Hello, CPA candidates! In this article, we will talk about all the upcoming CPA Exam changes. Some of these changes will go into effect starting this month, while others will not go into effect until January 2016. Your online materials will update automatically with these changes, so no need to worry about a new edition until 2016!
The areas affected by the changes are as follows:
- Compilation and Review Services
- General Principles for Engagements
- Preparation of Financial Statements
- Using the work of Internal Auditors
- Annual Amounts
- Tax Return Disclosure
- IRC Section 263A
Financial (changes most likely not testable until January 1, 2016):
- Fair Value Measurement
- Practical expedient for measuring defined benefit plan assets
- Cloud Computing Arrangements
- Debt Issuance Costs
- Private Companies Accounting – Recognition of intangible assets
- Elimination of Extraordinary Items
No changes affect the Q3/Q4 2015 exam
For more detailed information on the changes coming to the Auditing, Regulation, and Financial sections, read on below.
Auditing and Regulation Q3/Q4 Updates
These changes were made to our materials in early June to help customers prepare for the Q3/Q4 version of the exam. Auditing updates reflect SSARS 21 and AU-C 610, while Regulation updates include changes to the annual amounts based on the tax laws effective January 1, 2015.
1. SSARS 21 – This update affects the material on compilation and review services in Study Unit 19. Summary: The ARSC released SSARS No. 21 in October 2014. The new, clarified pronouncement is effective for periods ending on or after December 15, 2015. However, because early implementation is permitted, it may be adopted for engagements performed on financial statements dated after October 2014. Thus, it is testable on the CPA exam beginning July 1, 2015.
SSARS 21 includes the following sections. Substantive changes for each section are noted. AR-C 60: General Principles for Engagements – Material referencing the preparation of financial statements has been included. AR-C 70: Preparation of Financial Statements – A report is not required for financial statements that fall under this section, even when they are expected to be used or provided to a third party. However, a legend or disclaimer stating that no assurance is provided must be added. AR-C 80: Compilation Engagements – The submission requirement is eliminated. A report is always required for financial statements that fall in this section. The text of the report has been simplified. AR-C 90: Review of Financial Statements – Most of the previous separately issued SSARSs on reviews have been integrated into this section.
2. AU-C 610 – This update affects Study Unit 4, Subunit 1. Summary: The ASB issued AU-C 610, Using the Work of Internal Auditors, in February 2014. The new, clarified pronouncement is effective for periods ending on or after December 15, 2014. No early application is permitted. Thus, it is testable on the CPA exam beginning July 1, 2015. The clarified pronouncement adds the requirement that the external auditor consider whether the internal audit function used a systematic and disciplined approach in their work when deciding whether to use the work of the internal auditor.
Gleim released comprehensive updates to our Tax material based on the tax laws effective January 1, 2015. These updates include changes to annual amounts as well as an expansion of tax return disclosure material and coverage of IRC Section 263A.
Financial 2016 Updates
– ASU 2015-7 Fair value measurement – Net assets measurement and ASU 2015-4 Pensions – Practical expedient for measuring defined benefit plan assets:- These ASUs are not significant in the context of the CPA exam. We do not believe candidates need to worry about them and should instead focus on items that will impact their scores.
– ASU 2015-5 Cloud computing arrangements: This ASU clarifies how to account for fees paid by a customer in a cloud computing arrangement and guides customers regarding whether a cloud computing arrangement includes a software license. This topic will be updated for January 1, 2016, when this ASU is eligible for testing.
– ASU 2015-3 Debt issuance costs: This ASU will change the current presentation of debt issuance costs. Currently these costs are presented as a separate asset (deferred charges). ASU 2015-03 requires that debt issuance costs should be deducted from the carrying amount of the debt. The material will be updated for January 1, 2016, when this ASU is eligible for testing.
– ASU 2014-18 Private companies’ accounting – Recognition of intangible assets in a business combination: According to this ASU, in a business combination, a private company may apply an accounting alternative that allows it to not recognize-certain intangible assets separately from goodwill. While ASU 2014 – 18 is testable beginning Q3 2015, this topic is not significant and will likely have no impact on the CPA exam. Therefore, we have and will continue to disseminate the basics of this issue, but we will not include the changes in our materials until our next edition so that candidates can focus on topics that will impact their scores.
– ASU 2015-1 Elimination of extraordinary items: This ASU, which eliminates the concept of extraordinary items from U.S. GAAP, will not affect the CPA exam until Q1 2016. Our 2016 edition of CPA Review FAR will reflect this change.
With the Gleim Premium CPA Review System, your materials will always remain up-to-date under our Access Until You Pass Guarantee. If you have any questions regarding the updates we’ll be making to our materials or would like to discuss your CPA Exam preparation, simply call us at 800-874-5346. Good luck with your studies!
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