Accounting Advisory Services

Accounting Advisory Services Interview Guide

Financial Accounting Advisory (FAA), sometimes referred to as Technical Accounting Advisory or Financial Reporting Advisory, is an accounting-related service offering that provides corporate clients with expert guidance on complex and emerging accounting matters. The FAA team is engaged primarily by CFOs, controllers, and VP-level finance leaders at public and private companies, private equity and venture capital sponsors, audit committees, and corporate development teams to support the financial reporting function.

Services provided include revenue recognition (ASC 606 / IFRS 15), business combinations and purchase price allocation (ASC 805), stock-based compensation (ASC 718), fair value measurement (ASC 820), lease accounting (ASC 842 / IFRS 16), impairment testing (ASC 350 / 360), SEC comment letter responses, restatement support, IPO financial reporting readiness, SOX 404 internal control assessment, and technical accounting memoranda, among others depending on the engagement or project. When interviewing for FAA, it is critical to understand the accounting frameworks that govern financial reporting, the judgment calls that drive them, and the practical mechanics of applying those frameworks to real-world transactions.

When performing financial accounting advisory work, there are three critical analyses that everyone is required to understand: Revenue Recognition under ASC 606, Business Combinations and Purchase Price Allocation under ASC 805, and Stock-Based Compensation under ASC 718. All three analyses are compiled and put together in a technical accounting memorandum, a financial reporting model, or a disclosure draft and provided to multiple parties as part of the engagement: the client's finance team, the client's external auditors, the audit committee, and in the case of public companies, the SEC and the capital markets. This is then compiled into a final accounting position memo, a purchase price allocation schedule, or a financial statement footnote for the client, the client's auditors, or the relevant regulatory body.

Revenue Recognition — ASC 606 / IFRS 15

Revenue recognition is the first and most consequential analysis in modern financial reporting. Under ASC 606 (or IFRS 15 in an international context), revenue is recognized when a company satisfies a performance obligation by transferring control of a good or service to a customer, in an amount that reflects the consideration the company expects to be entitled to in exchange for that good or service. The standard replaces the old industry-specific revenue rules with a single, five-step framework that applies to virtually all contracts with customers. The five steps are: (1) identify the contract, (2) identify the performance obligations, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations, and (5) recognize revenue when (or as) the performance obligation is satisfied. The primary goal of the analysis is to ensure that revenue is recognized in the correct period, in the correct amount, and in a manner that faithfully represents the transfer of goods or services to the customer. A misapplication of ASC 606 can result in a material misstatement of revenue, a restatement, an SEC comment letter, or in severe cases, a going concern qualification if the revenue correction eliminates the company's profitability.

To walk through a basic example, assume a SaaS company enters into a 24-month subscription contract with a customer for a total fee of $140,000, which includes both the software subscription and a one-time implementation service. The company's standalone selling prices (SSP) are:

• SaaS subscription (24 months): $120,000
• Implementation service: $40,000
• Total standalone selling price: $160,000

Because the combined contract price ($140,000) is less than the total SSP ($160,000), the company must allocate the transaction price to each performance obligation based on its relative SSP:

The $10M impairment is recorded as a non-cash charge in the income statement, reducing goodwill on the balance sheet. The critical judgment in this analysis is the fair value of the CGU, which typically relies on a DCF. The selection of the discount rate, the growth assumptions, and the selection of peer companies for the market cross-check all directly drive the impairment outcome. In summary, the goodwill and intangible asset impairment analysis is not a mechanical exercise — it is a judgment-heavy process where the assumptions chosen can swing the impairment charge by millions of dollars, and the engagement team must be prepared to defend those assumptions to the client's auditors and, in the case of public companies, to the SEC.

Fair Value Measurement & Contingent Consideration

Under ASC 820 (or IFRS 13), fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard establishes a three-level hierarchy of inputs:

• Level 1: Quoted prices in active markets (e.g., publicly traded stock)
• Level 2: Observable inputs other than Level 1 (e.g., interest rate curves, credit spreads)
• Level 3: Unobservable inputs (e.g., company-specific forecasts, discount rates with no market equivalent)



The majority of complex valuation work — stock-based compensation (ASC 718), contingent consideration / earn-outs (ASC 805), and fair value of complex financial instruments — falls into Level 3, which means the valuation team is building the model from scratch using the client's assumptions and market data.

To illustrate, assume a buyer acquires a target for $10M in cash plus a Contingent Value Right (CVR) that pays $1.00 for every dollar of revenue above $50M over the next three years. The target's projected revenues are:

 The purchase price allocation is:

The $335M of goodwill is not amortized but is tested for impairment at least annually under ASC 350. The customer relationships ($80M) and developed technology ($50M) are finite-lived intangible assets and are amortized over their estimated useful lives (typically 5–10 years for customer relationships, 3–7 years for technology), generating a recurring non-cash expense on the income statement. The in-process R&D ($20M) is recognized as an intangible asset because it was acquired in a business combination (under ASC 805, in-process R&D is not expensed — it is capitalized, unlike the treatment of internally generated R&D under ASC 730). The critical judgments in the PPA are: (1) the fair value of each identifiable asset and liability, which often requires a valuation specialist; (2) the useful lives and amortization methods for finite-lived intangibles, which drive the annual amortization expense; and (3) the allocation between finite-lived intangibles and goodwill, which determines the future impairment exposure. In summary, the business combination and PPA analysis is the accounting bridge between the deal and the financial statements, and the quality of the PPA determines the earnings trajectory of the combined company for the life of the acquisition.

Stock-based compensation (SBC) under ASC 718 (or IFRS 2 in an international context) is the accounting framework that governs how a company recognizes the cost of equity awards granted to employees, directors, and consultants. The core principle is straightforward: the company must recognize the fair value of the equity award as a compensation expense over the service period (vesting period), regardless of whether the award is settled in shares or cash. In practice, the analysis is one of the most complex and judgment-heavy areas of financial reporting for a growth-stage or technology company, because it requires (1) valuing the award at grant date using an options pricing model, (2) classifying the award as equity-settled or liability-settled, (3) accounting for modifications and cancellations, and (4) estimating forfeitures over the vesting period. A misapplication of ASC 718 can result in a material misstatement of compensation expense, a restatement, or an inappropriate classification of the award (equity vs. liability) that distorts the balance sheet and the income statement.

To walk through a basic example, assume a company grants 100,000 stock options to its engineering team with the following terms:

• Exercise price: $20.00 per share
• Fair value of the company's stock at grant date: $25.00 per share
• Vesting schedule: 4-year cliff vesting (100% vests at the end of Year 4)
• Expected volatility: 35%
• Expected option term: 5 years
• Risk-free rate: 4.0%
• Dividend yield: 0%



Using the Black-Scholes options pricing model, the fair value of each option is estimated at $8.50 per share. The total compensation cost is:

The $212,500 per year is recognized as a non-cash compensation expense on the income statement over the four-year vesting period, with a corresponding credit to additional paid-in capital (APIC) on the balance sheet. The critical judgments in this analysis are: (1) the selection of the valuation model (Black-Scholes vs. binomial vs. Monte Carlo), which is driven by the features of the award and the company's characteristics; (2) the selection of model inputs, particularly expected volatility and expected term, which are highly judgmental for a private company; (3) the forfeiture estimate, which must be revised in each reporting period and can swing the cumulative expense recognized; and (4) the equity vs. liability classification, which is critical for awards that contain performance conditions, change-in-control provisions, or cash settlement features. In summary, the stock-based compensation analysis under ASC 718 is a valuation and judgment exercise disguised as an accounting exercise, and the quality of the grant-date valuation and the forfeiture estimate are what determine whether the compensation expense on the income statement is reasonable, defensible, and consistent with the economic substance of the award.

TAS Foundations — Financial Accounting Advisory Interview Package

We have developed and compiled a comprehensive interview guide including example case studies from FAA interviews at the largest accounting firms across the United States and Canada to support FAA candidates through the interview process. Our package includes:

• Full-length, detailed training package for Revenue Recognition (ASC 606), Business Combinations & PPA (ASC 805), Stock-Based Compensation (ASC 718), and related topics including Fair Value (ASC 820), Lease Accounting (ASC 842), and Impairment (ASC 350 / 360).
• Example Technical Accounting Memorandum — a full-length memo addressing a complex revenue recognition question with a SaaS contract.
• Example Purchase Price Allocation Schedule (Excel) — a complete PPA with fair value adjustments, goodwill calculation, and amortization schedule.
• Example SBC Grant-Date Valuation Model (Excel) — Black-Scholes and binomial model with sensitivity analysis, forfeiture schedule, and income statement impact.
• Complete set of potential interview questions with model answers, common follow-ups, and case study prompts.

Learning is growing. We have the tools and resources needed to support candidates and firms for their educational needs.



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