About the FAR CPA Exam

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Are you wondering what it will take to pass the FAR CPA Exam? The Financial Accounting and Reporting (FAR) section is something almost every CPA candidate is intimidated by. This is because it’s considered to be the longest, most difficult, and highly comprehensive section of the CPA Exam.

According to the American Institute of Certified Public Accountants (AICPA) Blueprints, FAR requires CPA candidates to have a strong understanding of US GAAP, including financial statement concepts and standards, typical financial statement items, specific types of transactions and events, governmental accounting, and reporting, and nongovernmental and not-for-profit accounting and reporting.

What Is The FAR CPA Exam Format?

There are five testlets in the FAR Exam: two testlets consisting of multiple-choice questions (MCQs) and three testlets consisting of task-based simulations (TBSs). The MCQ component of FAR accounts for 50% of the exam score, while the TBS segment accounts for the remaining 50%.

structure of FAR CPA Exam structure of FAR CPA Exam

Pre Exam

There is a welcome or launch code that flashes on your screen for 5 minutes before you commence the exam. After that, another screen that presents the confidentiality code remains for an additional 5 minutes. Hence, there is a total of 10 minutes for your pre-exam screen.


The five testlets of the FAR CPA exam consist of two types of questions: Multiple Choice Questions and Task-Based Simulations.

  1. Multiple-Choice Questions (MCQ) - One question with four potential answers. MCQs make up 50% of the FAR exam.
  2. Task-Based Simulations (TBS) - Questions that require you to apply practical knowledge. This could include filling out a document or finishing a research question. The TBSs make up 50% of the FAR Exam.

Multiple Choice Questions – MCQs are tested in 2 of the individual testlets with 33 questions per testlet. So, there are a total of 66 multiple-choice questions (MCQs) on the FAR CPA Exam. 12 are pretest questions which means they will not be graded. These questions are typically one sentence or a paragraph long and have four possible answer options.

Task-Based Simulations –TBSs are practical questions that require the candidates to type out answers. These may include research-based questions, completing a financial statement, filling out a form, or making journal entries. The TBSs are tested in 3 testlets containing 2 to 3 task-based simulation questions per testlet. There is a total of 8 task-based simulations, among 1 of which is pretested.

An optional 15-minute break that does not count toward the 4-hour test period is provided after the 3rd testlet.

Post Exam

Post Exam, you will be prompted to complete a five-minute survey regarding your exam experience. This is conducted in order to obtain candidate feedback.

Allocated Time

The FAR CPA Exam lasts for four hours total. There is a 10-minute introduction before you start the actual exam. The welcome screen takes the first 5 minutes, followed by a confidentiality screen which takes another 5 minutes. A standard 15 minutes break is allowed only after the third testlet, during which the timer is paused. In addition, there are two more optional breaks as well. These optional breaks are not excluded from the total duration of your exam, so the timer continues to run during these optional breaks. Finally, post-exam, there is a 5-minute survey.

Optimal Time Management For The FAR CPA Exam

Testlet Question Type Suggested Time
Testlet 1 33 MCQ 41 Minutes
Testlet 2 33 MCQ 41 Minutes
Testlet 3 2 TBS 36 Minutes
15-minute break (does not count toward total exam time)
Testlet 4 3 TBS 54 Minutes
Testlet 5 3 TBS 54 Minutes
Extra Time 14 Minutes
Total Time 240 Minutes

How Many Hours Should I Study for the FAR CPA Exam?

CPA Candidates frequently ask about the number of hours they should study in order to pass the FAR section of the CPA exam. The AICPA recommends spending a minimum of 300 to 400 hours studying for the CPA Exam. That equates to 80 to 100 hours of study time for each section.

However, no two CPA candidates are alike. Each person learns at a different pace and has different learning styles. Also, certain portions of the study material may take longer to get through than others. Take your study style into account and set a realistic expectation for how long it will take to study for the FAR CPA Exam. Understanding your own learning style and limitations is vital to passing.

What is Tested on the FAR Exam - Content & Topics

The substance of the FAR section, like the other three parts of the CPA Exam, is unique. It covers the financial accounting aspect of the profession. FAR questions are based on four content areas, which are mentioned below with percentages detailing how much each concept is tested on the exam:

  • Conceptual framework and standard-setting
  • General-purpose financial statements: for-profit business entities
  • General-purpose financial statements: nongovernmental, not-for-profit entities
  • Public company reporting topics
  • Financial statements of employee benefit plans
  • Special purpose frameworks
  • Cash and cash equivalents
  • Trade receivables
  • Inventory
  • Property, plant and equipment
  • Investments
  • Intangible assets
  • Payables and accrued liabilities
  • Long-term debt
  • Equity
  • Revenue recognition
  • Compensation and benefits
  • Income Taxes
  • Accounting changes and error corrections
  • Business combinations
  • Contingencies and commitments
  • Derivatives and hedge accounting
  • Foreign currency transactions and translation
  • Leases
  • Nonreciprocal transfers
  • Research and development costs
  • Software costs
  • Subsequent events
  • Fair value measurements
  • Differences between IFRS and U.S. GAAP
  • State and local government concepts
  • Format and content of the Comprehensive Annual Financial Report (CAFR)
  • Deriving government-wide financial statements and reconciliation requirements
  • Typical items and specific types of transactions and events in governmental entity financial statements

What Are The Skills Tested On The FAR Exam?

The skills required for the FAR CPA Exam are divided between remembering & understanding, application, and analysis.

  • (10-20%) Remembering and understanding is the process of observing and comprehending the significance of an area utilizing the acquired knowledge.
  • (50-60%) Application means the usage or display of the acquired knowledge, concepts, and techniques.
  • (25-35%) Analysis is the investigation of the interrelationships between different areas to uncover causes and find confirmation to support conclusions.
  • (5-15%) Evaluation is the assessment of a situation using judgments to reach a conclusion.
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How is the FAR CPA Exam Scored and Graded?

Scores for the FAR Exam are given on a scale of 0 to 99. All CPA Exam parts must be passed with a score of 75 or higher. This does not necessarily imply that you must answer 75% of the questions correctly. The numeric value of a question is determined by the difficulty level. It means difficult questions have more worth than easy or moderate questions. If you answer 5 difficult questions and 5 moderate or easy questions correctly, you will score more for the difficult questions.

The CPA Exam is not curved. The AICPA employs question weights instead of altering your score based on how your cohort performs. These weights are determined based on how candidates performed during the pre-testing of the questions.

Steps in computing FAR exam score Steps in computing FAR exam score

The FAR CPA Exam's MCQ testlets account for half of the overall score. The remaining 50% comes from the TBS testlets. The first set of MCQs is usually of medium difficulty. If the candidate performs well on the first testlet, the subsequent testlets are likely to be increasingly difficult. However, if the candidate performs poorly on the first testlet, the second testet will be of moderate difficulty. This process is known as multistage testing.

The TBS scores are pre-programmed and are not modified on the basis of the candidate’s performance. Partial scoring is also applied for TBSs as they include multiple responses. You are eligible to earn credit for each accurate solution. The multistage testing method is only applicable for MCQ testlets.

FAR CPA Exam Testlet Selection FAR CPA Exam Testlet Selection

FAR CPA Exam Pass Rates

Financial Accounting and Reporting is a broad section that covers financial management, government accounting, fund accounting, and other topics. It is the most challenging section of the CPA Exam, according to candidates we surveyed. For a long time, it has had the lowest passing rate among the four sections. This is most likely due to the vast amount of material that FAR covers, as well as the necessity to truly comprehend the concepts rather than simply memorize them.

How to Study for the FAR CPA Exam Section

Many candidates are intimidated by the FAR Exam content before they even begin studying. When studying for FAR, you must realize the importance of segmenting easy topics from the more difficult ones, and allocating study time accordingly. For example, dedicate plenty of study time to topics that are more difficult to understand, such as pensions, and dedicate less study time to topics that you already have a firm grasp on.

Analyze the Study Material

Reading through every chapter of your study material is the best approach to preparing for the FAR CPA Exam. You'll be able to tell which portions of your study material require more attention and which are more simple to grasp. Once you have a good gauge of where your strengths and weaknesses lie, establish a study plan and concentrate on the hardest sections.

Watch Lectures

You will have a general comprehension of the topics once you have finished reading your basic study material. Watch lectures on the topics to gain a broad understanding of the subject and jot down the main aspects that will help you construct concrete exam answers.

Work on Multiple-Choice Questions

Finally, you should attempt to answer all of the multiple-choice questions. Take notes on the questions you got wrong, and the ones you answered correctly. Not only should you read why the answer is correct; but you should also make sure you understand why the other options are incorrect.

The multiple-choice questions for FAR are long and draining because most of them require calculations. So remember that lots of practice and patience are required for FAR. If you can figure out what’s easy and what’s hard for you and use your time wisely, you’ll get through it soon enough! Here are some tips to utilize to study for FAR effectively:

  • After each full chapter, create practice quizzes based on the content of that chapter. Include questions that you answered incorrectly or questions that you have not seen yet. This will give you a good range of different ways questions can be asked on the same topic, providing lots of coverage.
  • Using the timer when practicing FAR quizzes will be helpful because of the amount of calculations involved—more so than AUD, BEC, or REG. It’s easy to get caught up in numbers and formulas under pressure, so having the timer on really ensures that you are managing time wisely. If you find that time is running out and you still haven’t decided on an answer, you can use the bookmark feature to go back and review the question(s) later.
  • After completing each quiz, understand the material better by reading the answer explanations for all the questions. This includes both incorrect and correct answers. We recommend reading through the entire answer explanation because it enhances and deepens understanding of the concepts being learned, leading to better retention and recall on exam day.

Focus on Governmental, NGO, and Non-Profit Accounting

Not everyone is well-versed with specific governmental or non-profit accounting. If you are one of them, spend some significant time reviewing these topics. They account for a larger portion of the FAR CPA Exam. Knowing how they work and how they differ from for-profit businesses will be immensely helpful.

FAR CPA Exam Study Tips

We recommend using some of the study techniques listed below:

  1. Focus on the FAR Exam first as it requires the most amount of time to prepare. FAR is easier for recent college graduates who can still remember college accounting course materials well, so we strongly recommend taking FAR while the material is still fresh.
  2. Understanding the details of financial statements makes learning the material easier. Additionally, it helps you analyze questions on the exam more quickly. If your study efforts are getting compressed, working knowledge of the statements allows you to logically examine most questions from the study materials.
  3. Even though you are very familiar with the material, you will still need to practice the questions to keep up a good pace at the time of testing.
  4. FAR has so many chapters, it is really easy to forget what you have learned. Hence, frequently review the previous chapter while you study the new ones.
  5. Partner with a CPA Review course that uses in-depth answer explanations, has engaging lectures, and integrates robust tracking and reports into their course materials to help you study more efficiently and effectively.
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We recommend taking the FAR CPA Exam first for several reasons:

  • FAR requires the longest study lead time, which will not count against your 18-month window if it is your first exam
  • FAR is the only section with material that overlaps all three other sections
  • FAR is arguably the most difficult section, offering a great opportunity to set the tone for your studies

To pass the FAR, you’ll need to be familiar with technical financial accounting standards and be able to perform accounting math in a timed environment. This demands a strong understanding of the material as well as numerous practice quizzes.

FAR is regarded as the most difficult section of the CPA Exam, with consistently low success rates (just around 50% in 2020). The amount and variety of knowledge you must know to pass this exam makes it the trickiest, according to most candidates. The FAR Exam will assess your understanding of basic accounting principles that include capital leases, bonds, and balance sheets. Furthermore, it tests your dedication and time management skills as well.

Business combinations, leases, bonds, stockholders equity, and a mix of government and non-profit organizations are the most heavily tested content topics for FAR.

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Take a look at the sample questions of the FAR CPA Exam and prepare yourself to achieve a great score.

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