This section is killing me. I haven’t taken any accounting or finance classes in college, and so that’s where I’m guessing my particular difficulty could be coming from. I got through the first study session relatively OK, but the second one is just destroying me. Just detail after detail to remember…
Does anyone have any recommendations for studying this section?
Other sections have many details to memorize as well, but they seem to me to be able to conceptualized into something that makes sense. For example, while there may be a few parts to the capital asset pricing model, I never had to think about memorizing it because it sort of just makes sense once you learn about it (I’m not saying this is a particularly hard thing to memorize, just using it as an example). Accounting on the other hand just seems to sort of be like “just the way it is.”
Anyone have any tips? For some reason this section is just killing me at it bores me to death.
Accounting does have a basic conceptual framework to it, which is where I would start. Ultimately its framed around rules and exceptions so its just memorizing the list of “what-ifs”. I found I learned better when doing review by getting right slaughtered doing the practice questions until my score steadily improved.
I feel your pain. I am also a structure guy and there really isn’t good structure to much of accounting because it is just a bunch of arbitrary choices people made. Back in the old days we had to learn “pooled interest” accounting for mergers and I though it was a pain in the butt. A year or so after CFA Institute tested us on it, FASB decided that they would no longer allow “pooled interest” accounting. I felt cheated. I don’t think I have ever learned anything in mathematics, for example, that somebody one day decided was no longer valid.
thanks for the responses guys the first study session in fin reporting was not too bad, like i said. this second one is tough though. still have yet to do the last 2
Firstly, the basics of accounting are based on pure logic - understanding what you are doing and why you are doing all that stuff is essential from my point of view. If necessary, use some other literature. Secondly, learn it all and don’t skip the details - my experience is that CFAI doesn’t hesitate to ask details… Thirdly, remember it all, you will need it not only for Level 1 but also for Level 2.
^This. This poster is totally right. If you think you can do well on this section by learning the basics and ignoring the IFRS/GAAP differences you’re doing it backward. Accounting is easy. CFAI is testing that you can actually apply the concepts and analyze differences and that takes a lot more conceptual understanding. It really doesn’t go away either, at L2 it is even more about the details.
I couldn’t disagree with this more. Mathematics is based on pure logic. You start with a finite set of axioms and then you use logical rules to derive everything else. You can take any concept in the most advanced possible mathematics and you can follow it all the way to its base in a set of simple sounding axioms. It’s a very profoundly beautiful thing. Now tell me even one general principle in accounting that would seem to be anything like an axiom. Just one. When I first started studying accounting, I started looking for them. I would posit axioms like “All temporary differences between tax accounting and financial accounting ultimately go away” or “Over the long run, accounting profit and economic profit are the same” or … Unfortunately, there isn’t even a ssingle piece of stable ground to be found. In mathematics, you can take courses called “Foundations of Mathematics” and stuff that deal with axioms, set theory, logic, etc. and discover the tools and base of mathematics with the promise that all mathematics ultimately relies on these (you have to be a really sophisticated student to find a foundations class even slightly interesting, unfortunately). I could teaach a course on the “Foundations of Accounting” and dismiss everyone early from the first class having discovered everything there was to learn about the topic in the first two minutes. Anyway, have you ever met an accountant or even an accounting professor who could tell you the first thing about pure logic? I haven’t
To make my point clear: math is pure logic and - I agree - math is more logical than accounting. Actually, you are talking about two totally different things. Accounting is not math! I did not say that all the accounting was pure logic. What I´m saying is that accounting principles are built on a logical basis and that it is easier to learn it if you know what and why you are doing it. The details - just as differences how you have to treat different things in, e.g., US-GAAP and IFRS, are sometimes not logical at all and simply have to be learned.
To make my point clear: math is pure logic and - I agree - math is more logical than accounting. Actually, you are talking about two totally different things.
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Two different things? You said accounting was pure logic and I said math was pure logic. If they are two totally differnt things, that means one of them is not pure logic. Then in your next post you said math is pure logic. You know what? It’s seeming pretty clear to me that you aren’t really very good at logic. Since you passed your CFA exams, you must be good at some stuff but logic isn’t it. Maybe we just better scratch the idea that accounting has anything to do with logic and let people learn it as the arbitrary made up set of rules that it is. I think that I could make massive changes in accounting rules based on what I think is important and (neglecting the cost of implementing new rules), the rules might even be better. Financial analysts would sure like them better because I would usher in a brand new era of transparency and clarity. And I wouldn’t use a speck of logic to do it.
accounting is not pure logic. it’s not logic at all. it’s more about politics of what corporations think is the best way to maximize profits, and how governments try to expand their tax base. the rules are just there and you have to find a way to comply with them as long as they are effective. today’s rules would be different from tomorrow’s due to lobbying and all.
it’s like my 2yr old son used to tell me “daddy, that’s a trin trin trin”. i reply, “no that’s a gear” then he yells at me “NO THAT’S A TRIN TRIN TRIN”. we go back and forth a couple more times then i say “yes it’s a trin trin trin”