CPA Exam: IFRS is Coming (someday)

The Spring 2009 Uniform CPA Exam Alert came out in March, but I was too busy tinkering with my site's WordPress conversion to write about it. Basically, the new Alert is an update of their release that I wrote about 11 months ago.

In short, Ethics and Independence are moving from REG to AUD; Business Structures is moving from BEC to the Business Law section of  REG;  BEC is getting a new section called “Corporate Governance” with IT getting tweaked to be tested from a management perspective; and FAR is hosting that mysterious rocker known as IFRS.

Here's a few things to consider:

– The jury is still out on the extent of IFRS that will be tested. They will release an update sometime in 2009 (my guess is that it will be on the Summer 2009 update in June).

-Yes, AUD is getting harder, but REG is getting easier. For REG, you're swapping ethics and independence for business structures…a trade I would make any day.

-The implementation date is TBD and will be announced when they update everyone on IFRS testing. My guess (and this is JUST conjecture, so don't take this to the bank) is that they will announce everything in the Summer 2009 update and give all of the CPA review companies the summer to change their materials prior to the filming and printing of their 2010 product, which will take place in the fall of this year. Expect implementation for the 2010 exams (again – just my opinion).

As I said in May of last year:

My Thoughts: Auditing will go from the easiest section to pass (?easiest? is a relative term?least difficult is more accurate, probably) to the second-hardest overnight. If I hadn?t passed AUD already, I would make passing it before the change a priority.

Here are the proposed CSOs (content specification outlines):

Auditing and Attestation (AUD)
Old: Area I Plan the Engagement (22-28%)
New: Auditing and Attestation: Engagement Acceptance and Understanding the Assignment (12-16%)

Old: Internal Control (12-18%)
New: Auditing and Attestation: Understanding the Entity and Its Environment (including Internal Control) (16-20%)

Old: Obtain and Document Information (32-38%)
New: Auditing and Attestation: Performing Audit Procedures and Evaluating Evidence (16-20%)

Old: Review and Evaluate Work Performed (8-12%)
New: Auditing and Attestation: Evaluating Audit Findings, Communications and Reporting (16-20%)

Old: Communications and Reporting (12-18%)
New: Accounting and Review Service Engagements (12-16%)

Old: N/A
New: Professional Responsibilities (including Ethics and Independence) (16-20%)

Note: the original CSO change proposal had “Auditing and Attestation:  Engagement Acceptance and Understanding the Assignment” at 51-57% and they knocked it all the way down to 12-16% in the new proposal.

They also added two new sections since last year's update: Accounting and Review Service Engagements (12-16%) and Professional Responsibilities (including Ethics and Independence) (16-20%)

Business Environment and Concepts (BEC)
Old: Business Structure (17-23%)
New: Corporate Governance (16-20%)

Old: Economic Concepts (8-12%)
New: Economic Concepts and Analysis (16-20%)

Old: Financial Management (17-23%)
New: Financial Management (19-23%)

Old: Information Technology (22-28%)
New: Information Systems & Communication (15-19%)

Old: Planning & Measurement (22-28%)
New: Strategic Planning (10-14%)

Old: N/A
New: Operations Management (12-16%)

Note: changes have been made since the original CSO change proposal in Spring 2008 to put more emphasis on Corporate Governance, Economics, and IT, and less emphasis on Strategic Planning and Ops Management

Financial Accounting and Reporting (FAR)

Old: Concepts & Standards for Financial Statements (17-23%)
New: Conceptual Framework, Standards, Standard Setting and Presentation of Financial Statements (13-17%)

Old: Typical Items in Financial Statements (27-33%)
New: Financial Statement Accounts: Recognition, Measurement, Valuation, Calculation, Presentation, and Disclosures (27-33%)

Old: Specific Types of Transactions (27-33%)
New: Specific Transactions, Events & Disclosures (27-33%)

Testing for Governmental and Not-for-Profit Accounting are not changed (8-12%)

Note: the current CSO is basically the same as the previous one

Regulation Content (REG)

Old: Ethics & Professional & Legal Responsibilities (15-20%)
New: Ethics,  Professional & Legal Responsibilities (15-19%)

Old: Business Law (20-25%)
New: Business Law (17-21%) (Independence and Ethics removed, Business Structures added)

Old: Federal Tax Procedures & Accounting Issues (8-12%)
New: Federal Tax Process, Procedures, Accounting and Planning (11-15%)

Old: Federal Taxation of Property Transactions (8-12%)
New: Federal Taxation of Property Transactions (12-16%)

Old: Federal Taxation of Individuals (12-18%)
New: Federal Taxation of Individuals (13-19%)

Old: Federal Taxation of Entities (22-28%)
New: Federal Taxation of Entities (18-24%)

note: nothing changed much since the last update

In closing: How does this affect you in 2009? Not much.

However, if you want to make sure you pass at least ONE exam in 2009, I would make it AUD. Next in line would be FAR. These new CSOs won't materially change your exam experience, but those who still have AUD on the horizon can take advantage of the current CSO before it changes in 2010 (again – my guess/opinion).

Thanks for reading.

Concert pic photo courtesy of Flickr user marfis75 under this Creative Commons license.

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18 comments

Matt W. (CA) 12 years ago

Dumb question: what is IFRS? This makes me a bit panicked considering I only have FAR and AUD left -- it appears that I better pass them before next year...

Jeff - another71.com 12 years ago

It's not a dumb question...if you don't work in an environment where you deal with SEC-related stuff, you haven't taken FAR, and you don't hang out with dudes who think it's cool to name-drop accounting terms at a club, then you may have missed IFRS talk. It's the International Financial Reporting Standards...it's what we're moving towards instead of using GAAP.

Jeff R. 12 years ago

I really think the whole idea of implimenting IFRS into the exam within the next year is a lot of talk with no actual backing. While I have no real basis for this claim, I believe that IFRS on the exam won't become a real possibility until the SEC comes out and states when they want IFRS implementation to begin with registered companies. Since that hasn't occurred yet, I doubt IFRS will appear on the exam anytime in the forseen future. I also believe the real CBT-E threat isn't the new AUD content; I believe it to be the "wildcard" written simulation for BEC. Lord only knows what how that will turn out...

Jeff - another71.com 12 years ago

Jeff R - you have some good points. I am just taking them at their word that IFRS is coming. I do think that they will make it a smaller weight (VERY small) until the SEC comes out and says something, but IFRS will at least get its foot in the door. They've had a year to change their mind since the original new CSO was proposed and they're still ringing the IFRS bell, which makes me think it's going to happen. Good points, though.

Jeff - another71.com 12 years ago

fyi...the SEC is still taking comments on IFRS up to April 20 (original deadline was in February). The new SEC chair has reservations about IFRS. https://www.journalofaccountancy.com/Web/SECNomineeCommentsatCongressionalHearing.htm

Jeff - another71.com 12 years ago

Another article on IFRS costs... https://www.schneiderdowns.com/IFRS_Conversion_Costs

Anonymous 12 years ago

I too am worried about the BEC simulation which could cover a variety of topics on the communication. I went ahead and registered for this section this window to get it out of the way before implementation of the changes. Same with AUD. Took it (and passed! we loners here in Alabama finally got scores yesterday!) last window to so I could take the "less difficult" version.

Jeff R. 12 years ago

Don't get me wrong...I believe IFRS will be on the exam someday. The convergence between GAAP and IFRS isn't a question of "if," it is a question of "when." I attended a small seminar on IFRS and apparently 30% of SEC registered filers are already using IFRS, so it is out there and actively used. I just think that the real push for IFRS integrated material on the exam won't occur until the SEC actually sets out a timetable for when GAAP/IFRS convergence will begin for registered domestic companies. Again, that is a question of "when" not "if." Again, this is all my opinion and I base this on basically nothing.

Anonymous 12 years ago

In my "state school MBA" :)program (I did have an acct. concentration) I actually did some research on the shift to IFRS and the challenges facing universities, students, and U.S. firms for my international business class(was writing a research paper on it but in the end my professor nixed the idea saying the other non-accounting students would get confused...and by that I think she meant herself)...I agree, it's "when" not "if"...The main problem I saw was just this. Most schools don't require acct classes on international standards and a lot of schools don't OFFER them because they don't have anyone to teach them. Same with firms...Many CPA's haven't had any training unless they're fresh out of school or have had some CPE's. From what I read, the AICPA is concerned that there are no lliteral requirements for these type classes to sit for the exam so how can they test it. I think eventually the AICPA will have requirements for some hours (3, 6, whatever) of classes on international standards before they will be able to implement it full force into the exam. They say within 5 years. 10 years ago they said 5 years. I'm going to be safe and try to get my exam out of the way before then either way. The university I went to did not and still does not have any classes offered dealing with international standards so I know nothing other than waht I picked up doing that research.

Anonymous 12 years ago

I should note to my above post.. when I say CPA's haven't had any training I am obviously referring to the smaller firms around the country that don't deal with firms that do business with or in countries abroad...I'm sure you know that these smaller firms make up the majority of the firms

Jeff - another71.com 12 years ago

You were supposed to give me a pass on the state school MBA comment. :)

12 years ago

does that mean , Aud Bec and Reg won't change till 2010, or will the change apply now? I am sitting for audit in April and BEC in may

Nan 12 years ago

They can't change the test for a new standard until a good 6 months or so after it is implemented, and they will make an official announcement stating when it is eligible for testing. Since the SEC is still taking comments on the implementation of IFRS, chances are almost zero that IFRS will be on the exam before 2010.

nayaa 12 years ago

Jeff, I think the changes have already been implemented, coz I took Auditing exam on Feb 2009 and I had a simulation about (edited).(needless to say I was not prepared for it),Yes as you said it was probably tougher, coz After I took the test-I was confident I was going to clear it but the results said otherwise. Planning to attempt it again this month.

Jeff - another71.com 12 years ago

Nothing will change in 2009. If it does, that loud sound you'll hear is the collective groan of all of the review companies scrambling to change their materials around.

Anonymous 12 years ago

Nayaa...I also took AUD in Feb. since it is uniform our sims should have been the same and I didn't see anything referring to IFRS?? Maybe you confused it with something else

Jeff - another71.com 12 years ago

re: anonymous The exam is uniform, but no two candidates will get the same exam MCQs or sims.

Anonymous 12 years ago

ah.. did not know that about the sims.. understandable about the MCQ's considering some are more difficult...just another reason it appears the exam is curved... where did you get this info? (i believe you of course! just curious)