Financial Accounting and Reporting Foundation Exam

CPA Australia is a member of the International Federation of Accountants (IFAC)
CPA Australia's education materials are developed in line with IFAC's International Education Standards
The foundation exams provide an opportunity to demonstrate competence in areas required for Associate membership of CPA Australia

Study plan:
- Review all learning objectives thoroughly
- Use weightings to ensure enough time for each learning objective
- Don't leave study to the last minute
- Be confident in understanding each learning objective
Study techniques:
- Apply concepts rather than just memorizing responses
- Use additional resources if needed
Tips for exams:
- Plan to arrive at the exam center at least 15 minutes before the exam
- Manage your time carefully
- Answering multiple-choice questions:
  - Read the question thoroughly
  - Read the options and eliminate obviously wrong answers
  - Consider the most likely correct answer
  - Flag questions for review if unsure
- Review incomplete or flagged questions at the end of the exam

Navigation functions:
- Selecting answers using the mouse or keyboard
- Moving through the exam using 'Next' or 'Previous' buttons
- Using the 'Navigator' button to view a list of all questions and their status
Formulae:
- A 'Formulae' button is available in the exam for this subject
- The 'Formulae' button allows you to view the formulae provided in the Study guide
Selecting questions for review:
- Use the 'Flag for Review' flag or ALT + F to mark a question for review
- Review screen lists all exam questions, with flagged questions marked

Modules 1 and 2 focus on accounting concepts and principles, and theories relevant to financial accounting and reporting
Modules 3, 4, and 5 cover the preparation and presentation of financial statements for limited liability companies
Module 6 covers the analysis and interpretation of financial statements### Module 1: The Financial Reporting Environment
The module introduces the need for financial information and the users of financial information.
Financial reporting involves producing financial statements for users, which are regulated by laws, Generally Accepted Accounting Principles (GAAP), and International Financial Reporting Standards (IFRS).

Accounting is regulated by:
- Local statute (company law)
- Stock exchange requirements
- Accounting standards (IFRS)

The IASB is responsible for setting International Financial Reporting Standards (IFRS).
The IASB's objectives:
- To develop high-quality, understandable, and enforceable global accounting standards
- To bring about convergence of national standards and IFRS

The IASB's Conceptual Framework is the international conceptual framework for financial reporting.
The framework's purpose:
- To assist the IASB in developing IFRS based on consistent concepts
- To assist preparers in developing consistent accounting policies when no IFRS applies
- To assist all parties in understanding and interpreting IFRS
Benefits of the Conceptual Framework:
- Used as a basis for developing accounting standards
- Financial reporting based on standardized principles
- A useful reference point in situations where no standard exists

Accounting policies are specific principles and conventions adopted by an entity in preparing and presenting financial statements.
IAS 8 explains how an entity should select and apply accounting policies.

The main elements of financial statements:
- Assets
- Liabilities
- Equity
- Income
- Expenses
Financial statements where these elements are recognized:
- Statement of financial position
- Statement of profit or loss and other comprehensive income
- Statement of cash flows
Recognition criteria for each element of financial statements.### Financial Reporting Environment
Accounting standards and concepts:
- Set out accounting rules that companies must follow to give a fair presentation
- Important for international harmonisation to have one set of global accounting standards
Role of accounting standards:
- Reduce variations in methods of accounting
- May be inflexible/inappropriate in some circumstances
Accounting standards and choice:
- Fundamental qualitative characteristics of financial information: relevance and faithful representation
- Enhancing qualitative characteristics: comparability, verifiability, timeliness, and understandability
Elements of financial statements and recognition criteria:
- Assets, liabilities, equity, income, and expenses
- Recognition criteria: definition, relevance, and faithful representation

Accounting policies: principles, bases, rules, conventions, and practices used in preparing financial statements
Objective of general purpose financial reporting: provide information that is relevant and faithfully represents underlying transactions
IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors

Financial reporting: process of classifying, recording, and presenting financial data in accordance with generally established concepts and principles
General purpose financial reporting: provides information about a reporting entity's assets, liabilities, equity, income, and expenses that is useful to users of financial statements
Types of business entities: sole traders, partnerships, limited liability companies, and not-for-profit entities
Financial statements: statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, and statement of cash flows

Accounting: process of recording, analysing, and summarising transactions of a business and communicating that information to decision-makers
Financial accounting: method of reporting the results and financial position of a business
Management accounting: management information system that analyses data to provide information as a basis for managerial action
Distinction between financial and management accounting:
- Financial accounting: primary focus on providing information to external users
- Management accounting: primary focus on providing information to management for decision-making