November 13, 2019
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– Hello and welcome, welcome. My name is Roger Philipp
of Roger CPA Review, and today I want to talk about
the 2018 CPA exam updates. There are several changes in content, but also in the User Experience. And as far as the User
Experience, certain updates, first of all their goal
is to improve the exam taking experience for
you, the CPA candidate. First of all, it’s
expected to be implemented in quarter two of 2018, which
would be about April first. They’re gonna have
updated software design, technological enhancements,
also larger monitors. And that’s nice because when
you go to the Prometric’s testing centers where
you take the CPA exam, they currently have smaller monitors, but they’re gonna increase
them to HD 23 inch screens. The benefit of that is
you can view multiple elements of the exam on that one screen. So for example, if you’re
doing a task-based simulation or DRS document review
simulation it gives you the opportunity to kind of
split the screen and have more surface area upon which
to work out the problems. Now what they’re doing is they’re actually using the real Microsoft Excel. It replaces the generic
spreadsheet tool that’s currently being used on the exam. Also, most of you already
have experience working with Excel through your
universities or also through your actual work. So that will definitely
prove useful in working with the Excel spreadsheets. They said they will not be
testing the Excel abilities. So, you’re not necessarily
setting up formulas and so on, but you’re acting more
as a tool to use on the exam to keeping track
of information as you’re doing a document review simulation. As far as the content
updates for the 2018 exam, let’s look at them by parts. First of all starting out
with the auditing exam. With the audit exam there’s
a couple of changes. One deals with the auditors
consideration of an entities ability to
continue as a going concern. Now, we’ve always had this going concern, you’re concerned about
whether or not they’re gonna be around next year. So for example, Blockbuster
right, where are they today? Bubba, bub, bye, bye, bye, gone. And the key is, that we
wanna make sure that not only us as an auditor are
we required to look at it and make sure we address
the audit report if there’s a problem, but the company
now also needs to analyze and document the work that
they’ve done to make sure that they have communicated to you
the fact and given you the confidence that they are
continuing as a growing concern as apposed to a going concern doubt. Also, auditor involvement with
exempt offering documents. That says, let’s say
you’re exempt under the 1933 Federal Security Regulations Act, it’ll basically give us guidance. So, those are some of the basic
changes for the audit exam. For BEC, no real audit, no
real BEC content updates. Basically the new vocabulary
that the AICP has announced is new for the exam purposes only. It’s been used in the IT
world for many, many years. But what you’re gonna do
is you’re gonna see a shift on the emphasis from what
computers do to how CPA’s use those computers within the information technology IT topics. Now the Blueprint
updates there are no real changes to representative tasks, but they’re adding a lot of vocabulary. So they’ve added more
recent, current terminology. So, artificial intelligence,
AI, machine learning, automation, big data right? Cause everything’s about data, data, data, Marsha, Marsha, Marsha. Data analytics, data
visualization, Bookchain, Cryptocurrencies, like Bitcoin right? Bitcoin didn’t exist many years ago, now it is a form of currency
that we’re currently using. Cloud operations, data
storage, cybersecurity, things like that. So, you’ll see that we’ve
added a glossary in our materials as well, to emphasis
some of those key terms that are already included in
the IT section of the BEC exam. Also, the anticipated
changes for the COSO ERM, Enterprise Risk Management
framework will not be tested in Q one of 18,
most likely Q two of 2018, and that would be for ERM,
Enterprise Risk Management. As far as FAR changes,
FAR will by far have the most significant changes. With the Blueprints, there’s
changes to the nongovernmental and non-profit organizations for example. Which I’ll talk about in a few minutes. First of all, Business Combinations, so they’re clarifying the
definition of what a business is, and that’ll help to recognize fewer and tangible assets in
that Business Combination. For income taxes, they’re
replacing the term Public Entity with Public Business Entity. There’s also gonna be some
additional disclosures for income taxes, deferred taxes. Statement of Cash Flows, there’s a new area called Restricted Cash. So, that’ll help to
disclose not only cash, but what part of that is Restricted Cash. Compensation, Retirement Benefits, and then also Compensation, Stock Options, Stock Compensation plans. So, they’re looking at your service cost and other net benefit costs. For example, for pensions. Also the scope of modification
for simplification initiative, which deals
with a variety of areas for Stock Compensation. The big change is Revenue Recognition, and that’s a big change
in how and when revenue is recognized when we’re
dealing with contracts with customers, which I’ll
expand on in a moment. Financial Instruments overall
deals with recognition and measurement of financial assets. So it’s a pretty broad area. Non-Profit Organizations,
the presentation of financial statements of non-profit. Used to have three
categories, unrestricted, temporarily restricted,
permanently restricted. Now we have two categories,
net assets without donor restrictions, and net
assets with donor restrictions. Leases, everyone’s talking
about leases, leases, leases, that doesn’t hit till 2019. So in 2019, that’s when we’ll
go through the different types of leases, the criteria,
leaser, lessee and so on, but we have another year
to worry about that. Again, the most prominent,
the biggest most significant change for FAR is the Revenue Recognition. Which says on this next
slide, we’re looking at Revenue Recognition, these
are contracts with customers. So, these are the biggest
changes, should hit the exam. Could hit as early as
quarter one, January 2018. Again, I just refinished
filming all of this and updating materials and
updating homework questions as well, because we used
to say is it earned, is it realizable. Now what we’re doing is a
five step process in order to recognize revenue on
contracts with customers. For example, step one, identifying the contracts with customers. Is the contract legally binding? We’ll have these five
criteria we have to look at. Identifying all of the separate
performance obligations within the contract. So in other words, is there what we call a distinct performance obligation? So, in the olden days
we didn’t look at this, but now we say okay the
obligation is to buy this thing like a washing machine, and then another obligation
is to service this thing. So the question is,
when should we recognize that revenue once we figure
out how much revenue there is? We maybe recognizing it when
the performance obligation is satisfied, or while or
as it is being satisfied. So that second criteria is identify them. Third one is determine the total consideration for the contract. So, how much money? How much consideration are we paying? Also, how do we value these
performance obligations? Do they have a stand along
price or an observable price? So we’ll have to go through
the definitions of that. Then, we’re gonna take
that amount and allocate it among the separate
performance obligations. So, now we’re gonna say
here’s how much we’re getting for this contract
with the customer, let’s allocate it between
the washing machine and the service obligation,
or the warranty for example, that’s gonna be recognized over time. Then finally, we have
to recognize the revenue either when the performance
obligation is satisfied, so you deliver the washing
machine, the product, or while, or as it is
being satisfied over time like the service contract. So these are things that
in the olden rules we didn’t deal with, now we
do because we’re trying to get more in conformity with IFRS, the International Auditing Standard, I’m sorry International
Accounting Standards AIS, IAS. Also, the IFRS, International
Financial Reporting Standard. So it kinda bring US GAP into closer alignment with the international rules. So it eliminates a lot of the
industry specific factors. Cause there were all
these different industry– So it tries to minimize that, but it also adds a lot of
additional disclosures. Again, as we will go through
in the actual course. For regulation changes,
not a lot of changes, some terminology, Treasurer
Regulations was added and Regulations was omitted. So, now they call them Treasury
Regulations for example. But as well all know, there’s all this new talk about new tax reform and so on. There’s no content updates yet
for REG as of this filming. But stay tuned for any
updates, and as there may, because again, Congress, the President, they’re going back and
forth, they’re trying to figure out what they wanna do. Once they approve it, it’s not gonna hit the exam for at least six months. So there’s a six month lag. But again, we will have
those once they’re passed and approved in our updates. We will also update the
video lectures as well. And also update all of your
IPQ Interactive Practice question homework as well. Once that hits, assuming
they can all agree on the new tax reform laws. Now, what do you do about the changes? First of all, don’t wait. In other words, there’s
still time to pass the exam, there’s still time to pass even
if you haven’t started yet, that one part for 2017 before
the changes hit for 18. I would suggest of those four areas, the biggest change is gonna be in FAR. So if you can sit for FAR this year, that might be nice to do because then you don’t have to learn all those
Revenue Recognition updates. But, it’s gonna be
important for you to know, once you get out in
the real world as well. So it’s nice to learn it here with us, but if you wanna avoid
it for the exam sake and you’ve learned the old rules, it’s earned and realizable that’s great, then you can stick with that. So that’s something to consider as far as if you only have time
to study for one part in 2017, which part would
I want to study for? Also, stay up to date
on all the changes by subscribing to our blog
and our newsletter as well. Because remember, no matter
what the changes are, remember that you have
a partner in all of us here at Roger CPA Review. Because our team is
dedicated to ensuring that you’re set up for success
when you’re facing any exam changes and
we’ll continue to provide you with any and all CPA exam
related news and updates. So again, sign up for the blog,
sign up for the newsletter, check out our website periodically, and you too will stay informed about the 2018 CPA exam changes and updates. Again, thank you for
your time and study hard.

Robin Kshlerin

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