exam day. See revisions below for each CPA Exam section.

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 and Audit Data Analytics (ADAs). Note that these updates do not change the nature or scope of content eligible for testing.

  • 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.
  • Revised the 3rd bullet under the Area II description:
    • Assessing Risks and Planning Further Procedures — Identifying and assessing risks of misstatement due to error or fraud and developing appropriate engagement procedures, including understanding and calculating materiality and considering specific engagement risks, as well as incorporating concepts such as audit data analytics, group audits, using the work of the internal audit function and the work of specialists.
  • Revised the 1st sentence in the description of Area III:
    • Area III of the AUD section blueprint covers performing engagement procedures and concluding on the sufficiency and appropriateness of evidence obtained, including performing specific types of procedures (e.g., analytical procedures, analytical procedures using audit data analytics, observation and inspection, recalculation and reperformance); testing the operating effectiveness of internal controls; performing tests of compliance and agreed-upon procedures; understanding and responding to specific matters that require special consideration (e.g., accounting estimates, including fair value estimates); evaluating and responding to misstatements due to error or fraud and to internal control deficiencies; obtaining management representations; and performing procedures to identify and respond to subsequent events and subsequently discovered facts.
  • Revised the application representative task statements in Area II, C, 4:
    • Identify and document an entity’s key IT general and application controls, their impact on the audit of an entity’s financial statements, including an audit of an entity’s internal controls, and consider the effect of these controls and manual controls on the completeness and reliability of an entity’s data.
    • Perform and document tests of an entity’s key IT general and application controls, their impact on the audit of an entity’s financial statements, including an audit of an entity’s internal controls, and consider the effect of these controls and manual controls on the completeness and reliability of an entity’s data.
  • Added an analysis representative task statement in Area II, E, 3:
    • Assess risks of material misstatement using audit data analytic outputs (e.g., reports and visualizations) to determine relationships among variables and interpret results to provide a basis for developing planned audit procedures.
  • Added an analysis representative task statement in Area III, C, 1:
    • Perform analytical procedures using outputs from audit data analytic techniques to determine relationships among variables and interpret results in an audit or non-audit engagement.
  • Added two analysis representative task statements in Area III, C, 6:
    • Determine the attributes, structure and sources of data needed to complete audit data analytic procedures.
    • Use audit data analytic outputs to determine relationships among variables and interpret results to meet objectives of planned procedures in an audit or non-audit engagement.

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 July 2019 CPA Exam Changes

Download our free PDF for a breakdown of the changes you can expect on July 1, 2019.

Business Environment and Concepts (BEC)

Blueprints: There have been revisions to the July 2019 BEC Blueprints to add clarification and reorganize the material. However, the revisions do not significantly change the content eligible for testing. More specifically, these changes:

  • Clarify the Section introduction by:
    • Replacing the description of Area I with the following:
      • Area I of the BEC section blueprint covers several topics related to Corporate Governance, including the following:
        • Knowledge and use of internal control frameworks
        • Knowledge and use of enterprise risk management frameworks
        • Identifying key corporate governance provisions of regulatory frameworks and laws such as the Sarbanes-Oxley Act of 2002
    • Replacing the description of Area IV with the following:
      • Area IV of the BEC section blueprint covers several topics related to Information Technology (IT), including the following:
        • Understanding the role of IT and systems, including the use of data in supporting business decisions.
        • Identifying IT-related risks associated with an entity’s information systems and processes, such as processing integrity, protection of information and system availability, including those risks introduced by the relationships with third-parties.
        • Identifying application and IT general control activities, whether manual, IT dependent or automated, that are responsive to IT-related risks, such as access and authorization controls, system implementation testing and incident response plans.
      • Adding a reference:
        • COSO-issued application material, thought papers and guides related to the above frameworks
  • Reorganize Area IV, Information Technology, to clarify the nature and scope of content. The following representative tasks have been revised as follows:
    • Area IV, A, 1 – Understanding of information technology (IT) – Organization and governance: Identify the role of information systems (e.g., enterprise and application systems) in key business processes (e.g., sales, cash collections, purchasing, disbursements, human resources, payroll, production, treasury, fixed assets, general ledger and reporting).
    • Area IV, A, 3 – Understanding of information technology (IT) – Data:
      • Understand key characteristics of a relational database (e.g., data dictionary, data types, tables, records, fields, relationships, keys, views, queries and reports).
      • Recognize the role of big data in supporting business decisions.
    • Area IV, A, 3 – Understanding of information technology (IT) – Data: Use business intelligence (including data analytics and statistics) to support business decisions.
    • Area IV, B, 1 – Risks associated with IT - Risk assessment: Identify IT-related risks and describe mitigation strategies given risk severity, probability and costs.
    • Area IV, B, 2 – Risks associated with IT - System development and maintenance: Determine the fundamental issues and risks associated with selecting, developing and implementing new information systems or maintaining existing information systems.
    • Area IV, Group B, Topic 3 – Risks associated with IT - Processing integrity: Determine the risks associated with ensuring the completeness, accuracy and continued processing integrity in input, storage, processing and output processes.
    • Area IV, Group B, Topic 3 – Risks associated with IT - Processing integrity: Determine the risks associated with ensuring the completeness, accuracy and continued processing integrity in input, storage, processing and output processes.
    • Area IV, B, 4 – Risks associated with IT - Security, availability, confidentiality and privacy:
      • Identify the risks (e.g., cybersecurity and internal) associated with protecting sensitive and critical information (e.g., proprietary and personal information) within information systems (including processing, storing and transmitting information internally and with external parties).
      • Perform threat identification to identify risks related to information confidentiality.
    • Area IV, B, 4 – Risks associated with IT - Security, availability, confidentiality and privacy: Perform threat identification to identify risks related to system availability.
    • Area IV, C, 1 – Controls that respond to risks associated with IT – Application controls: Determine the role and appropriateness of input, storage, processing, and output application controls (e.g., authorizations, approvals, tolerance levels, input edits and configurations) to support completeness, accuracy and continued processing integrity.
    • Area IV, C, 2 – Controls that respond to risks associated with IT - General IT controls:
      • Understand the controls and testing strategies used in selecting, developing and implementing new information systems.
      • Identify effective IT control activities, including manual, IT dependent and automated controls, as well as preventive, detective and corrective controls.
    • Area IV, C, 3 – Controls that respond to risks associated with IT - Logical and physical controls: Identify logical and physical access controls (e.g., roles and rights and segregation of duties).
    • Area IV, C, 3 – Controls that respond to risks associated with IT - Logical and physical controls:
      • Identify the controls associated with protecting sensitive and critical information (e.g., proprietary and personal) within information systems.
      • Determine responses to information system confidentiality risks (e.g., incident response plan).
    • Area IV, C, 4 – Controls that respond to risks associated with IT - Continuity and recovery plans: Determine responses to system availability risks (e.g., data backup and recovery procedures and alternate processing facilities).

Content: There are no new content updates to BEC for 2019.

Financial Accounting and Reporting (FAR)

Blueprints: The FAR Blueprints have one change in response to ASU 2016-14: Presentation of Financial Statements of Not-for-Profit Entities (eligible for testing on January 1, 2019).

  • Added a Topic titled “Notes to the financial statements” to Area I, 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.

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, 2018-20 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 in 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, 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

GASB Updates:

  • Statement No. 84 – Fiduciary Activities
  • Statement No. 88 – Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements

Regulation (REG)

Blueprints: The revisions made to the REG Blueprint in January of 2019 were to accommodate tax reform. The mid-year Blueprint changes merely provide clarification and do not change the nature and scope of content eligible for testing.

  • 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.
  • Added to the Section introduction – The REG section of the Exam includes multiple-choice questions, task-based simulations and research prompts. Candidates should assume that the information provided in each question is material and should apply all stated assumptions. To the extent a question addresses a topic that could have different tax treatments based on timing (e.g., alimony arrangements or net operating losses), it will include a clear indication of the timing (e.g., use of real dates) so that the candidates can determine the appropriate portions of the Internal Revenue Code or Treasury Regulations to apply to the question. Absent such an indication of timing or other stated assumptions, candidates should assume that transactions or events referenced in the question occurred in the current year and should apply the most recent provisions of the tax law in accordance with the timing specified in the CPA Exam Policy on New Pronouncements.
  • Area III, A, 4 – Federal Taxation of Property Transactions - Acquisition and disposition of assets - Related party transactions (included imputed interests):
    • Calculate the direct and indirect ownership percentages of corporation stock or partnership interests to determine whether there are related parties for federal income tax purposes.
  • Area III, C, 3 – Federal Taxation of Property Transactions - Estate and gift taxation - Determination of taxable estate:
    • Recall assets includible in a decedent’s gross estate for federal estate tax purposes.
    • Recall allowable estate tax deductions for federal estate 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 80% 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.

 

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
  • Automation
  • Big data, data analytics, and data visualizations
  • Blockchain and cryptocurrencies (e.g., bitcoin)
  • Cloud operations and data storage
  • Cybersecurity
  • Digital business models

Corporate Governance

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.

Revenue Recognition

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.

Regulation (REG)

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.

Excel Logo

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.

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.

AUD

BEC

FAR

REG

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
Analysis
Evaluation
Written Communication 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
Section Current 2017 Current 2017 Current 2017
AUD 90 72 7 8 - -
BEC 72 62 - 4 3 3
FAR 90 66 7 8 - -
REG 72 76 6 8 - -

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.

  AUD BEC FAR REG
Current 60% MCQ
40% TBS
85% MCQ
15% WC
60% MCQ
40% TBS
60% MCQ
40% TBS
2017 50% MCQ
50% TBS
50% MCQ
35% TBS
15% WC
50% MCQ
50% TBS
50% MCQ
50% TBS

SCORING

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.

  AUD BEC FAR REG
Current 4 3 4 3
2017 4 4 4 4

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.

EXAM COST

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
    • Regulators
    • 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).

Additional Resources


CPA Exam Changes Q & A

If you purchase a Roger CPA Exam review course now, you will have access to a fully upgraded course platform once the 2019 CPA Exam changes go into effect in January 2019. All Roger CPA Review students will receive automatic updates to their online course materials for the duration of their course.

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