CPA Exam Changes for 2020: Here’s What You Should Know

Every year, the American Institute of Certified Public Accountants (AICPA) makes changes to the exam it administers to would-be CPAs. Candidates need to keep up with the latest developments to make sure they prepare for the test appropriately.

In 2020, the CPA exam will see even more adjustments than have been common in recent years. Companies that offer cpa exam review courses, though, have been busy cataloging the changes to make sure test-takers will be ready for them. A look at a few of the most significant modifications to the CPA exam for 2020 follows.

A Fundamentally New Take on Credit Losses

When businesses are unable to collect debts for long enough, they are eventually forced to write them off. In the past, the CPA exam has asked candidates to utilize a credit loss model based on the actual, incurred cost of debts gone bad.

Starting this year, would-be CPAs will need to use an expected credit loss model, instead. This approach differs significantly from the older one that starts from an incurred loss basis.

Because of this, CPA exam prep experts have been recommending that students make sure to work through plenty of problems using the expected loss model. With many candidates having already become familiar with the incurred loss alternative, a period of adjustment is to be expected.

Refined Guidance on Intangibles for Digital Companies

Many accomplished accountants have been struggling in recent years to calculate costs for cloud computing operations and other service-based digital businesses. One common question is whether to capitalize costs incurred implementing related infrastructure or to write them off as one-time expenses.

New AICPA guidance to be reflected in the 2020 CPA exam should put this issue to rest. When costs are incurred in the course of developing a new or existing software platform or application, they can be capitalized as in the past.

Otherwise, they are to be considered conventional expenses of doing business and treated as incurred costs. As this will always have significant financial implications, becoming familiar with the new guidelines should be regarded as a top priority.

A New Approach to Goodwill

Calculating losses stemming from the impairment of goodwill is always a challenging task. Passing the CPA exam requires mastering a well-established test that is designed to make the process as systematic and rigorous as possible.

For 2020, though, the AICPA-endorsed goodwill impairment test has been simplified significantly. The second step of the previous version of the test has been eliminated. As a result, the canonical approach now jumps directly to a comparison between the fair and carrying values of goodwill as determined by the reporting unit.

Effective Preparation Will be Important

These are three of the issues that will make the 2020 CPA exam a significantly different beast from last year’s test. People who hope to pass the exam this year will want to become intimately familiar with these developments and others that the AICPA has highlighted.

As with every year’s CPA exam, many who take the test will not pass it on the first try, regardless. In every case, students who take preparation seriously stand a better chance of taking this important step toward becoming a CPA.

While 2020’s exam will differ from those of recent years in a number of important ways, most of the material will remain largely the same. Test takers who have already put in some time preparing should be able to come up to speed with the changes for 2020 fairly quickly.

About the Author: Ajay

You May Also Like

Leave a Reply

Your email address will not be published. Required fields are marked *