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 segment 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 to communicate financial information which is 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. The boundaries of the syllabus do not restrict the knowledge expected in a professional environment, hence candidates and members of the profession are strongly encouraged to learn beyond the syllabus. Financial reporting is a significant part of an entity’s governance and accountability process. This segment builds on the themes contained in the segment, Ethics and Governance. Compliance with the IFRSs 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.

Financial Reporting is a compulsory subject in the CPA Program professional level for candidates commencing from semester 2, 2009. It is an elective subject for candidates who commenced prior to semester 2, 2009.

Exam structure

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

You will see two new question types in your Financial Reporting exam in Semester 1 2017. Where previously in the extended response section candidates may have read a case study and typed an answer in the form of written sentences, candidates now use the following methods to respond to questions:

  1. In one of the question types, candidates will use the mouse to "drag and drop" the most appropriate response from options in a list to an answer space.
  2. In the other question type, candidates will type a numerical response into a spreadsheet.

We recommend you view the Sitting your exam with CPA Australia video carefully to familiarise yourself with these new question types before the exam.

Segment aims

The primary aim of Financial Reporting is to provide you with globally transferable skills to prepare a set of general purpose financial statements in different jurisdictions. The subject encourages high quality financial reporting and the practice of strong ethical values in the accounting profession.

The secondary aim is to provide:

  • effective financial analytical skills
  • the ability to comprehend and use a stock-exchange listed entity's financial statements.

General objectives

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

  • explain the application and basis of selected IFRSs issued by the IASB
  • apply IFRSs 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.

Segment content

The segment 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, while the ‘proportion of study time’ column 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



2. Presentation of financial statements



3. Revenue received from customers: Provisions, contingent liabilities and contingent assets



4. Income taxes



5. Business combinations and group accounting
 24  24
6. Financial instruments



7. Impairment of assets



Module 1: The Conceptual Framework and its application in financial reporting

This module explains the role and importance of financial reporting, as a communication tool for entities to provide information to users to help with decision making. 

The module considers the application of reporting in an international context and focuses on the major components of the Conceptual Framework issued by the IASB. The objectives of general purpose financial statements and the diversity of users’ information needs are considered, as well as the underlying assumptions and qualitative characteristics of financial reporting. 

The module then discusses the need for general purpose financial statements (GPFS) and the role that the Conceptual Framework plays in financial reporting.

The application of the Conceptual Framework's definitions and recognition criteria of elements of financial statements in selected accounting standards is evaluated.

In discussing the definitions and recognition criteria outlined in the Conceptual Framework, the module examines their application in IFRSs in the context of selected issues. It also discusses issues of measurement and use of professional judgement in financial reporting. 


  • The role and importance of financial reporting
  • The Conceptual Framework for Financial Reporting
  • Qualitative characteristics of useful financial information 
  • The elements of financial statements
  • The role of accounting standards
  • Measurement of elements of financial statements
  • Application of measurement principles in IFRSs 

Module 2: Presentation of financial statements

This module focuses on the preparation of a complete set of financial statements in accordance with IAS 1 Presentation of Financial Statements. IAS 10 Events after the Reporting Period is also discussed to highlight the importance of how post-reporting-date events are dealt with when preparing financial statements.

Another area of emphasis is IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors which deals with changes in accounting policies, correction of errors and estimates. The differences between prospective application and retrospective application are included to provide a practical understanding and application skills of how changes in accounting policies are adopted.


Part A: Presentation of financial statements

  • Complete set of financial statements
  • Accounting policies
  • Revision of accounting estimates and correction of errors
  • Events after the reporting period

Part B: Statement of profit or loss and other comprehensive income

  • Presentation of comprehensive income
  • The concept of other comprehensive income and tital comprehensive income
  • IAS 1 - disclosures and classification

Part C: Statement of changes in equity

  • IAS 1 - disclosures of changes in equity

Part D: Statement of financial position

  • Format of the statement of financial position 
  • Presentation of assets and liabilities
  • IAS 1 - disclosures in the statement of financial position or in the notes

Part E: IAS 7 Statement of Cash Flows

  • Information to be disclosed
  • Common methods adopted on how to prepare a statement of cash flows
  • How does a statement of cash flows assist users of the financial statements?
  • Consolidated financial statements

Module 3: Revenue received from customers: Provisions, contingent liabilities and contingent assets

This module focuses on the requirements of IFRS 15 Revenue Received from Customers and IAS 37 Provisions, Contingent Liabilities and Contingent Assets including the five step model of revenue recognition, and the disclosures required by both standards.


Part A: Provisions

  • Recognition of provisions
  • Contract costs
  • IAS 37—Disclosure 

Part B: Specific applications

  • Recognition of provisions
  • Measurement of provisions
  • IAS 37—disclosure
  • Provisions and professionla judgement

Part C: Contingent liabilities and contingent assets

  • Contingent assets
  • Contingent liabilities

Module 4: Income taxes

This module focuses on the requirements of IAS 12 Income Taxes and explores the methodology of tax-effect accounting. The module discusses the recognition and measurement of deferred tax assets and liabilities in detail, including the accounting for tax losses, and the tax effect of revaluation of assets.


Part A: Income tax fundamentals

  • Tax expense 
  • Current tax
  • Deferred tax

Part B: Recognition of deferred tax assets and deferred tax liabilities

  • Recognition of deferred tax liabilities
  • Recognition of deferred tax assets
  • Recoupment of tax losses

Part C: Assets carried at fair value or revalued amounts

  • Assets carried at revalued amounts
  • Recognition of deferred tax on revaluation

Part D: Financial statement presentation and disclosure

  • Presentation of current tax and deferred tax
  • Major components of tax expense 
  • Relationship between tax expense (income) and accounting profit
  • Information about each type of temporary difference

Part E: Comprehensive example

  • Carrying amounts and tax base of buildings
  • Other deferred tax assets and liabilities
  • Taxable profit and current tax expense
  • Illustrative disclosures

Module 5: Business combinations and group accounting

This module reviews the main features of business combinations and discusses the acquisition method prescribed in IFRS 3 Business Combinations to account for these types of investments. It also explores group accounting as required by IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements. Preparation and presentation of consolidated financial statements are discussed with emphasis on the consolidation adjustments and eliminations related to the subsidiary’s pre acquisition equity and its identifiable assets and liabilities, intra-group transactions and recognition of non-controlling interest. This module also addresses accounting for investments in associates and joint arrangements, with particular focus on the equity method prescribed in IAS 28 Investments in Associates and Joint Ventures and the requirements of IFRS 11 Joint Arrangements. The disclosure requirements in accordance with IFRS 12 Disclosure of Interests in Other Entities are also covered.


Part A: Business combinations

  • Identifying a business combination 
  • The acquisition method 
  • Applying the acquisition method to different forms of business combinations 
  • Deferred tax arising from a business combination 
  • Disclosures: Business combinations

Part B: Consolidated financial statements 

  • Introduction to consolidated financial statements 
  • The group 
  • Preparation of consolidated financial statements 
  • Disclosures: Consolidated financial statements 
Part C: Investments in associates 
  • Identifying associates 
  • Use of equity method 
  • Basis of equity method 
  • Application of the equity method 
  • Disclosures for associates 
Part D: Joint arrangements—overview

Module 6: Financial instruments

The module focuses on the requirements of IFRS 9 Financial Instruments, IAS 32 Financial Instruments: Presentation, and IFRS 7 Financial Instruments: Disclosure. The emphasis is on identifying a financial instrument and the measurement options available for those of instruments (such as fair value, amortised costs). The impairment test for financial instruments is also highlighted as being different from that in IAS 36 Impairment of Assets. Presentation and disclosure matters are given some focus, particularly the distinction between liabilities and equity and the IFRS 7 disclosures on the different types and characteristics of risk are explored.


Part A: What are financial instruments? 

  • Definition of a financial instrument 
  • Liability or equity? 
  • Instruments that are a mix of liability and equity 
  • Contracts to buy or sell non-financial items 
  • Derivative financial instruments 

Part B: Recognition and derecognition of financial assets and financial liabilities

  • Recognition of financial assests and financial liabilities
  • Derecognition of financial assets and financial liabilities
  • Derecognition of a financial liability

Part C: Classification of financial assets and financial liabilities

  • Classification of financial assets
  • Classification of financial liabilities
  • Reclassification

Part D: Measurement 

  • Initial measurement
  • Subsequent measurement of financial liabilities
  • Investments in equity securities 
  • Liabilities designated at fair value through profit or loss
  • Compound financial instruments\

Part E: Hedging accounting

  • Hedging relationships
  • Accounting for hedging relationships
  • Special accounting rules
  • Assessing hedge effectiveness
  • Discontinuing hedge relationships
  • Increased disclosures

Part F: Disclosure issues

  • Scope and level of disclosure
  • Significance of financial instruments for financial position and performance
  • Statement of profit or loss and other comprehensive income
  • Collateral and other credit enhancements

Module 7: Impairment of assets

The module focuses on the requirements of IAS 36 Impairment of Assets. The module includes the impairment requirements relating to individual assets such as property, plant and equipment, intangible assets as well as the impairment requirements of cash-generating units, including goodwill.


Part A: Impairment of assets – An overview

  • Basic principles of impairment of assets
  • Identifying assets that may be impaired

Part B: Impairment of individual assets

  • Measurement of recoverable amount
  • Fair value less costs of disposal
  • Value in use
  • Recognising and measuring an impairment loss
  • Reversals of impairment losses

Part C: Impairment of CGUs

  • Identification of CGUs 549
  • Recoverable amount and carrying amount of a CGU (Impairment of CGUs)

Part D: IAS 36 – Disclosure

Study and exam reference materials

Throughout this subject we are applying the accounting standards as presented in the International Financial Reporting Standards (or ‘Red Book’) issued on 13 January 2016. This book is presented in two parts:

  • Part A includes the Conceptual Framework as well as all of the accounting standards and interpretations as issued at 13 January 2016
  • Part B includes all of the supporting documents for the Conceptual Framework accounting standards and interpretations as issued at 13 January 2016.

All the relevant extracts from the IFRSs that are required for your study and exam purposes are presented in this study guide. It is not compulsory to access, print or buy the IFRSs for your study or exam. Candidates who would like to explore the standards in more detail may consult the digital A copy of the IFRSs is provided on My Online Learning. Candidates are advised against viewing the IFRSs from other sources.

CPA Australia encourages you to access the IASB’s website regularly, as it contains many relevant resources for continuing professional development. However, the IFRSs on the IASB’s website may not be aligned with the version of IFRSs used for your study materials, due to frequent amendments to the standards. You will be examined on the version of the standards used in this study guide, which are aligned with the ‘Red Book’ 2016.