Hello readers! Welcome to another informative guide that will enlighten you with the facts to pass the FAR section of the CPA exam.

To acquire the CPA- Certified Public Accountant license exam, the CPA candidates must prepare diligently and pass each of the four sections- BEC (Business Environment and Concept), REG (Regulation), AUD (Auditing and Attestation), and FAR (Financial Accounting and Reporting).

By the end of this article, you will know everything you need to pass the most difficult section of the Uniform CPA Examination – the FAR Exam.

Here is what we will cover in this article:

About FAR CPA Exam
FAR Exam format
FAR Exam content and grading
Study tips for FAR CPA preparation

Without further ado, let us ease the stressful exam aura around you- because knowledge is power!

About FAR CPA Exam

Throughout the history of the CPA examination and statistical data reported by AICPA – (American Institute of Certified Public Accountants), the FAR section has had the lowest pass rate of all.

You may wonder why.

FAR stands for Financial Accounting and Reporting. According to the exam blueprints, this CPA exam section covers a wide array of broad topics to test the candidate’s knowledge of accounting standards.

FAR emphasizes accounting principles, including general-purpose financial statement reporting for non-profit business organizations, and handles the legal responsibilities of government entities. 

The professional responsibilities of a CPA licensed person involve demonstrating and analyzing practical accounting and reporting skills. This is why, whether you are into accounting or not, you need to get those calculations, transactions, and financial stuff right to pass FAR.

FAR Exam Pass Rate

FAR incorporates difficult mathematical calculations that can be challenging to solve in the limited exam time – the biggest reason most of the candidates do not get the desired exam score.

The pass rate for the FAR exam hovers around 50%, and mostly it is even below 50.

The easiest CPA exam section, BEC, has a pass rate of 62%, REG is second in line with 59%, and AUD is 53%.

Looking at these ratios; the entire CPA exam has a pass rate of 50%.

Do not give up on your CPA dream yet.

Even though the pass rate might not look favorable, the majority of candidates manage to pass all the sections by learning about the exam format, content, and a thorough study plan.

The road to a CPA career might be difficult, but the future is promising. CPA licensed professionals to earn at least 10-15% more than regular accountants or their non-licensed peers.

CPA Exam Format

Before preparing for the exam or setting a study plan, it is important to learn the exam format. Because you cannot prepare for the exam if you have no idea what the questions will look like. 

In today’s digital era, people can easily use the internet to find study materials and CPA exam blueprints.

However, so much information and not knowing where to go can be overwhelming.

And with your CPA exam round the corner, we do not want you to put any extra burden on your already stressed mind.

This is why we have summarized the exam format to help you understand what sort of questions you will be facing. Furthermore, it will also help you with time management during the actual exam. 

Every CPA candidate must sit for the pre-exam before the actual FAR exam based on two sections.  

Even though the pre-exam does not contribute to the exam score, you need to give it your best shot. The better you do in the pre-exam, the more likely you will perform well in the actual exam.

The FAR actual exam is structured into two different types of questions contained in different parts called testlets.

There are five testlets in total, each with different questions and difficulty levels.

Two of the testlet contain the MCQs, while the rest are TBSS based.

MCQs and TBSS are further divided into:

  • Pretest questions– The CPA candidates must attempt some questions right before the actual exam begins. 

AICPA sets the pretest to analyze the candidates’ skills and determine the difficulty level for the actual exam. 

However, the pretest answers are not marked and do not contribute to the exam score. 

  • Operational Questions– These are the questions part of the actual FAR exam. They have varying difficulty levels and determine the exam score of the candidate. 

Here are the FAR exam question types:

  • Multiple Choice Questions – MCQs, as the name suggests, have multiple or 4 precise answers listed under a question. 

Out of the 4, only 1 is correct; the question can be a one-liner or an entire concept-based paragraph. 

There are two MCQ testlets in the actual exam, each containing 33 questions, totaling 66. Of these, 12 are the pretest MCQs, and 54 are the operational MCQs.

  • Task-Based Simulations – TBSS are studies based on real-life case calculations or practical questions, for which the candidate has to write or “type-in” the answers. 

TBSS is designed to test the practical and analytical skills of individuals, as well as the conceptual knowledge of the candidate.

Three testlets cover a total of 8 TBSS, 1 of which is a pretest question.

Here is what the FAR CPA exam format looks like:


  • Section 1: Welcome and Launch Code
  • Section 2: Confidentiality and Section Information

Actual Exam:

  • Testlet 1: 33 MCQs
  • Testlet 2: 33 MCQs
  • Testlet 3: 2 TBSs
  • Testlet 4: 3 TBSs
  • Testlet 5: 3 TBSs

If you want to get through the FAR exam on your first attempt, you must get a maximum of 74 questions right. 

The question is, how do you do that?

Keep reading to know-how.

Time Allocation

  1. Pre-exam: For each section’s pre exam, the candidates get 5 minutes. As there are two sections, it takes 10 minutes of mind-charging questions to prepare the candidate for what is coming up next. 
  1. Exam: The actual exam lasts for four hours with one 15-minute break after the first TBSS testlet. The candidate can also leverage two optional breaks. One after the first MCQ testlet and one after the second MCQ testlet.

However, take these breaks only if you direly need one because these optional breaks do not come with any extra time. They are allotted within the exam time frame while the clock keeps running.

Even if there are no difficult questions in the exam,  time management can be a big issue as the answers can be tricky, lengthy, or mathematically complex. 

Here are some time management tips to help you sail the FAR exam ship smoothly!

  • Every testlet has questions with different levels of difficulty. In contrast, you may be able to solve some instantly, while others may take a good amount of time. Therefore, allocate the time accordingly.  
  • If you are skeptical about an answer, do not waste your time on it. Just mark it and solve the rest of the test paper. Once you are done and have extra time, come back to the marked one(s), review them and then settle for the answers. 
  • Include as many practice exams in your study plan as you can because practice makes a human perfect. 

The best way to master the FAR CPA questions is to learn the content, tackle the time, and play to your strength.

Once you give it your all, there will be no stopping you. 

FAR Exam Content and Grading Structure

The Financial Accounting and Reporting exam section of CPA has extensive and complicated topics divided into four content areas.

Content AreaPercentage of Questions
Conceptual Framework, Standard Setting and Financial Reporting 25-35%
Select Financial Statement Accounts30-40%
Select Transactions20-30%
State and Local Government 5-15%

All of the content areas are set to analyze the skill levels of the CPA candidates. There are three skill levels that assess the candidate’s performance.

Skill LevelExam Content Allocation Percentage 
Understanding and Remembering10-20%

Given the skill-testing criteria, half of the FAR exam is set to judge the concepts and their successful application in scenarios by the candidate.

The CPA professional is responsible for handling the accounts and all legal laws and aspects related to them. This is why AICPA sets the majority of questions to test the practical and demonstrative skills and analyze if the individual is fit to apply these real-life skills. 

It is not a mystery anymore why FAR is the most difficult section of the CPA exam. 

Here is a content breakdown for you to help you prepare for each content area and excel in each skill set.

Conceptual Framework, Standard-Setting, and Financial Reporting

  1. Conceptual framework and standard setting for nonbusiness entities
    • Conceptual framework
    • Standard setting process
  2. General purpose financial statements: for-profit business entities
    • Balance sheet/statement of financial position
    • Income statement/statement of profit or loss
    • Statement of cash flows
    • Notes to financial statements
    • Statement of comprehensive income
    • Statement of changes in equity
    • Consolidated financial statements
    • Discontinued operations
    • Going concern
  3. General purpose financial statements: nongovernmental, not-for-profit organizations  
    • Statement of financial position
    • Statement of activities
    • Statement of cash flows
  4. Public company reporting topics
    • SEC reporting requirements
    • Earnings per share and segmented reporting
  5. Financial statements of employee benefit plans
  6. Special purpose framework

Select Financial Statement Accounts

  1. Cash and cash equivalents
  2. Trade receivables
  3. Inventory
  4. Property, plant, and equipment
  5. Investments
    • Financial assets at fair value
    • Financial assets at amortized cost
    • Equity method investments
  6. Intangible assets
  7. Payables and accrued liabilities
  8. Long-term debt
    • Notes and bonds payable
    • Debt covenant compliance
  9. Revenue recognition
  10. Compensation benefits
    • Compensated absences
    • Retirement benefits
    • Stock compensation
  11. Income taxes

Select Transactions

  1. Accounting changes and error corrections
  2. Business combinations
  3. Contingencies and commitments
  4. Derivatives and hedge accounting
  5. Foreign currency transaction and translation
  6. Leases
  7. Nonreciprocal transfers
  8. Research and development costs
  9. Software costs
  10. Subsequent events
  11. Fair value measurements
  12. Differences between IFRS and U.S. GAAP

State and Local Government

  1. State and local government concepts
    1. Conceptual framework
    2. Measurement focus and the basis of accounting
    3. Purpose of funds
  2. Format and content of the financial section of the comprehensive annual financial report (CAFR)
    1. Government-wide financial statements
    2. Governmental funds financial statements
    3. Proprietary funds financial statements
    4. Fiduciary funds financial statements
    5. Notes to financial statements
    6. Management’s discussion and analysis
    7. Budgetary comparison reporting
    8. Required supplementary information (RSI)
    9. Financial reporting entity
  3. Deriving government-wide financial statements and reconciliation requirements
  4. Typical items and specific types of transactions and events: measurement, valuation, calculation, and presentation in governmental entity financial statements
    1. Net position and relevant components 
    2. Fund balances and relevant components 
    3. Infrastructure assets and capital assets
    4. General and proprietary long-term liabilities
    5. Interfund activity, including transfers
    6. Nonexchange revenue transactions
    7. Expenditures and expenses
    8. Special items
    9. Budgetary accounting encumbrances
    10. Other financial sources and uses

FAR Exam Grading/ Scoring Structure

The total exam score for the FAR exam is calculated from the MCQ questions and 50% from the TBS questions, just like all other CPA exam sections.

The wrong answers are not penalized nor negatively marked. Therefore, attempt all the questions even if you do not know the right answer.

 If you get your “guess” right, you will score better in the exam, but if you get it wrong, well, you will be getting the same score as if you leave the questions unanswered. 

So, there is no harm in attempting.  

MCQs and TBSS are graded according to the level of difficulty of the questions.

  • Scoring for Multiple Choice Questions

The first question of the MQ testlet is usually at a “medium” level of difficulty. Moving further, the difficulty level for the rest of the MCQs can range from medium to hard.

For the MCQs, your performance on the first testlet determines the difficulty level for the second testlet, therefore, the better your performance, the harder the questions and the more you score! 

For CPA exam questions, there is no “easy way out.” It is always the harder way out. 

  • Scoring for Task-Based Simulation Questions

TBSS is nothing like the MCQs, not in format, not in grading. 

The questions for each testlet are pre-set; your performance on one testlet has no impact on the other testlet, however, you can acquire partial credits if you get parts of the TBSS right. 

From exam format to content and grading, your mind is well–equipped with all the preparatory stuff you need to know about FAR. 

Now, it is time to recruit up-to-date study material and work as hard as possible to pass the exam in one go.

Study Tips for FAR CPA Exam Preparation

FAR can be hard, but it does not mean you have to fear it or lose hope. On the contrary, your interest and prior accounting experience can be a plus.

However, worry not; even if you have zero knowledge about finances, you can still pass the exam by forming a study schedule based on the following study tips.

  • With FAR, make no delays – The content areas in FAR align with what you have learned in high school in your Financial Accounting courses. 

Therefore, it is better to take FAR as soon as possible, especially when your accounting knowledge is still intact in your brain. 

Moreover, the CPA exam has a testing window; you only have 18 months to clear all four sections once you give the first section or exam. 

So choosing FAR as your first CPA exam allows you to prepare in an unrestricted time frame, and most of the FAR-related concepts overlap with the rest of the CPA sections. 

So, if you prepare for FAR first, it might be easier to get through the rest of the CPA exams.

  • Keep track on update – You have to keep track of these updates and study from the relevant resources. 

You can use reliable CPA exam review courses like Becker, Gleim, Surgent, and Roger that regularly update their content and provide you with practice past papers and handy CPA exam tips.

  • Spend more time on the content that weighs more – The Governmental, NGO, and Non-Profit Accounting topics form the bulk of the FAR exam. 

Some of you would have taken the classes for these topics in college, while some – or most of you would have skipped them. 

Therefore, to ace the CPA FAR exam, you must cover every aspect of these topics and spend more time practicing the relevant questions. 


Certified Public Accountant- CPA Exam is complicated and challenging. However,  you can get through all the CPA exam sections, even FAR, on your first try if you equip your mind with the right information and study from updated, reliable resources.

Get accounting experience by enrolling in an internship program or even a job if you have to. These small steps make you a lot closer to your CPA license. 


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