Financial Reporting

Content Summary

Study guide: fifth edition

Financial Reporting is designed to provide you with financial reporting, technical accounting and business skills and values that are applicable in a professional and global environment. The subject is based on International Financial Reporting Standards (IFRSs) which are issued by the International Accounting Standards Board (IASB), thereby remaining jurisdiction neutral for professional learning and development purposes. Most international jurisdictions have adopted, or are progressively adopting, the IFRSs.

In a competitive international environment, financial reporting provides users with information to formulate corporate strategies, business plans and leadership initiatives. There is also a common acceptance of IFRSs for communicating financial information, because they are commonly understood by an international audience. This reduces the cost of capital for the international reporting entities.

Financial reporting provides information for corporate leadership. Members of the accounting profession with financial reporting skills and knowledge provide business advice to board directors, analysts, shareholders, creditors, colleagues and other stakeholders. Members of the accounting profession who provide assurance services for financial reports also require a good understanding of the IFRSs. Directors are also required to declare that the financial statements are fairly stated. These examples underscore the importance of the skills taught in this segment. In addition to the completion of this segment, CPA Australia encourages continuous professional learning to further develop in financial reporting, which is constantly evolving.

This subject's technical content includes linkages with the other segments in the CPA Program. Financial reporting is a significant part of an entity's governance and accountability process, issues which are covered in the subject Ethics and Governance. Compliance with IFRS results in the presentation of fairly stated financial statements except in rare circumstances. This compliance outcome is also the aim of audit and assurance services. The assurance knowledge and audit skills are taught in the subject, Advanced Audit and Assurance. While taxation is covered in the segment, Advanced Taxation, and is by and large distinct from financial reporting, the accounting for tax is recognised as material information and therefore included in this subject. Financial reporting provides information about the business operations and the financial results. As a result, there is a relevant topical link with the segment, Contemporary Business Issues.

Exam structure

The Financial Reporting exam is comprised of a combination of multiple-choice and extended-response questions.

General objectives

On completion of this subject, you should be able to:

  • explain the application and basis of selected IFRS issued by the IASB
  • apply IFRS in the preparation of general-purpose financial statements
  • explain details relating to general purpose financial statements
  • prepare general purpose financial statements for designated entities, including the exercise of professional judgement.

Subject content

The subject is divided into seven modules. A brief outline of each module is provided below.

The weighting column in the following table provides an indication of the emphasis placed on each module in the exam. The proportion of study time is a guide for you to allocate your study time for each module.

Module Recommended proportion of study time (%) Weighting (%)
1. The role and importance of financial reporting 10 10
2. Presentation of financial statements 14 14
3. Revenue from contracts with customers: provisions, contingent liabilities and contingent assets 10 10
4. Income taxes 18 18
5. Business combinations and group accounting 24 24
6. Financial instruments 14 14
7. Impairment of assets 10 10

Subject outline

For further information, see the subject outline below.