Special Purpose Frameworks & Cash-to-Accrual Conversion | CPA FAR Foundations

Learn special purpose frameworks and cash-to-accrual conversion for FAR Area I: Financial Reporting. This CPA FAR Foundations lesson covers cash basis, modified cash basis, income tax basis, contractual basis, regulatory basis, statement presentation, and cash-to-accrual adjustments. CHAPTERS 00:00 Special Purpose Frameworks Overview 00:35 The Five Frameworks 02:56 Financial Statement Titles 03:59 Cash-to-Accrual Adjustments 06:14 Cash-to-Accrual Example 07:40 Final FAR Workflow THE FIVE FRAMEWORKS Cash Basis → Revenue when cash is received → Expenses when cash is paid Modified Cash Basis → Cash basis with specified modifications Income Tax Basis → Follows applicable tax return recognition and measurement rules Contractual Basis → Follows requirements of a specific agreement Regulatory Basis → Follows requirements of an applicable regulator Do not confuse modified cash basis with governmental modified accrual accounting. CASH-TO-ACCRUAL CONVERSION Start with cash basis income and adjust for timing differences. Accounts Receivable Increase → Add Accounts Receivable Decrease → Subtract Accounts Payable / Accrued Liability Increase → Subtract Accounts Payable / Accrued Liability Decrease → Add Prepaid Expense Increase → Add Unearned Revenue Increase → Subtract EXAMPLE Cash basis income: $186,000 AR increases by $7,000 → Add $7,000 AP increases by $5,000 → Subtract $5,000 Accrual basis income: $186,000 + $7,000 − $5,000 = $188,000 FINAL FAR WORKFLOW Identify the Basis → Apply It Consistently → Use Appropriate Statement Titles → Convert Timing Differences → Determine Accrual-Basis Income After watching, reinforce these concepts with related MCQs and task-based simulations in your CPA review course. CPA Explained AI is an independent educational platform and is not affiliated with, endorsed by, or sponsored by the AICPA, NASBA, or any CPA review course provider. #CPAExam #CPAFAR #CashToAccrual #CPAExamPrep