Everybody’s looking to save time when studying for the Certified Public Accountant (CPA) Exam, but trying to cut out low-yield or time-consuming topics can severely backfire and hurt your chance of passing. For the Financial Accounting and Reporting (FAR) section of the CPA Exam, common “skip list” topics include:
- Statement of cash flows
- Consolidated financial statements
- Not-for-profit (NFP) entities
- Governmental accounting
- Earnings per Share (EPS) and Securities and Exchange (SEC) reporting
- Deferred taxes
- Leases
The main problem with “skip advice” is that it’s usually based on someone’s specific exam experience rather than the official CPA Exam blueprint. If a topic appears in the blueprint, it’s eligible for testing, and skipping it is a calculated gamble. Let’s talk about why the commonly skipped topics are still worth your time, and how to study them efficiently.
“Skip Logic” Is Riskier on FAR than Candidates Realize
The FAR CPA Exam is organized around important financial reporting tasks, not random trivia. Candidates are tested on their ability to:
- Prepare and analyze financial statements
- Apply recognition and measurement guidance
- Correct errors and adjust reporting
- Interpret financial information across different entities
Multiple-choice questions (MCQs) and task-based simulations (TBS) are weighted equally. That means a single weak area can show up as a multi-step simulation where partial understanding isn’t enough. By skipping a topic, you risk missing more points than you might realize.
Statement of Cash Flows
Why candidates skip it:
Cash flows are time-consuming and error-prone.
What FAR tests:
Candidates may be asked to:
- Prepare or complete a statement of cash flows (indirect method)
- Classify cash inflows and outflows
- Identify and correct errors
- Analyze how transactions affect cash
Why skipping statement of cash flows is risky:
Cash flow simulations often combine multiple skills, such as adjustments, classifications, and error detection. Guessing here usually leads to multiple incorrect answers.
How to study statement of cash flows efficiently:
- Don’t try to “master everything.” Master the repeatable patterns:
- Net income → Cash flows from operating activities (CFO) adjustments
- Classification rules for cash flows from investing and financing activities (CFI/CFF)
- Common traps (gains/losses and noncash investing/financing disclosures)
- Practice until you can do a basic indirect statement quickly and cleanly.
Consolidated Financial Statements
Why candidates skip it:
Some candidates feel that consolidated financial statements are too complex for FAR.
What FAR tests:
FAR Area I covers consolidated financial statements, including wholly owned subsidiaries and noncontrolling interests (NCI), with representative tasks, such as preparing consolidated statements with adjustments/eliminations and correcting errors. Advanced consolidation topics can appear on the Business Analysis and Reporting (BAR) CPA Exam, but FAR still includes consolidation in a highly testable form.
Why skipping consolidated financial statements is risky:
Consolidation is a high-leverage area for analysis-style testing: Eliminations, what to combine, what to remove, and what belongs in NCI. Even “basic” consolidations can be costly to skip, as they may appear as multi-step TBS work.
How to study consolidated financial statements efficiently:
- Focus on basic consolidation logic.
- Practice common elimination entries.
- Understand how NCI is presented and calculated.
You don’t need advanced edge cases, just clean fundamentals.
Not-For-Profit (NFP) Entities
Why candidates skip it:
Many candidates are unfamiliar with NFP accounting, leading them to believe it’s tested less frequently.
What FAR tests:
- Statement of financial position
- Statement of activities (including donor restrictions/releases)
- Statement of cash flows (NFP-specific objectives and preparation)
- Reporting expenses by nature and function
- Contributions (with and without restrictions) and pledges
Why skipping NFP entities is risky:
NFP topics are structurally different from for-profit accounting, making them ideal for both MCQs and TBS. FAR frequently tests whether candidates understand how restrictions flow through the statements, not just definitions. Skipping NFP also weakens revenue/contribution questions, as FAR’s revenue section includes NFP contribution mechanics (e.g., pledges, agency/intermediary concepts, and contributed services).
How to study NFP entities efficiently:
- Build a 1-page “NFP map” with:
- Net asset classes (with/without donor restrictions)
- Where restrictions show up (statement of activities and releases)
- Functional expense reporting requirement
- Practice a few statement-building TBS
Once the framework clicks, NFP questions become predictable.
Governmental Accounting
Why candidates skip it:
Many candidates believe governmental accounting was removed from the FAR exam or is no longer relevant.
What FAR tests:
FAR continues to test foundational governmental concepts, including:
- Government-wide vs. fund financial statements
- Measurement focus and basis of accounting
- The purpose and structure of major governmental fund types
This is not the full governmental universe. Deeper Governmental Accounting Standards Board (GASB) reporting sits heavily in the BAR CPA Exam, but you’re still responsible for foundational governmental logic.
Why skipping governmental accounting is risky:
These topics are easy to test in MCQs and frequently appear inside broader reporting questions. Candidates who skip them often lose quick points or misclassify transactions without realizing why.
How to study governmental accounting efficiently:
- Understand accrual vs. modified accrual at a conceptual level.
- Memorize the fund types along with their measurement focus and basis of accounting (this is heavily tested).
- Learn the “purpose of funds” at a practical level: Which fund records what activity and why.
You don’t need deep GASB expertise, but you do need functional understanding.
EPS and SEC Reporting
Why candidates skip it:
Many candidates assume that Securities and Exchange reporting and Earnings per Share are minor topics.
What FAR tests:
- Understanding the purpose of Forms 10-K, 10-Q, and 8-K
- Identifying items in portions of 10-Q and 10-K
- Calculating basic and diluted EPS considering stock options, preferred stock, convertible preferred stock, and/or convertible debt
Why skipping EPS and SEC reporting is risky:
EPS is efficient to test and relatively unforgiving. Small mistakes in dilution logic often eliminate otherwise easy points.
How to study EPS and SEC reporting efficiently:
- Build EPS in layers: Basic → Dilutive securities.
- Practice treasury stock and if-converted methods.
- Thoroughly understand each form’s purpose and use.
EPS and SEC reporting is 1 of the highest return-on-time topics in FAR.
Deferred Taxes
Why candidates skip it:
Many candidates feel overwhelmed by deferred taxes and put off studying it.
What FAR tests:
FAR focuses on income taxes from a financial reporting perspective, including:
- Temporary vs. permanent differences
- Deferred tax assets and liabilities
- Valuation allowances
- Journal entries for tax expense and tax payable
Why skipping deferred taxes is risky:
This area is built for both MCQs and TBS because it combines rules, calculations, and entries. The exam blueprint expects you to compute and record, not just recall.
How to study deferred taxes efficiently:
- Learn and memorize the most testable differences in book and tax reporting (e.g., depreciation, municipal interest, and key-person life insurance).
- Determine deferred tax assets (DTA) vs. deferred tax liabilities (DTL).
- Understand when valuation allowances apply.
- Practice journal entries until they’re mechanical.
You’re not being tested as a tax preparer. You’re being tested as a financial reporter.
Leases
Why candidates skip it:
Candidates assume that lessee accounting will be simplified or unlikely to appear on the exam.
What FAR tests:
- Residual value guarantees, purchase options, and variable lease payments
- Lease classification criteria (for lessee): Operating vs. finance lease
- Calculating right-of-use (ROU) asset/lease liability and preparing journal entries
- Lease cost recognition
Why skipping leases is risky:
Lease questions are often structured around small rule triggers (e.g., variable payments, options, and guarantees). If you misclassify the lease (e.g., you classify a finance lease as an operating lease), you’ll get most of the remainder of the question or TBS wrong. The exam blueprint explicitly requires calculations and entries.
How to study leases efficiently:
Use a repeatable process:
- Classify the lease and identify included components.
- Calculate the lease liability.
- Determine the ROU asset.
- Record initial and subsequent entries.
Practice just enough to avoid being trapped by common twists, such as variable payments, options, and residual value guarantees (RVG).
The Bottom Line on Skipping FAR Topics
It’s impossible to outguess the FAR CPA Exam. Candidates who cover the blueprint and understand the fundamentals are the ones who pass. Skipping topics leads to high-risk gaps that, statistically, will be exposed on the exam. Instead of developing a minimum viable proficiency, learn how to:
- Recognize topics quickly.
- Perform basic calculations.
- Make or adjust required entries.
UWorld CPA Review is a great program to achieve this. It helps you strategically approach each exam topic through hundreds of high-yield videos, streamlined study guides, and realistic MCQs and TBS. As you complete the course, SmartPath Predictive Technology® analyzes your performance and keeps you on track to pass.
You don’t need to be perfect to pass the CPA Exam, but you do need to know what’s on it. One of the worst feelings you can have on the exam is coming across a topic you intentionally skipped. Make an effort to familiarize yourself with every tested topic, and success will follow.
