When studying for the CFE and PEP exams, writing cases is critical for success. Since you have limited amount of time to study, you may be wondering, should you write brand new cases or re-write prior ones to firm up your knowledge? Here are 3 reasons why writing new cases is better for your CPA studies.

#1: New cases teach new technicals

The CPA program has so many study resources, you won’t have time to go through all the readings. Writing new cases should be your primary source of learning technical material, because each case is filled with new technicals.

Between reading technicals or writing cases, writing cases is a better way to study for the CPA exams. While study notes and the eBook can be a good source for knowledge, writing cases helps you apply the topics in exam situations. The more cases you write, the more opportunity you have to understand how topics are tested on the exam. You also have a better opportunity of learning non-routine topics.

Rewriting cases you’ve previously written hinders your ability to test your understanding of the material, as you’ve already learned what is tested on the case and how to answer them.

#2: New cases help you practice your case approach

When writing new cases, you will experience situations when you can identify the AO correctly but you’ll be unsure how to answer it correctly. Most candidates’ fear in writing new cases is that they think they don’t know enough to even attempt the case. This shouldn’t be fear factor. If you’re in this situation, then take a guess on such AOs. You’ll be surprised on how often you get it right.

During the exam, you won’t have the opportunity to stop writing and search up the applicable technical. This means it’s critical to learn how to approach these AOs to the best of your ability, as leaving the AO blank is not an option. This is why writing new cases is a better way to study for the exam, it helps you practice your case writing skills.

Remember to attempt AOs through the general CPA response structure:

• Introduce the issue
• Assess using the Handbook, ITA, CAS, USO (users strategic objectives)
• Integrate case facts
• Explain the implication (i.e. answer the “so what” and “how / why” questions)
• Recommend

Writing new cases helps you to challenge yourself in developing your responses while replicating an exam setting, as you will already be familiar with the exam requireds on cases you have written previously. It also allows you to reflect on the major technical topics to determine if you feel comfortable addressing them.

#3: New cases teach time management

While rewriting cases can still provide some value in enhancing your time management skills, it takes away the unpredictability that happens during the exam. For example, you already know the number of AOs, where to find them, which ones require more time, etc. When writing new cases, you can truly focus on how to read the case efficiently, prioritize AOs based on your initial impressions, and decide quickly which ones you think will require more time.

The more new cases you write, the more you will be able to learn how to allocate your time, and develop trust in sticking to your time budget. In getting exposure to more new cases, you will come across new topics in which you can create templates that will help you respond in a quicker manner if you come across that required again.

When to rewrite old cases

With all these benefits of writing brand new cases, it isn’t to say rewriting cases is not recommended. It’s about knowing when rewriting cases will add the most value to you.

First, I recommend writing new cases, whether that be new supplemental cases or CPA module cases you’ve written before. After attempting these, you can then rewrite any that you found particularly challenging, or the AOs that you struggled with. For long CFE cases (ie, Day 2 cases), it’s a good idea to re-write only the AOs you struggled in, because you already have good understanding of other topics.

As you get closer to the exam date, rewriting cases holds more value. You can attempt to rewrite a case that you initially wrote at the beginning of your course, that wouldn’t be as fresh in your mind. This allows you to search to find AOs, apply technicals, apply case facts etc. making it feel almost like a new case. The difference now being that you improved your case writing skills since then. This is often a good motivator for candidates to see just how far they’ve come in their learning.

Conclusion

While writing new cases is important for practice, you want to balance this with what is reasonable for you to accomplish. There would be little value in writing a new case, but not having the sufficient time to debrief the cases you’ve already written. Proper debrief includes a review of the feedback guide, the solution, your responses, and summarizing the takeaways. For more tips on how to debrief a case, click here.

 

The Common Final Exam, or the CFE, is the last exam of the CPA Canada’s PEP program. 

 

 

 

CFE is made up of 3 days of continuous examination: Day 1, Day 2 and Day 3.

Day 1 is 4 hours, Day 2 is 5 hours, and Day 3 is 4 hours. The whole exam is like a triathlon:

• Day 1 is the “warm up”
• Day 2 is the “marathon”
• Day 3 is the “sprint”

You warm up on Day 1, because you’re just getting into case writing. On Day 2, you have the longest case and you’re going into depth, which is why it’s called the marathon. Day 3 is when you’re moving quickly, so it’s the sprint.

Day 1 CFE

Day 1 doesn’t have a lot of technicals, you get only 1 comprehensive case which is based on the same company that came up in your Capstone 1. They will take that same company, move it forward 3 or 4 years, and give you new problems to solve. It’s meant to test your case writing skills, management accounting (MA) and finance technicals.

The strategy to passing Day 1 is to follow the CPA Way format, avoid fatal flaws and integrate. The CPA Way is to:

• Assess the situation,
• Analyze major issues
• Conclude
• Communicate

You should start your case with a Situational Analysis. This includes mission, mission, values, SWOT, key success factors, objectives and so on. You then move to Analyzing major issues, then you Conclude, and then wrap up the memo with an overall recommendation.

Fatal flaw means not providing useful qual or quant, making unsupported conclusions, providing generic discussions and not providing a balanced analysis. To provide useful quant, you need to study MA and Finance. Some of the quants include: net present value (NPV), payback (PB), return on investment (ROI), contribution margin (CM), make or buy, valuation, profitability, lease vs buy and so on. I have detailed lessons on how to tackle these quants with templates in my CFE Review program.

Integrate (“tie in”) means connecting the first part of the case (Situational Analysis) to the rest of your memo. For example, if you have a SWOT threat that the government will increase taxes in Eastern Canada, you can write in your pros that if the company opens the new branch in the Western provinces, then it will mitigate the threat of the potential tax increase.

Day 2 CFE

Day 2 has a new comprehensive case. It’s a very long case, more than 40 pages long, with 5 hour duration, and it has two parts. The first part is called Common, the second is Role.

Common is the same for everyone in Canada. It has only Financial Reporting (FR) and/or MA questions.

Role is based on the specific area that you choose. You have 4 options:

• Assurance
• PM
• Tax
• Finance

You choose the role when you register for the CFE and you ignore all other roles. For this reason, you don’t read the entire 40 pages of Day 2 case, you read only the Common and your Role, which is 20 to 25 pages.

Most students choose the role that they took as an elective, and for most people, it’s Assurance or PM. Even if you’ve never worked in assurance, it’s still recommended to take that as your role, because it has fewer technicals compared to other roles.

If you’re thinking of opening your practice and doing taxes or audits, there are specific requirements on what role you have to choose in the CFE, so make sure to check your province’s licensing requirements before you pick your role.

Strategy for the day 2 is to pace yourself. It’s the depth day, which means you have to go into depth and analyze all the questions very thoroughly. Day 2 has 12 to 14 AOs. You should expect to write 12 to 14 pages for a Day 2 case. I suggest spending 1 hour reading the case, 2 hours on the common area, and 2 hours on your role.

The second strategy is to aim for C. I will talk about the passing profile later in this blog. The way the CFE is marked, you must get Cs in Day 2 to pass CFE.

Day 3 CFE

Day 3 has 3 to 4 multi-competency cases and you’re going to get AOs on every topic: FR, MA, audit, tax, finance, and governance. This is why it’s called the breadth day, you have a big breadth of topics to tackle.

The problem with Day 3 is the time crunch. You’re writing 3 different cases, on the third day when you are extremely tired, and you get hit with every kind of AO. You’ll get 5 to 8 AOs per case and there will be 18 to 22 AOs in total.

The strategy for Day 3 is to move quickly and touch on everything. This is the day where you want to get mostly RCs, with Cs in the easier AOs and FR (or MA). 

The second strategy is to budget your time. When I’m coaching students and marking their cases, I see the same pattern: first two cases are done really well, then the 3rd case is halfway finished. It’s very easy to lose track of time in Day 3. It’s important to write how many minutes you’re gonna spend on each AO and stick to your time budget.

How to Pass CFE

Day 1 and Days 2/3 are graded separately. You may pass Day 1 but fail at Days 2/3, or vice versa. If you pass Day 1,  but fail Days 2/3, you have to re-do only Days 2/3, you don’t have to re-do the entire 3-day exam.

Day 1 is graded holistically, which means you’re graded on the following:

• Did you follow the CPA Way?
• Did you integrate well enough?
• Did you provide a useful qual and quant?
• Did you provide a balanced analysis and supported conclusions?
• Did you consider the constraints?

Days 2 and 3 are graded per the passing profile below:

To pass CFE Days 2/3, you have to pass 4 levels.

First level is called the sufficiency level. It means the sum of all Cs and RCs you got across Days 2 and 3. Days 2/3 will have 31 to 34 AOs in total and you should get as many Cs and RCs as possible. They’re gonna take every candidate who’s written this exam and they’re gonna add up all the Cs and RCs. For example, C may be worth 6 points, RC will be 3 points, NC and NA will be 0 points. They will list everybody, add up their scores and pass a certain threshold. This threshold is determined every year by the Board of Examiners depending on some factors: how well everybody did, how many CPAs are needed in the market, previous pass rates, and so on. If you don’t pass Level 1, you’re gonna get a decile ranking.

Second level is the depth level. This level checks how good you are with FR or MA, because these are the core competencies in the CPA program. The goal is to get 3 to 5 Cs in FR or MA. This number changes every year depending how well everyone did, but generally this is a good guideline. Notice that it’s FR “or” MA. You don’t need 3 to 5 Cs in both, in FR or MA.

For both Levels 1 and 2, you are graded on how well you did in Days 2 and 3, so both days are your assets.

Third level is your role level. In here, they’re counting how many Cs you got only on your role, only on Day 2. This means you’ll have only Day 2 to do a great job and that’s a problem. If you do badly in your role in Day 2 and you think you will catch up on Day 3, it won’t work. You have only Day 2 to score Cs in your role. This means you should focus on getting Cs on your role in Day 2 because you have only one chance to pass your role. If you fail at Level 3, it doesn’t matter if you passed levels 1 and 2, you’re gonna fail the entire Days 2/3 exam.

Fourth level is the breadth level. The idea behind level 4 is to check if skipped any competencies. For example, if you don’t like Finance, and you want to completely skip it in the entire exam and do a good job everywhere else, it won’t work. They want you get RC at least once or twice in every area. Though students do fail at Level 4, it’s relatively easier to pass. If you’ve gotten through Levels 1, 2 and 3, that means you got a lot of Cs and RCs everywhere, so if you haven’t skipped anything, then you’ll pass Level 4.

The average CFE pass rate is about 67%, yet over and over students are not successful at CFE because they don’t understand the structure of the exam, what strategies to use, they don’t practice enough cases, don’t get case marking, they have weak technicals, or they don’t have live, one-on-one support from mentors.

All these support resources are available in the highly-rated CFE coaching program called CFE Review.

 

Candidates often select the Finance module due to their financial professional background. However, Finance has many similarities to Core 2 and prepares well for Day 1 of the CFE. Below are some helpful tips for successfully completing the Finance module.

#1: Expect F/S Analysis

Providing explanation on a company’s financial position is common AO in the Finance exam. These AOs ask you to determine the expansion possibilities, financing options, and comparing financial structures to competitors or industry trends. Your recommendations should focus on improving the company’s financial health.

Similar to Core 2, some examples on key areas to focus on include:

• Vertical Analysis: Analyze company’s F/S by different accounts (eg. gross margin ratio involves revenues and COGS)
• Financial Ratios: Measuring liquidity (eg. Current Ratio), Profitability (eg. Profit Margin Ratio, Return on Equity, etc.) and Leverage (eg. Debt Ratio, AP Turnover, etc.)
• Horizontal Analysis: Analyze company’s F/S over multiple periods to spot trends and patterns.

It’s not as simple as stating that a company is in good or bad health. You should discuss company’s strengths and/or weaknesses using numeric and qualitative support, with the integration of case facts. This will ensure you get C grading.

#2: Practice Quants

Because there is a large portion of quant analysis required in Finance elective, it’s important to practice quants calculations and use your time effectively. Being able to identify the most appropriate analysis (“quants tool“) will help you save time when writing cases. Identifying the user’s ask (i.e. the ultimate goal of the calculation), the financials available, and the time frame will help you isolate what quants tool you need.

Some examples include:

• WACC – know how to calculate and when to use it
• Working Capital (Current Assets – Current Liabilities) – know how to calculate
• Capital Investments – Net Present Value (NPV), Internal Rate of Return (IRR), Payback (PB)
• Cash Flow Statements and Capital Budgeting
• Financial analysis/ratios
• Valuations

These will come with practice, so actively track your time as your practice cases. Spend the necessary time debriefing your calculations to determine where best to begin, what approaches enable you to solve for missing components, and how to lay out your exhibits in excel in an organized manner. Sticking with the time and learning when to walk away from an AO will set you up for success.

#3: Practice Valuations

Knowing how to value a business is important for acquisition AOs. You’ll be asked to determine if an offer price for the business is appropriate, or how much to offer on the potential acquisition. This is a common testable AO as there are several methods to valuing a business.

Some examples of valuations include:

• EBITDA multiple
• Replacement cost method
• Relief-from-royalty method
• Capitalized cash flows
• Discounted cash flow
• Asset based

Understanding the core differences between each of the valuation methods and understanding when best to use each method by looking at the inputs and case facts will be critical. Additionally, keep in mind that these AOs will often require an interpretation / discussion on the result, core assumptions / considerations used in the calculation, and a recommendation on if the proposal should be pursued.

#4: Add Qualitative

Qualitative discussions in Finance elective are based on interpreting results, discussing causes, and providing recommendations. The case will require concise and specific explanations, while integrating case facts.

Some examples of qual. include:

• For ratio analysis, you’ll be required to discuss the results of efficiency, liquidity, and solvency ratios. You’ll also be asked to identify causes and compare to industry benchmarks or prior years.
• For leasing, you’ll be required to discuss the pros and cons of leasing an asset vs. buying.
• For expansion or sale of a business, you’ll be required to discuss the different ways to sell or acquire a business including the purchase of shares vs assets.
• For sources of financing, you’ll be required to discuss the pros and cons of each option to help the company come to a decision.

See my PM tips article on how to write good quals with a handy formula.

#5: Understand Financing Sources

Like Core 2, you’ll likely be asked to provide an analysis on the various financing options available (“sources of financing”). Ideal approach is to use a pros and cons format to discuss the options: loan amount, interest expense, any constraints/risk, flexibility, etc. Then perform quants calculations, if enough information is provided. Offer any mitigations or suggestions for the options available and finally make a clear recommendation on which option to pursue.

Extra Resources

To be successful in the CPA Canada Finance module, you must understand the core quantitative topics and how best to manage time for calculations. Extra study resources are available in the Finance Review course.

The Capstone 1 CanDo Fitness (CFL) case will be tested in September 2022 and 2023 Common Final Exams (CFEs) on Day 1. The original Capstone 1 case was made available to candidates enrolled in Capstone 1 and released publicly by CPA Canada.

How do I prepare for CFL case for the CFE Day 1?

On CFE Day 1, you will be presented with the same CFL case and you will be required to analyze and answer new strategic and operational issues.

Follow these strategies:

• Step 1: Study the Capstone 1 original case well: It’s important that you know the Capstone 1 case inside-out. You will encounter the same users and similar industry challenges. I suggest making notes of the following key situational analysis factors:
  • Users
  • Mission, vision and values
  • Key success factors (KSF)
  • Strengths, weaknesses, opportunities and threats (SWOT)
  • Board objectives
  • Quantitative analysis
• Step 2: Know the Capstone 1 strategic issues: In Capstone 1, CFL was facing 4 major strategic issues (acquisition MFI; indoor climbing wall facilities; distribution and video contract with Zenfit; develop PurCafes in 5 gyms) and several minor issues. In the Day 1 CFE exam, you’ll get 4 new strategic issues.
• Step 3: Make note of the timeline: CFE Day 1 case is several years in the future and there are new issues to analyze. It helps to stay organized by creating a timeline of events as you are reading the case.
• Step 4: Understand key stakeholder preferences: CFL case has several users who have opposing views. It’s important that you understand these user preferences as these will repeat in the CFE Day 1.

I strongly recommend practicing with supplemental mock exam cases. In Capstone 2, you will get 3 practice versions of the CFL case. However, most writers find that this is not enough and feel unprepared.

Where can I get extra CFL mock exam cases?

I provide one (1) original CanDo Fitness (CFL) supplemental mock exam practice case to help you better prepare for the CFE Day 1. The mock exam case is a realistic simulation of what you may get on your exam and covers typical AOs that you may find in your Day 1. The casepack includes the CFL mock exam case, marking guide and the solution.

Head over to the cases section of my website for a free preview. If you have any questions or need additional help, I’m here for support.

 

 

 

 

 

In this post, I’ll discuss what is decile ranking, in both CPA Canada PEP and CFE results.

What is Decile Ranking?

Decile ranking is a statistical measure that tells writers who failed how close they were from passing. For example, decile 1-3 means they were close to passing, while decile 8-10 means they were far. Decile ranking is meant to help you decide whether you should appeal your results. Decile ranking shows ONLY if you failed. If you see N/A, it means you Passed or Marginally Passed.  

CPA Canada PEP  (Core 1, Core 2, electives) – Decile Ranking

In PEP exam results, you’ll receive a transcript that shows your result: “Pass with Distinction”, “Pass”, “Marginal Pass” or “Fail” (note: Marginal Pass is as good as a Pass). For example, here’s a transcript of a writer who did not pass:

 

 

 

 

 

 

 

 

 

 

 

 

 

The decile ranking will show only if you failed. If you passed, it will not show, and you don’t have to worry about it (it’s irrelevant to you if you passed).

In the above example, the student did not pass which is why they see a decile ranking. Their decile ranking is 7. This means they were far from passing, so they should not appeal the results. Decile ranking closer to 0 (such as 1-3) means a student was close to passing so it may be worth appealing.

For a detailed post on how to read your CPA PEP exam transcript and what to do if you failed, please see this post on PEP results.

CPA Canada CFE– Decile Ranking

Similar to PEP exam, CFE results will show the decile ranking ONLY if you failed.  CFE results are more complex, with several levels to pass. Please see this detailed post to learn how decile ranking works in CFE results.

 

 

 

If you’ve made it to the elective modules, you’ve been successful at Core 1 and Core 2, congrats! While some candidates find the Performance Management (PM) module to be overwhelming with both qual and quants, others find it overlaps with Core 2, so it’s easier to study. Below are some helpful tips for succeeding in the PM module.

#1: Don’t Forget The Qualitative

Many candidates think of calculations (quants) when they think of performance management. However, ~70% of the AOs will be qualitative, while ~30% quantitative. The practice cases will require concise and specific explanations, while integrating case facts.

Some examples of qual. include:

• When preparing variance analysis, you’ll be asked to explain what the variance implies and identify potential causes, based on case facts.
• For ratio analysis, you’ll be required to discuss the results of efficiency, liquidity, and solvency ratios. You’ll also be asked to identify causes and compare to industry benchmarks or prior years.
• When asked to assess responsibility centers, you’ll be asked to identify the type of center the division is and make a suggestion on how to evaluate performance.
• When asked to help with a decision, such as capital investment, purchase, acquisition, partnership, outsourcing, etc., you may be required to perform a pro/con analysis, in addition to quant analysis.

A good formula for writing pro/con qual analysis is: case fact + interpretation/explanation + impact (operating and financial) + integration.

Most candidates miss the “impact” and “integration” elements, which drops them to RC/NC. Impact means how and why the case fact is important to the company. Think of  impact as: “how are the company’s operations and financials affected.” For example, here are some operating impacts:

• New market access
• Geographic expansion
• Enhance brand awareness
• Employee morale
• Lead to synergies
• Give competitive advantage
• Help to retain customers
• Improve the supply chain
• Cause delays in delivery
• Enhance company reputation
• Access to new technology
• Tap into growing market

Here are examples of financial impacts:

• Improve sales
• Improve profits
• Improve the bottom line
• Improve ratio X
• Decrease costs
• Help with cash flow constraints
• Help with covenants

You can write either operating or financial impact, or both. I recommend both (see example below).

Integration means connecting to the big picture (eg M/V/V, KSF, objectives, user preferences, etc).

You should use “connecters” to tie these 4 elements together. Some examples of connectors include: which means, therefore, as such, as a result, consequently, while, etc.

Let’s look at an example of a “perfect qual”. Here’s a con that’s written in-depth (C/CD):

You have no prior experience in the clothing industry. This means you may not be able to buy the right amount of clothing in appropriate sizes and styles. As such, the store could be left with a large quantity of unsaleable clothing, or it may not have enough stock of the popular styles, which could affect the store’s reputation and be costly, while reputation is one of values of your company.

1. Case fact: You have no prior experience in the clothing industry.
[Connector: This means]
2. Interpretation/explanation: You may not be able to buy the right amount of clothing in appropriate sizes and styles.
[+Connector: As such]
3. Impact (operating and financial): The store could be left with a large quantity of unsaleable clothing, or it may not have enough stock of the popular styles, which could affect the store’s reputation and be costly. (Note: “Reputation” is operating impact, “costly” is financial impact).
[+Connector: While]
4. Integration: Reputation is one of values of your company.

A good method to practicing qual is to compare your response to the solutions while debriefing. CPA Canada case solutions are typically lengthy and unrealistic under exam situation. However, for PM qual AOs, you should write at the same length and depth as the solutions to ensure you get C. I suggest that you re-write the required, compare your response to the solution, and identify what elements you’re missing using the formula above.

#2: Identify The Appropriate Calculation

Being able to identify the most appropriate analysis (“quants tool“) will help you save time when writing cases. Identifying the user’s ask (i.e. the ultimate goal of the calculation), the financials available to you, and the time frame will help you isolate what quant tool you need.

Some examples include:

• When reviewing potential capital investments, you can choose NPV (Net Present Value) or IRR (Internal Rate of Return). NPV is more appropriate when you have the discount rate, long-term projects, or when you need to find the potential surplus from a project. IRR is more appropriate for short-term projects or when you have benchmark rate to compare to.
• Opportunity costs should be considered when there is potential forgone income or expenses between multiple options. For example: outsourcing vs insourcing, operating capacities, closing down a division, or adding a new product.

There are several other quants tools: Payback, CM analysis, ratio analysis, break-even point (BEP), valuation, constraint, product mix, pricing, net advantage of leasing (NAL) and so on. MA Templates toolkit is a great resource to master these.

#3: Consider the Big Picture

For many of the assessment opportunities (AOs), it’s important to realize the content is often big-picture focused. Big picture means you’re asked to assess the overall strategy and make suggestions that align with company’s values or user objectives.

Some examples include:

• You’re asked to help with deciding to pursue a new business venture. You should write about alignment with user preferences, integrating the company’s mission, vision, values (M/V/V).
• In some cases, you may be asked for suggestions on how to revise the mission or vision, based on strengths and weaknesses of the company. You should discuss the current M/V/V with their strengths/weaknesses, what ideal M/V/V should look like, and suggest new ones.
• You’re asked to identify major risks and discuss the impact on the overall strategy. You should perform a variation of WIR analysis (Weakness + Implication + Recommendation) called RIM (Risks + Implication + Mitigation).
• You’re asked to address strategic decisions or perform external environment analysis. You should perform a Porter’s 5 Forces, SWOT (Strengths, Weakness, Opportunity, Threat) or PESTEL (Political, Economical, Social, Technological, Environment, Legal).
  

Keep the big picture items in mind when addressing each of the above AOs, while making recommendations that are practical and realistic for the company.

#4: Understand Integration of Various AOs

One of the challenges you’ll face in the PM module is the integration of AOs. Many appendices and calculations will overlap and you’ll need to use case facts interchangeably.

Some examples include:

• Discount rate is provided in one appendix, while NPV analysis will be required in various external and internal projects. You’ll need to note the discount rate in your case outline, so that you can use it in different AOs.
• You’re given financials, such as Income Statement, and you’ll use it for Cash Flow forecast and valuation AOs.
• You’re asked to calculate CM (contribution margin), which is later used for beak-even analysis, target sales or deciding which product to pursue given an input constraint.

Understanding the various quants tools and having an organized case outline will help you answer these integrated AOs.

#5: Practice Time Management

Because there is a mix of qual and quant analysis, it’s important to manage your time effectively. For each AO, you should be allocating your time appropriately during your planning phase, by considering: complexity of the AO, whether both quant and qual are required, size of the appendix (ie, number of case facts to read), how well you know the topic, and ranking of issues (ie, does one AO impact the other and should be done first).

This will come with practice, so actively track your time as you practice cases. Sticking with the time and learning when to walk away from an AO will set you up for success.

Conclusion

To be successful in the CPA Canada PM module, you should practice a balance of well laid out quants, case specific and detailed quals, big picture integration, and time management. Extra study resources are available in the PM Review course.

CPA Canada releases PEP (Core 1, Core 2, electives) results after every semester, usually 2 weeks after the exam is complete, at 12pm EST. Find out if you passed using the link below:

• CPA Canada PEP exam results: https://www.certificationenterprise.net/CPAcp/cpLogin.aspx
  (Note: To access, use your CPA portal log in and password, not your D2L) 

How to Read CPA Exam Transcripts

You’ll receive a transcript. It’ll show “Pass with Distinction”, “Pass”, “Marginal Pass” or “Fail”.

• Pass with Distinction: This means you passed with top results. Students need to score only Cs and CDs to be here.
• Pass: This means you passed the module and advance to the next one.
• Marginal Pass: This is as good as pass. It doesn’t hurt your chances at any of the future modules nor CFE. Marginal Pass means you were close to failing, so make sure to analyze your results and re-focus your efforts.
  
• Fail: This means you were unsuccessful, you will need to challenge the exam or re-take the entire module. You have 3 attempts at each module in total. After 3 attempts, you are de-registered from PEP and will need to re-register and start over from Core 1 again. 

Decile ranking

Your transcript may also show a “Decile ranking.” Decile ranking shows ONLY if you failed. If you see N/A, it means you Passed or Marginally Passed.

Decile ranking is a statistical measure that tells students who failed how close they were from passing. For example, decile 1-3 means they were close to passing, while decile 8-10 means they were far. 

Objective format and Case portion

Your transcript will be divided into two parts: (1) Objective format questions, (2) Case portion. 

Objective format means MCQs. For both these MCQs and the case portion, you’ll see the tested competencies (eg: Financial Reporting, Audit, Taxation, etc) and your results.

 

As you can see above, the transcript will show the 4 grades horizontally:

• Not competence (NC)
• Reaching competent (RC)
• Competent (C)
• Competent with distinction (CD)

For each grade, you’ll see percentages. These percentages show how the general population of writers did. For example, if 5,000 students wrote Core 1 in your semester, the breakdown will show what percentage scored NC, RC, C and CD. The yellow highlighted box shows where you ended up.

What to Do if You Failed

If you were unsuccessful at your PEP module exam, you can:

• Option #1: Request review and re-marking
• Option #2: Challenge the next exam
• Option #3: Retake the module

#1) Review and re-marking will have your exam re-marked by a senior marker. There are specific deadlines and fees. From my experience, only ~1% of remarks are successful. I don’t recommend this option for most students.

#2) You can challenge the exam where you sit at the next exam without going through the entire module. This is available for 2nd attempts only. If you are unsuccessful again at the 2nd attempt, you must re-take the entire module.

With this option, you should understand your weaknesses, build a study plan and re-write all PCs, IPs and MCQs. It helps to get extra cases and MCQs because you’re already familiar with the module PCs. If you need consultation, feel free to contact me.

#3) You can re-take the module and go through the module again with the help of your facilitator. Similar to #2 above, you should get extra cases / MCQs and build a study plan to ensure you’re on track.

Conclusion

I know failing CPA exams is demotivating. It doesn’t mean you’re not smart or unable to succeed, it means you need a new strategy. Take some time think about your options and decide what you will do differently next time. If you feel you need a coaching program to help you succeed, you can preview some of my free lessons.

 

 

 

Gevorg, also known as Georgios in Ancient Greek, is a first name. It’s an Armenian form of the name George. Gevorg is a masculine first name derived from two Greek words: geo (earth) + ergon (work). The correct pronunciation of Gevorg is: get-WORK (listen here).

Gevorg Grigoryan, CPA, is the founder of the Gevorg, CPA Coaching exam preparation company. Gevorg teaches accounting to university students and financial literacy to business professionals. He has previously worked with CPA Canada Western School of Business and various private companies. He has been featured in several news articles as CPA Canada exam preparation expert.

References: LinkedIn, Wikipedia

The following article will go over the key concepts for obtaining competent (C) grade in government grant AOs in CPA Canada PEP and CFE exams under IFRS.

In Part 2 (to be posted later), we will look at a similar example for ASPE. 

The best way to understand how to solve government grant AOs is to look at an example. In green color below I walk you through the example and in black color I explain the technicals. Let’s take a look.

Example

In January 20×0, the government provided a $20,000 grant to Company ABC to purchase new manufacturing equipment. At the time, the equipment was purchased for $100,000, and has a useful life of 10 years. To retain the grant, Company ABC must meet specific production criteria for the next 5 years. In the last few years, Company ABC has met this production criteria.

Definition

A government grant is defined as a type of assistance by the government in the form of a transfer of resources (monetary or non-monetary) to the entity. This could be for past or future compliance with specific conditions related to the entity’s operating activities.

This differs from government assistance in which economic benefits are provided indirectly through action, for example free marketing or business advice. (Note that ASPE 3800 uses the term “government assistance” to refer to both government grants and government assistance. On the other hand, IAS 20 distinguishes these two and provides different rules for government grants vs. government assistance.)

In the case of Company ABC, the transaction of $20,000 represents a monetary transfer of resources for future compliance, and meets the definition of a government grant. Therefore, the definition criteria is MET.

Recognition & Measurement

Government grants should only be recognized when the following criteria are met:

1. There is reasonable assurance that the entity will comply with the conditions.
2. There is evidence the grant is likely to be received. 

In the case of Company ABC, there is reasonable assurance of compliance with the conditions as they have been in compliance for the last few years and that can be expected to continue. The grant has also already been received. Therefore, recognition criteria are MET.

There are two approaches for measuring government grants:

1. Income approach
2. Capital approach

Under income approach, the grant is recognized in P&L depending on nature. Under capital approach, the grant is treated as a capital transaction and credited to equity. The capital approach is not used (per IAS 20, para. 12), so we’ll follow the income approach.

Income Approach – Grants for Current or Past Period Expenses

These should be recognized in the P&L immediately as revenue. This can be shown separately or netted against the corresponding expense.

Income Approach – Grants for Future Period Expenses

These should be deferred and amortized as the expenses are incurred (i.e. deferred revenue).

In the case of Company ABC, the transfer of resources don’t relate to the expenses (ie, it’s for capital equipment, not to cover their expenses), therefore the Income Approach would not make sense. Since it relates to the purchase of an asset, the Capital Approach is appropriate.

Income Approach – Grants for PPE

There are two acceptable methods for presenting these.

1. Reduce the PPE balance and amortize based on this new carrying amount.

Under this first option, Company ABC would deduct the grant from the equipment costs and recognize the grant as income by reduced depreciation expense. The initial entry would be:

Dr. Cash $20,000
   Cr. Equipment $20,000

At year-end, depreciation would be recorded as follows:

Dr. Depreciation expense $8,000 ($100,000 – $20,000 = $80,000 / 10 years)
   Cr. Accumulated depreciation    $8,000 

Note: Without this grant, the depreciation recorded would had been $10,000 ($100,000 / 10 years)

2. Record a deferred liability account and amortize on the same basis as PPE.

Under option 2, Company ABC would recognize the grant as a liability and amortize the income over the life of the equipment.

The entry would be:

Dr. Cash $20,000
   Cr. Deferred government grant $20,000

At year-end, the following adjustment would be made:

Dr. Deferred government grant $2,000
   Cr. Revenue from grant $2,000 ($20,000 / 10 years)

Note: The impact on income is the same under both approaches, so we need to assess user needs and how they want to see the information presented.

Non-Monetary Grants

These are grants for things like land or other resources (non-monetary). These are special measurement rules, these are accounted for at fair value. 

Forgivable Loans

If the government provides a forgivable loan, it can be treated as a government grant as long as there is reasonable assurance the entity will comply with the terms for the forgiveness of the loan.

Repayment of Grant

In the case where conditions are broken and the grant must be repaid to the government, this treatment will dependent on how the initial grant was recognized.

In the case of Company ABC, assume as of the end of 20X2, the conditions of the grant will be broken. The government now requires the entire $20,000 grant to be returned.

Repayment – Grants Related to Income/Expenses

This repayment will be treated prospectively as a change in estimate. Profit or loss should immediately be recognized for the extent in which the repayment exceeds the deferred credit for the grant.

For example, if a grant of $2,000 was received to offset salary expenses, but only $500 had been incurred, a deferred balance of $1,500 would exist. If the government required $1,800 to be repaid, there would be a loss of $300 ($1,800 – $1,500) to recognize immediately.

Repayment – Grants Related to PPE

Repayment for a grant related to an asset should be treated by increasing the carrying amount of the asset or reducing the deferred income balance by the amount repayable, dependent on which method was initially used.

If a deferred liability was set up initially under the Capital Approach option 1, the amortization expense will get reversed as the loan is to be repaid.

For Company ABC, the entry would be:

Dr. Deferred Revenue $14,000
Dr. Loss $6,000 ($20,000 – ($20,000 / 10 years) x 3 years)
  Cr. Cash  $20,000

If the grant was initially set to reduce the carrying amount of the asset, the additional depreciation that would have been recognized had the grant not been recorded, should be recognized immediately as profit or loss.

For Company ABC, the entry would be:

Dr. Equipment  $20,000
Dr. Loss   $6,000 ($2,000 depreciation x 3 years)
  Cr. Accumulated Amortization  $6,000
   Cr. Cash $20,000

Conclusion

In determining which method is right for the company, you should assess the nature of the grant, the user needs for the presentation and overall case facts. For more information on government grants under IFRS, review IAS 20 or get my technical FR summaries.

In Part 1 of this two-part series, I discussed which elective to take as part of your CPA Canada PEP program. In here, I’ll speak about which role to take for CFE Day 2.

Understand the CFE

The CFE contains 3 separate exam days, with Day 2 requiring you to select a “role” of your choice. Day 1 and Day 3 don’t have roles.

Day 2 of CFE focuses on depth in Financial Reporting (FR), Management Accounting and your role area. Everyone is given the same case which has a common section (Financial Reporting and Management Accounting) and role section. 

There are four roles you can select for CFE Day 2:

• Assurance
• Performance Management (PM)
• Finance
• Tax

You are not required to choose a role that was one of your electives (eg. if your electives were PM and Finance, you can choose Assurance as your role). However, it’s not a smart idea to do that; it will be very hard for you to score Cs on a role that’s not one of your electives.

Here are factors to consider and my recommendation.

Assurance role

Pros

• This role is required for public practice licensing. If you are thinking of opening your practice down the road, this will be required when applying for the license with a few exceptions (check your provincial CPA website for specific requirements, for example Ontario’s is available here).
• It’s closely linked to Financial Reporting so it will help you prepare for Day 2 FR as well. For example, in recent CFEs there were FR issues in the Assurance role. Students who took Assurance as their role got extra practice from those FR AOs.
• Because of high volume of candidates that select this role, there will be more study material available as well as more potential study partners.
• There are a limited number of topics under Assurance role that can be tested, often less than other roles. For a list of sample topics, check out Part 1 of this blog series. 
• There is little quant analysis.
• The Assurance standards are available to you in the exam in the Handbook, which means you don’t have to memorize as much as with other roles.
• Most of the AOs can be answered in a template format, which makes it easier to get a C.

Cons

• If you don’t have audit work experience, the complex nature of assurance will make it difficult for you to get full understanding of topics. For example, writing procedures is a challenge for most candidates who have never worked in audit.
• Due to the high volume of candidates selecting this role (typically the default role for candidates in public practice) there will be more writers to compete against for depth. Since CFE is marked on a curve, you have a higher bar to pass.
• Assurance is a qualitative heavy exam. Most AOs will require clear, concise, and well-structured written responses to achieve C grade. If you have not worked in Audit or English is not your first language, this role may not be suitable for you.

Tax

Pros

• Similar to Assurance, this role is required for public practice licensing. Check your provincial regulations for specific rules.
• If you like “concrete answers” (eg tax payable calculation, employee benefits rules, tax formulas), as opposed to subjective answers (eg procedures, strategy, performance evaluation), you’ll succeed in this role because it will be clear what you are doing right or wrong.
• If you are currently working in tax (personal or corporate), you will have a better understanding of this role during Day 2.
• You are provided with the Income Tax Act (ITA) on the exam, which means you can look up topics that you are not sure about.
• If you have intentions to grow in a tax-related role in your career, this is a good opportunity to learn many technical subjects.

Cons

• Not a common role that students select. This means those who do select it are confident in their expertise, so you’ll have strong competitors to beat. There will also be fewer resources and study partners available as support due to low volume of students taking this.
• While you are provided with the ITA, this is often difficult to interpret and hard to rely on, which means there will be much more to memorize.
• You need to be very detail-oriented. You’ll find it takes longer to study Tax and perfect the Tax AOs than with other roles.
• Even if you have experience in either personal tax or corporate tax, it is unknown which AOs will come up on the exam, due to breadth of topics, so your experience may not be that useful.
• This role is heavy on technicals. You’ll have a lot to study and memorize for the CFE. 

Performance Management (PM)

Pros

• You won’t be competing with writers in public practice.
• If you are working in corporate and/or industry type role, you will have a better understanding of this role. For example, you probably had exposure to Excel quants analysis, like cash flows, DCF, contribution margin, break-even analysis, etc. This experience will help you solve AOs during the CFE.
• Taking this role will significantly help with Day 1. The CFE Day 1 has similar quants, like CM, NPV, breakeven, IRR, cash flows, etc.
• Taking this role will also help with Day 2 common area MA AOs, because PM has lots of MA AOs. This means you can study for both your role and MA AOs at the same time.
• Well-rounded with both quantitative and qualitative AOs.
• This role is less criteria-focused compared with Tax and Assurance. It will be easier for you to get Cs if memorization is not your strong skill.
• Most find the calculations to be more intuitive compared with a Finance role.

Cons

• Qualitative components are ambiguous and subjective. You’ll find it challenging to achieve depth and write at C level. For example, if you are asked to discuss the pros/cons of outsourcing, you need to provide specific factors and answer “so what”, “why” and “how,” which is difficult for most writers.
• You will not be provided with resources during the exam, such as the ITA/Handbook for Taxation and Assurance, so there is less to rely on and more to memorize.
• Common misconception that you will be tested just on qualitative AOs (such as pros/cons and SWOT). PM role includes several quant AOs, so time management and depth are often struggles for candidates who are not strong with quants.

Finance

Pros

• If you are currently working in finance type role, you will have a better understanding of this role for Day 2 and certain topics will be more intuitive for you.
• Similar to PM, taking this role can significantly help with Day 1 on the CFE, as the exams have common calculations and AOs.
• Could be helpful if you are interested in future plans to pursue the CFA designation.
• Suitable if you are strong with calculations because Finance role is quants heavy.

Cons

• There are lots of calculations and quants involved. It’s more technical than PM.
• Similar to PM, you will not be provided with resources during the exam, such as the ITA/Handbook for Taxation and Assurance, so there is less to rely on and more to memorize.
• Because this roles has several calculations, time management and depth are struggles for candidates. You will need to be very proficient with Excel and quants.
• Few individuals take this role (compared with PM and Assurance), so there could be fewer resources and study partners for support.

Which CFE Role to Choose?

I recommend Assurance or Tax for candidates working in public practice. Between the two, Assurance is preferred. It’s less technical, you can apply templates, there are more study partners available, and it will help you with FR AOs.

I recommend PM or Finance for candidates in corporate/industry. Between the two, PM is preferred because it’s less technical, more balanced with quant/qual, and prepares you better for Day 1.

You can also think back to your electives and choose the one you did better. For example, if you took PM and Finance, and did better in PM, then you should choose PM.

According to CPA Canada CFE Reports, Assurance and PM roles make up 90% of all writers. You can now see why more writers choose Assurance and PM compared to other roles. If you need coaching with the CFE, check out my CFE Review course which has 90%+ pass rate on the CFE.