Are you sitting for the CPA Exam in 2015? If so, you should know that there are changes happening! Find out what you need to know about the 2015 CPA Exam in this quick 10-minute summary covering all of the important changes to come, broadcasted straight from the desk of Elena Redko, CPA, one of Roger CPA Review's dedicated Content Specialists.
WHAT TO EXPECT ON THE 2015 CPA EXAM
Featuring Elena Redko, CPA – Course Coordinator, Roger CPA Review
Hi guys, my name is Elena Redko and I am the course coordinator for Roger CPA Review. Since my job predominantly entails making sure that you get the most up to date information, I wanted to take a moment and chat with you today a little bit about our 2015 CPA exam.
There is a handout that comes along with this video and I certainly encourage you to download it and read further detail for yourself.
We are going to start today with the FAR update. There are three major parts to the FAR update this year.
One of them has to do with the revenue recognition provisions, and the other one has to do with the big GAAP versus small GAAP rules, and the third one has to do with understanding of the conceptual frameworks and the differences between the conceptual frameworks on the CPA exam.
Let's start with the conceptual frameworks. In terms of understanding the conceptual frameworks, there are four that we will be talking about in our 2015 materials.
First one is GAAP, second one is IFRS and, of course, both of those frameworks fall under accrual accounting framework or the framework that we are most familiar with in our studies for the financial accounting in general.
And then there are two more frameworks and that's the tax basis and the cash basis. Understanding the differences and the interaction of those frameworks is going to be really important on the 2015 CPA exam.
Whereas accrual accounting accrues for revenues and expenses under either GAAP or IFRS depending if you're preparing domestic or international financial statements, cash basis accrues only on, well, cash basis and tax basis has to do with increasing our revenues and decreasing our expenses to make sure that we make the taxable income as large as possible.
Well, that's a little bit of an overstatement, but if we had to go really basic, that is what is happening.
So that is the first update and we will have a relatively large chapter in our financial books to address the differences between the frameworks since those are technically foundations for everything else that you are going to do in the financial exam.
The second part of the big GAAP versus small GAAP is discussed by Mark Dauberman in details in our seminar that is our webinar that is available on our website currently.
The very, very bird-eye view of the big GAAP versus small GAAP is the fact that small companies were subject to the same rules as larger corporations and it was becoming very obvious that making the small companies follow the same rules as the big companies for certain items such as goodwill was becoming really burdensome for the small companies and so they were finally heard and the new rules were developed in order to make smaller companies take a smaller burden when preparing their financial statements.
Mark Dauberman will talk to you more about it in our webinar on big GAAP versus small GAAP.
The third and final, for today, discussion of the financial update has to do with revenue recognition. In 2015, the revenue recognition update is not going to be huge. However, in 2017, it will be. Here is why.
For 2015, only IFRS revenue recognition rules have been updated and therefore it will be a much smaller theoretical update.
However, in 2017, our GAAP rules will be updated and once the GAAP revenue recognition rules are updated that will impact a large part of the way that we do accounting because think about it, if we actually accrue revenue or recognize revenue in a different manner than we do today, that would impact a ton of the way that we prepare our financial statements.
All right, that rounds up our financial update. Let's take a look at what's happening with audit.
We're gonna sort of decrease in size as we move along through the webinar so our financial update is truly our biggest update this year.
In terms of audit or auditing and attestation, there are also three updates, but they're much smaller in size. The first one has to do with additional requirements for supplementary information, the second one has to do with the use of internal auditors, and the third one, and probably the most important one, has to do with auditors' ability to now prepare financial statements and provide non-attest services.
So let's talk about those. In terms of additional requirements for supplementary information, the auditor, the external auditor, now simply has to provide more information in the supplementary information to the report that he or she prepares.
Pretty easy, right? And we will tell you what those additional requirements are, you'll read through them, there may be a mnemonic, there may not be a mnemonic, we will help you memorize it, or understand it, or both, and then we'll move on.
In terms of the use of internal auditors, of course when we come in as auditors, as external auditors, on an engagement, we always ask internal auditors or controllers for information because we have to run tests, we have to see if their quality control is in place, etc., etc.
This update emphasizes that no matter if we're getting our information from a bookkeeper, or from a controller, or from an internal auditor, it is ultimately the external auditor's responsibility to check all of the information and then use it properly to determine whether the financial statements are truthful and whether everything is properly disclosed.
And then the third update has to do with the fact that now as external auditors we are able to provide non-attest services. We are able to help our clients prepare financial statements as long as we're not also auditing them, which makes sense, right?
So that was pretty easy and those were the two biggest updates.
In terms of Regulation and BEC, Regulation is not gonna really have a theoretical update. In terms of our theory for tax, and business law, you know, and surety, and bankruptcy, and all that stuff, that's all gonna stay the same.
There are going to be tax updates or updates to tax materials and those will have to do with, you know, increasing percentages or certain changing to thresholds and expiration of certain provisions and tax credits so some tax credits are going to be simply removed from the books and numbers are going to be updated.
For example, the itemized deduction for medical, for medical expenses, is now going to be 10% of the AGI instead of 7.5% of the AGI. So those are going to be pretty simple.
All right, last but not least, is our BEC. For BEC, we are going to have one relatively large update and that will be the Dodd-Frank Act. The Dodd-Frank Act is currently being tested somewhat in the regulation exam.
It will continue being tested in the Regulation exam, but it will also be now tested in the BEC exam. However, in the BEC exam, it will be tested specifically in the corporate government section, meaning it will likely be together with the Sarbanes-Oxley Act and the 1929 Act just to remind us that the ultimate responsibility of the accounting profession is truly to protect the public.
All right? So that finishes up our 2015 update. Remember, everybody at Roger CPA Review is truly here to help you pass and pass in the best possible, the most efficient, the most effective, and the most enjoyable way. Thank you.