FAR topic guide

Consolidations for FAR CPA candidates.

Consolidation questions are easier when you think like the consolidated entity: remove internal activity, recognize the acquired net assets, and separate parent and noncontrolling interests.

Practice FAR consolidation questions CPA sections

By World of Accountants editorial team. Last reviewed August 23, 2026. World of Accountants is independent and not affiliated with the AICPA, NASBA, Becker, NINJA, UWorld, Gleim, or other CPA review providers.

FAR sample question

Test the rule before you leave this FAR guide.

Read the topic explanation, then use this real FAR question to check whether the controlling fact is sticking.

FAR-000006FAR-IIIRevenue recognition

A contract bundles a machine and a one-year service plan for $120,000. Their standalone selling prices are $100,000 and $50,000, respectively. If the service plan is performed evenly and the first quarter is complete, how much of the transaction price should be allocated to the service plan revenue recognized to date?

A.$10,000
B.$20,000
C.$40,000
D.$50,000

Answer: A. $10,000

The service plan receives $40,000 of the $120,000 transaction price: $120,000 x ($50,000 / $150,000). One quarter is $10,000, so that is the revenue recognized to date.

Why the other answers are wrong

B. This does not apply the relative standalone selling-price allocation and the one-quarter performance period together.
C. $40,000 is the full amount allocated to the service plan before considering that only one quarter has been performed.
D. $50,000 is the standalone selling price, not the allocated transaction price or the amount recognized for one quarter.

Core idea

Consolidated statements present the parent and subsidiaries as one economic entity. Intercompany balances and transactions are eliminated so the statements show outside-party activity.

What FAR likes to test

Watch for acquisition-date fair values, goodwill, noncontrolling interest, intercompany inventory profit, intercompany debt, and equity-method adjustments.

Common miss

Candidates often leave intercompany activity in the statements or treat the subsidiary as if it remains a separate reporting entity in consolidation.

How to practice

Write the consolidation objective before the calculation: what internal balance or profit has to disappear from the consolidated view?

How to use this guide

Turn consolidations for far cpa candidates into a short practice loop.

Read the core idea first, then answer a small set while the rule is still active in your head. The goal is to see whether you can recognize the tested fact without rereading the guide.

Spot the tested fact

Before choosing an answer, name the one fact that should control the result. FAR questions often become easier once the controlling fact is separated from background detail.

Explain the distractor

When an answer is wrong, say why it is wrong in one sentence. That habit turns answer review into durable exam judgment instead of memorizing a letter.

Retest later

Bookmark misses and revisit them after another study session. A topic is stronger when you can recover it after time has passed.

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Practice loop

Use the topic, then answer questions while the idea is fresh.

Short practice sets are enough to expose whether the rule is sticking.

Practice FAR consolidation questions