The second step in the goodwill impairment test (ie, calculating the implied fair value of goodwill) has been eliminated for simplification purposes.Now you basically just compare the fair value of the reporting unit with its carrying value. Such assets are written off when they are entirely uncollectible.When expected credit losses decrease, the allowance for credit losses is decreased, and a credit loss expense is reversed on the income statement.When expected credit losses increase, an allowance for credit losses (ie, a contra-account) is booked at the reporting date to adjust the value of the asset, and credit loss expense is recognized on the income statement.The new guidance applies to assets measured at amortized cost (eg, receivables and held-to-maturity debt securities) and available-for-sale (AFS) debt securities, as well as finance leases and off-balance-sheet credit exposures (eg, financial guarantees).Estimates can be based on historical information, current conditions or reasonable and supportable forecasts (eg, predictive data analytics).The new model estimates expected credit losses over the lifetime of the asset for more credit risk transparency.This represents a switch from an incurred credit loss model to a current expected credit loss (CECL) model to reflect economic downturns in the financial statements faster (ie, earlier recognition).These changes remove more bright-line rules that accountants are used to and require more judgment, and in some cases data analytics, to develop expectations for credit losses. Area III, Financial Management, decreased by 1%įinancial Instruments – Credit Losses (ASUs 2016-13, 2018-19, 2019-05) - The credit loss (ie, bad debt) changes are pervasive and complicated.Area I, Corporate Governance, increased by 3%.Shifting from Remembering & Understanding to Analysis by 5%.Area II, Risk Assessment and Planning, increased by 5%.Working with data (extraction, transformation, and loading)Ĭhanges in Content and Skill Weighting on JBlueprints.Understanding the importance of SOC 1 reports for outsourced IT functions.Skepticism and judgment in analyzing data.Use of automated tools and data analytics in the audit.Effect of general and application controls on the completeness and reliability of data.Business processes and internal controls.A Sampling of Changes Coming to the CPA Exam Topics to be Expanded on the Examĭigital and Data-Driven Mindset and Other Technological Impacts