How I Scored a 95 on FAR: My Study Approach
The FAR exam can be daunting, given both the quantity of content and the wide range of topics. This article will walk you through my study approach for FAR along with the most important topics you need to master!
Back in 2019, I passed the FAR exam with a score of 95. I also scored:
- 98 on BEC
- 91 on REG
- 90 on AUD
So I decided to launch Maxwell CPA Review to help students pass the CPA exams. Let's now jump into the content!
Want to see my complete CPA study framework?
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Get My Free CPA 101 CourseFAR Exam Structure
What You'll Face:
- 50 Multiple Choice Questions (least MCQs of any exam)
- 7 Task-Based Simulations (calculation-heavy)
Skill Testing Breakdown:
- Only 5-15% tests pure memorization
- 85-95% tests application and analysis
This means FAR is not about reciting rules - it's about applying them through calculations.
My Study Approach
Study Schedule Breakdown:
- Duration: 8 weeks
- Monday-Friday: 2 hours per day
- Saturday-Sunday: 5 hours per day
- Weekly Total: ~20 hours
- Total Hours: ~160 hours
Weekday Routine (Monday-Friday)
Focus: New Content (2 hours)
- Review outline (10-15 minutes)
- Watch video lectures and take notes
- Immediately practice questions on what I just learned
This ensured same-day reinforcement of new concepts.
Weekend Routine (Saturday-Sunday)
Focus: Review & Practice (5 hours/day)
- NO new content
- Review the week's content using my study outline
- Run as many MCQs and task-based simulations as possible
Weekends were consolidation days. If you want to see exactly how I structure my study routine with practice questions and real examples, you can check out my Free CPA 101 course.
Final Two Weeks
- Two weeks out: Take Practice Exam #1, identify 5 weak areas
- 10 days later: Take Practice Exam #2
- Final stretch: Review outline repeatedly, focus on patterns
Game-Changing Tip: Use Excel
The actual FAR exam provides a spreadsheet tool (called SpreadJS) that has all the same functionality as Excel.
Why Excel is Essential:
- Fewer calculation errors - Use cells instead of handwriting
- Review before submitting - Check your work systematically
- Identify mistakes - Catch errors you'd otherwise miss
Practice with Excel while studying. It becomes a massive advantage on exam day.
Most Important Topics to Master
These topics appear repeatedly and carry significant weight on the exam.
1. Cash Flow Statement
Master the three categories:
- Operating activities: Day-to-day business operations
- Investing activities: Long-term assets (purchase/sale of fixed assets)
- Financing activities: Raising cash through debt or equity
Key Rule to Memorize:
• If assets increase then cash flow decreases
• If liabilities increase then cash flow increases
Pattern Recognition:
Once you have your first entry in a specific section, all following related entries go in that same section.
Example: If purchasing a fixed asset is an investing outflow, then selling that asset is an investing inflow.
Indirect Method Focus: Start with net income, then add back non-cash items (like depreciation) and adjust for changes in working capital accounts.
2. Accounting for Leases (Lessee Perspective)
Two types of leases:
Finance Lease
Like purchasing an asset with payments
- Interest expense
- Amortization expense
Operating Lease
Like a rental agreement
- Single lease expense
- Straight-line method
Initial Recording (Both Types):
Dr. Right-of-Use Asset (at present value)
Cr. Lease Liability (at present value)
Study Tip: Write out all entries from start to finish of the lease lifecycle. This builds true mastery.
3. Consolidated Financial Statements
Core Elimination Entry (Memorize This!):
Dr. Subsidiary's Equity (100%)
Cr. Parent's Investment in Subsidiary
Why? A parent owning a subsidiary is like saying "I own myself." We eliminate this redundancy.
Then layer in (when applicable):
- Fair value adjustments (debit)
- Goodwill (debit)
- Bargain purchase (credit)
- Non-controlling interest (credit, if ownership less than 100% but greater than 50%)
Eliminating Entries (Intercompany Transactions)
My Approach:
- Write the journal entry from the parent's perspective
- Write the journal entry from the subsidiary's perspective
- Determine what should have been recorded if the intercompany transaction never happened
- Compare to what was actually recorded
- The difference = your eliminating entry
4. Earnings Per Share (EPS)
Two calculations you must know:
Basic EPS
Key Skill: Calculate weighted average shares
Example: If you have 100,000 shares all year, then issue 12,000 more shares on December 1st:
- 100,000 shares × 12/12 = 100,000
- 12,000 shares × 1/12 = 1,000
- Weighted average = 101,000 shares
Calculate each layer separately based on how many months it was outstanding.
Diluted EPS
Assume all convertible securities convert to common stock.
If Convertible Bonds Convert:
- Numerator: Add back interest expense (net of tax)
- Denominator: Increase by new shares
If Preferred Stock Converts:
- Numerator: Add back preferred dividends
- Denominator: Increase by new shares
Break it into layers. Always.
5. Debt and Equity Securities
When a business owns bonds or stocks, classification determines how we record unrealized gains and losses:
Trading Securities
• Short-term holding to profit from price changes
• Unrealized gains/losses go to Income Statement
Available-for-Sale Securities
• Not short-term, but not holding to maturity either
• Unrealized gains/losses go to Other Comprehensive Income
Held-to-Maturity Securities
• Bonds held until maturity
• No unrealized gains/losses recorded
6. Accounting for Equity Investments
Method depends on ownership percentage:
Less than 20% Ownership
• Use adjusted cost method
• No significant influence
• Recognize income only when dividends received
20-50% Ownership
• Use equity method
• Recognize investment income based on ownership %
• Example: 30% ownership of company with $100,000 net income = $30,000 investment income
More than 50% Ownership
• Majority stake = consolidation
• Consolidate financial statements
Powerful Study Technique
Download real-world financial statements:
- For-profit company: Search "[Company Name] 10-K report"
- Government: Search "[Your State/County] annual financial report"
- Non-profit: Search "[Organization Name] annual financial report"
Why this works:
The FAR exam can be overwhelmingly theoretical. Seeing how these rules apply in actual financial statements makes theory concrete and reduces confusion dramatically.
Conclusion
The FAR exam can be challenging, but if you master these high-yield topics, use Excel effectively, and follow a structured study approach, you'll be well on your way to passing.
I hope that reading this article has put you one step closer to passing the FAR exam!
About the Author
Kyle Ashcraft is a CPA that scored a 90+ on all four CPA exams. Kyle founded Maxwell CPA Review, which is an exam-prep company that offers video courses and private tutoring.
Kyle can be reached at MaxwellCPAreview@gmail.com or by visiting MaxwellCPAreview.com.
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