Section 1: 30–40%1A6
Consolidated Financial Statements
Exam insight
Consolidations is one of the most calculation-heavy topics on FAR, so expect a sim that has you eliminate intercompany transactions and compute consolidated net income. Here's the part people miss: even when Parent sold goods to Sub and Sub already resold them to outsiders, you still eliminate the original intercompany revenue and COGS. Know the full goodwill method cold too, since NCI allocation comes up constantly.
What AICPA wants you to know
- 1Apply the consolidation requirement (control = >50% voting interest, or variable interest entity)
- 2Eliminate intercompany transactions: sales, loans, dividends
- 3Calculate noncontrolling interest (NCI) on the balance sheet and income statement
- 4Recognize goodwill on acquisition and subsequent impairment testing
- 5Distinguish consolidation from equity method and cost method
Patterns in this topic
The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.
Exam tip
Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.