BAR, Business Analysis and Reporting
Sources for Business Analysis and Reporting Core
Last reviewed
The standards and authorities behind PocketCPA's BAR lessons on Business Analysis and Reporting Core. The topic rests on Financial statement analysis and financial management.
About this topic
BAR is a discipline section. It covers advanced financial reporting, data analysis and financial management.
Nothing beyond those four is presumed.
Key points
- BAR tests the ability to analyze financial data rather than just prepare it, reversing the direction of FAR problems.
- Financial ratio analysis requires matching the numerator and denominator to the same measurement basis.
- Cost accounting concepts (contribution margin, breakeven, relevant costs) are tested alongside financial reporting.
- Forecasting and valuation require building forward from historical ratios and applying present value techniques.
What the lessons cover
- Ratio and financial-statement analysis
- Ratio analysis: solving for the remedy, not testing candidate amounts
- Ratio analysis: what is allowed in the numerator
- Ratio analysis: reading a divergence between two ratios
- Ratio analysis: comparability, when the ratio moved and the business did not
- Financial management: cost of capital
- Derivatives and hedging (ASC 815)
- Hedge accounting: fair value and cash flow hedges
- Hedge accounting: net investment hedges, embedded derivatives and ASU 2017-12
- Consolidation (ASC 810)
- Consolidation: attribution to the noncontrolling interest, and presentation
- Consolidation: ownership changes and the foreign subsidiary (ASC 830)
- State and local government (GASB)
- Prospective analysis: building the forecast
- Prospective analysis: forecasting balances from a held day count
- Prospective analysis: forecasting earnings per share and cash collections
- Prospective analysis: growth, financing and covenant testing
- Prospective analysis: covenants on the pro forma balance sheet, and return on equity
- Prospective analysis: scenarios, sensitivity and the limits of a forecast
- Capital budgeting: net present value, payback and the hurdle rate
- Cost and managerial accounting: contribution margin, operating leverage and variances
Authoritative references
Derivatives and hedging:
- ASC 815-10-15-83, the definition of a derivative instrument by three characteristics that must all be present at once.
- ASC 815-10-15-22, the start of the normal purchases and normal sales scope exception, which is a scope analysis and not part of the definition.
- ASC 815-15-25-1, embedded derivatives.
- ASC 815-20-25-3, the formal hedge documentation: the hedging relationship, the risk management objective, and the method of assessing effectiveness.
- ASC 815-25-35-1 through 35-5, the fair value hedge.
- ASC 815-30-35-3, 35-28, 35-30, 35-35 through 35-37, and 35-39, the cash flow hedge, including reclassification of amounts out of accumulated other comprehensive income.
- ASC 815-35-35-1, 35-12, 35-15, 35-16 and 35-22 through 35-25, the net investment hedge, including the nonderivative hedging instrument at 35-12.
- ASU 2017-12, the targeted improvements to hedge accounting.
Consolidation:
- ASC 810-10-15-8, a controlling financial interest, ownership of more than 50 percent of the voting interests.
- ASC 810-10-15-8A, a limited partnership tested on kick-out rights through voting interests, added by ASU 2015-02.
- ASC 810-10-25-38A, the primary beneficiary of a variable interest entity.
- ASC 810-10-45 and 45-1, the noncontrolling interest within consolidated equity, and the elimination in full of intra-entity balances and transactions.
State and local government:
- GASB Statement No. 33, nonexchange transactions, including the recognition of imposed nonexchange revenue such as property taxes.
- GASB Statement No. 34, the reporting model, and the reconciliation of the fund statements to the government-wide statements.
- GASB Statement No. 54, the five governmental fund balance classifications.
- GASB Statement No. 63, the components of net position.
- GASB Statement No. 65, deferred outflows and inflows of resources, including unavailable revenue.
Material taught in full elsewhere in the curriculum:
- Cash and cash equivalents and restricted cash, ASC 305-10-20, ASC 230-10-20, and ASC 210-10-45.
- Earnings per share, ASC 260-10-45-10 and 45-11.
- Noncontrolling interest and the primary beneficiary test, ASC 810-10-45-15 and ASC 810-10-25-38.
The ratio and financial-statement analysis, cost of capital, forecasting, capital budgeting, and managerial accounting sections of this unit rest on analytical frameworks rather than on Codification paragraphs, so they carry no pinpoint citation.
How PocketCPA uses these sources
Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.