Dodd-Frank of 2010

I have decided to give the CPA examination a shot. I plan on taking the Business Environment and Concepts section first. This post reviews some of the requirements of the Dodd-Frank Act of 2010.

One requirement the Dodd-Frank Act established is all members of the compensation committee of public companies must be independent. Remember the compensation committee is suppose to review and approve CEO compensation based on meeting performance goals. Can you imagine what type of ethical dilemas might come up if the compensation committee is not independent from the CEO and company--we'll probably see more golden parachutes, ridiculous bonuses, etc. The compensation committee is also responsible for making recommendations to the board with respect to incentive and equity-based compensation plans. The committee should attempt to align incentives with shareholder objectives and risk appetite.

This act also requires other things such as share holds must be allowed a nonbonding vote on executive compensation at least every three years. I think this requirements was thrown in there just incase the independence requirement was not met.

Comment below, let me know your thoughts on the Dodd-Frank Act of 2010. Is it improving corporate governance in publicly held companies?

Useful Tips and videos for Candidates

I have collected a few links to some awesome youtube videos that offer great tips. Watch 'em here or on youtube.com. You should subscribe to some of the channels that you find helpful.


http://youtu.be/ClzZovNmRFw

http://youtu.be/QdT3V4mEGrM

http://youtu.be/RbHSTBhf71c

http://youtu.be/3J-Np6LI-0I

http://youtu.be/Tb0guP-hcvo

http://youtu.be/wYrusvOuYfA

http://youtu.be/JhQAPBn7e2Q

http://youtu.be/nt0gfzXiPIY

FAR: Deferred Tax Question (IFRS related)

Here is a multiple choice question about deferred tax that pertains to the International Financial Reporting Standard (IFRS). Questions like this may show up in the Financial Accounting and Reporting (FAR) section of the Uniform CPA examination.

Galway Corp. prepares its financial statements in accordance with IFRS. Which of the following is true regarding reporting Galway’s deferred income taxes in its year 4 financial statements?

A)     Deferred taxes of one jurisdiction are offset against another jurisdiction in the netting process.

B)      Deferred tax assets are always netted with deferred tax liabilities to arrive at one amount presented on the balance sheet.

C)      Deferred tax assets and liabilities may only be classified as noncurrent.

D)     Deferred tax assets and liabilities are classified as current and noncurrent based on their expiration dates.

Choice C is correct because IFRS does not permit deferred tax assets or liabilities to be classified as current. Therefore, deferred tax assets and liabilities are reported in the noncurrent section of the statement of financial position. Choice A is incorrect because IFRS does not allow companies to mix deferred taxes for different jurisdictions. For example, a multinational corporation that operates both in the U.S. and England could not combine its deferred tax from the U.S. with deferred tax from its operation in England. Choice B is incorrect because that is not always the case. If a company have deferred tax assets or deferred tax liabilities from two different jurisdictions for example it could not net the deferred tax liabilities and assets. D is incorrect because IFRS does not allow current deferred tax at all.

FAR: Example of Treatment of a Change in Estimation (Depreciation)

Here is a simple multiple choice question from the Wiley TestBank that pertains to the treatment of accounting changes and error correction. 

Cory Company acquired some machinery on January 2, year 2. Cory was using straight-line depreciation with an estimated life of 15 years with no salvage value for this machinery. On January 2, year 6, Cory estimated that the remaining life of this machinery was 6 years with no salvage value. How should this change be accounted for by Cory?

A)     Revising future depreciation per year to equal the book value of January 2, year 6, divided by 6.

B)      Making a prior period adjustment and changing to an accelerated depreciation method that will compensate for under-depreciation in prior years.

C)      Estimating the effect of the change on each year’s net earnings, but maintaining the method of depreciation as originally determined.

D)     Revising future depreciation per year to equal the original cost divided by 6.

Revising future depreciation per year to equal the book value of January 2, year 6, divided by 6 is correct. Cory Company’s change of depreciation is considered a change in estimate. A change in estimate is treated prospectively by revising the remaining years’ depreciation expense. Book value of the asset at the time of change should be divided by 6, the estimated remaining life.

The key thing to remember here is that whenever an issuer changes depreciation methods because their estimation was off, they have to account for the change in the current year and future years. Estimations are just that, estimations. So, there were no mathematical errors really. The book value, not the historical or original cost, would be used to recalculate the new depreciation expenses for each remaining year. 

6 Ways to Study on the Go!

We all know that the Uniform CPA Examination is very demanding. There are so much material and skills that the candidate must demonstrate a level of proficiency in. Even when you study for one section of the exam at a time the amount of information you need to retain is extensive. To make matters worst, most of us candidates are extremely busy with life and we don't want to give up all of our leisure activities for six months straight. My solution to this dilemma is to use all the white spaces in our schedule in addition to our regular study sessions to study for the exam. We can take advantage of travel time in the car, while we wait in long lines, or in waiting rooms. Here, I have outlined six ways candidates can study on the go.

1. Use Flashcards
Flash cards are the number one tool for studying on the go. You can put them in your pockets and take them out when you are waiting in line, etc. If you have a smart phone you can use digital flashcards. Another71.com has ninja flashcards. I haven't used them because I have made my own. If you don't have the time to make flashcards you should get them from http://www.Another71.com or http://www.FlashcardExchange.com.

2. Use Study Buddies
Using the buddy system will not only keep you honest about actually study but you can use each other as support. Try giving your buddy a copy of the notes you are studying and later on when you out on the beach or park can him or her to chat about the notes. Have them quiz you while you are waiting for the bus or  tanning. You get the picture.

3. Use Audio Files and Podcasts 
You have a long flight or car ride? That is the perfect time to listen to some Podcasts or audio files from your CPA Exam Review course. Make sure to select audios that have energetic presenters to put you to sleep. If possible take notes of the key points of what speaker talks about.

4. Use Mobile Apps
You can download apps for almost anything now, why not download Wiley's test bank app for your iPhone or Android phone. Using the app will give you that extra practice while you are away for you study area. I have already taken advantage of my Galaxy S4 by downloading the Wiley's test bank on it and doing multiple choice questions during downtime at work.

5. Have an Audience
Get on some forums to ask questions and answer some questions. You may think you know a topic well enough until you have to explain it to some else. There are many different forums online that focuses on the topics of the Uniform CPA Examination. Create a student affiliated AICPA accounting on https://www.ThisWayToCPA.com, Another71.com, or any other CPA exam review course site.

6. Study in Different Locations
It is actually good for you to study away from home. Take the time to study whenever you visit different places, especially if the scenery is spectacular. It would be too boring if you just study in your room. Get out and have some fun too.

Good luck!

Effective Ways to Retain Study Materials

According to Adult Learning Theory, lectures are the least successful way to retain learning material. Reading, listening, and observing are not so effective neither. The most effective way to retain material from a training program is through teaching the material yourself. Practice by doing comes next followed by discussions and then demonstrations. To apply this to your accounting education and training, try teaching or tutoring others to help you retain the material more effectively. You can form a study group which each member of the group takes turns presenting a topic.

Below are the percentages of memory retention of each mode of learning (from michellemotivateme.com):


Lectures 5%
You only retain about five percent of lecture material.

Reading 10%
You only retain about ten percent of what you read.

Audio/Visual 20%
You only retain about twenty percent of what you see and hear.

Demonstration  30%
If you demonstrate something you will most likely retain about thirty percent of the material.

Discussion 50%
Discussions will allow you to retain about fifty percent of the material you discussed.

Practice by Doing 75%
This is where test banks come in handy. You retain about seventy five percent of the things that you practice doing. For example, taking the multiple choice questions that is formatted like the Uniform CPA Examination.

Teach Others 90%
The number one way to retain study material is by teaching others.

Ways to Avoid Exam Preparation Burn Out

Hi future CPAs,

It is easy for CPA candidates to become burnt out after intense studying and reviewing of CPA Examination material. I have to constantly remind myself to take it step by step. I make sure that I get some leisure active in my life and look at other subjects besides accounting, auditing, business law, taxation, etc. Its a good thing I have my family members around me that drags me away from my studies, they sort of remind me to chill out and enjoy life too.

Today I got up early and did the usual Wiley Testbank multiple choice questions and simulation questions. Afterwards, I spent the day enjoying my time with the kids. We swam a few laps in the pool, read some books, and did some shopping. Then we ate a nice dinner at Olive Garden. Some days you have to take it easy to avoid being burned out from the stress of  over studying. After spending a lot of time reading about the same subject, it feels relaxing to discuss new interests with others.

I view the CPA Exam as a marathon. Just as beginner marathon runners have to train up to the point where they can run 26 miles none stop, so too CPA candidates have to train themselves to be able to sit in for sections of the exam lasting for hours. Most beginning runners must train for at least six months. As part of their train regiment, they would include a great diet, good sleep habits, consistent gradual training. I don't think the mind is any different from training the body. Adequate rest and nutrition are very important for both a person's body and mind.

Make sure to enjoy your summer by including frequent breaks and leisure activities during your exam preparation. This would most likely make your study session more robust.

Some ways to avoid exam burn out:

• Study in different places (beach, pool area, park, library)
• Take frequent breaks and dedicate some days out of the week for rest days
• Have a support system (i.e., supporting family members, study groups)
• Socialize more often
• Do leisure activities that are fun to you
• Don't stress yourself by trying to take multiple sections all together--space them out.