CFA Level 1 - LOS Changes 2014 - 2015 PDF

CFA Level 1 - LOS Changes 2014 - 2015
Topic LOS Level I - 2014 (532 LOS) LOS Level I - 2015 (529 LOS) Compared
describe the structure of the CFA describe the structure of the CFA
Institute Professional Conduct Program Institute Professional Conduct Program
Ethics 1.1.a 1.1.a
and the process for the enforcement of and the process for the enforcement of
the Code and Standards the Code and Standards
state the six components of the Code of state the six components of the Code of
Ethics 1.1.b Ethics and the seven Standards of 1.1.b Ethics and the seven Standards of
Professional Conduct Professional Conduct
explain the ethical responsibilities explain the ethical responsibilities
required by the Code and Standards, required by the Code and Standards,
Ethics 1.1.c 1.1.c
including the sub-sections of each including the sub-sections of each
Standard Standard
demonstrate the application of the Code demonstrate the application of the Code
of Ethics and Standards of Professional of Ethics and Standards of Professional
Ethics 1.2.a 1.2.a
Conduct to situations involving issues of Conduct to situations involving issues of
professional integrity professional integrity
distinguish between conduct that distinguish between conduct that
conforms to the Code and Standards conforms to the Code and Standards
Ethics 1.2.b 1.2.b
and conduct that violates the Code and and conduct that violates the Code and
Standards Standards
recommend practices and procedures recommend practices and procedures
designed to prevent violations of the designed to prevent violations of the
Ethics 1.2.c 1.2.c
Code of Ethics and Standards of Code of Ethics and Standards of
Professional Conduct Professional Conduct
explain why the GIPS standards were explain why the GIPS standards were
created, what parties the GIPS created, what parties the GIPS
Ethics 1.3.a 1.3.a
standards apply to, and who is served standards apply to, and who is served
by the standards by the standards
explain the construction and purpose of explain the construction and purpose of
Ethics 1.3.b 1.3.b
composites in performance reporting composites in performance reporting
Ethics 1.3.c explain the requirements for verification 1.3.c explain the requirements for verification
describe the key features of the GIPS describe the key features of the GIPS
Ethics 1.4.a standards and the fundamentals of 1.4.a standards and the fundamentals of
compliance compliance
www.passingscore.net 1
describe the scope of the GIPS describe the scope of the GIPS
standards with respect to an investment standards with respect to an investment
Ethics 1.4.b 1.4.b
firm’s definition and historical firm’s definition and historical
performance record performance record
explain how the GIPS standards are explain how the GIPS standards are
implemented in countries with existing implemented in countries with existing
standards for performance reporting standards for performance reporting
Ethics 1.4.c 1.4.c
and describe the appropriate response and describe the appropriate response
when the GIPS standards and local when the GIPS standards and local
regulations conflict regulations conflict
describe the nine major sections of the describe the nine major sections of the
Ethics 1.4.d 1.4.d
GIPS standards GIPS standards
interpret interest rates as required rates interpret interest rates as required rates
Quantitative 2.5.a of return, discount rates, or opportunity 2.5.a of return, discount rates, or opportunity
costs costs
explain an interest rate as the sum of a explain an interest rate as the sum of a
real risk-free rate, and premiums that real risk-free rate, and premiums that
Quantitative 2.5.b 2.5.b
compensate investors for bearing compensate investors for bearing
distinct types of risk distinct types of risk
calculate and interpret the effective calculate and interpret the effective
annual rate, given the stated annual annual rate, given the stated annual
Quantitative 2.5.c 2.5.c
interest rate and the frequency of interest rate and the frequency of
compounding compounding
solve time value of money problems for solve time value of money problems for
Quantitative 2.5.d 2.5.d
different frequencies of compounding different frequencies of compounding
calculate and interpret the future value calculate and interpret the future value
(FV) and present value (PV) of a single (FV) and present value (PV) of a single
Quantitative 2.5.e sum of money, an ordinary annuity, an 2.5.e sum of money, an ordinary annuity, an
annuity due, a perpetuity (PV only), and annuity due, a perpetuity (PV only), and
a series of unequal cash flows a series of unequal cash flows
demonstrate the use of a time line in demonstrate the use of a time line in
Quantitative 2.5.f modeling and solving time value of 2.5.f modeling and solving time value of
money problems money problems
calculate and interpret the net present calculate and interpret the net present
Quantitative 2.6.a value (NPV) and the internal rate of 2.6.a value (NPV) and the internal rate of
return (IRR) of an investment return (IRR) of an investment
contrast the NPV rule to the IRR rule, contrast the NPV rule to the IRR rule,
Quantitative 2.6.b and identify problems associated with 2.6.b and identify problems associated with
the IRR rule the IRR rule
calculate and interpret a holding period calculate and interpret a holding period
return (total return) return (total return)
calculate and compare the money- calculate and compare the money-
weighted and time-weighted rates of weighted and time-weighted rates of
Quantitative 2.6.d return of a portfolio and evaluate the 2.6.d return of a portfolio and evaluate the
performance of portfolios based on performance of portfolios based on
these measures these measures
calculate and interpret the bank calculate and interpret the bank
discount yield, holding period yield, discount yield, holding period yield,
Quantitative 2.6.e effective annual yield, and money 2.6.e effective annual yield, and money
market yield for U.S. Treasury bills and market yield for U.S. Treasury bills and
other money market instruments other money market instruments
convert among holding period yields, convert among holding period yields,
Quantitative 2.6.f money market yields, effective annual 2.6.f money market yields, effective annual
yields, and bond equivalent yields yields, and bond equivalent yields
distinguish between descriptive distinguish between descriptive
statistics and inferential statistics, statistics and inferential statistics,
Quantitative 2.7.a between a population and a sample, 2.7.a between a population and a sample,
and among the types of measurement and among the types of measurement
scales scales
define a parameter, a sample statistic, define a parameter, a sample statistic,
and a frequency distribution and a frequency distribution
calculate and interpret relative calculate and interpret relative
frequencies and cumulative relative frequencies and cumulative relative
frequencies, given a frequency frequencies, given a frequency
distribution distribution
describe the properties of a data set describe the properties of a data set
Quantitative 2.7.d presented as a histogram or a 2.7.d presented as a histogram or a
frequency polygon frequency polygon
calculate and interpret measures of calculate and interpret measures of
central tendency, including the central tendency, including the
population mean, sample mean, population mean, sample mean,
Quantitative 2.7.e 2.7.e
arithmetic mean, weighted average or arithmetic mean, weighted average or
mean, geometric mean, harmonic mean, geometric mean, harmonic
mean, median, and mode mean, median, and mode
calculate and interpret quartiles, calculate and interpret quartiles,
Quantitative 2.7.f 2.7.f
quintiles, deciles, and percentiles quintiles, deciles, and percentiles
calculate and interpret 1) a range and a calculate and interpret 1) a range and a
mean absolute deviation and 2) the mean absolute deviation and 2) the
Quantitative 2.7.g 2.7.g
variance and standard deviation of a variance and standard deviation of a
population and of a sample population and of a sample
calculate and interpret the proportion of calculate and interpret the proportion of
observations falling within a specified observations falling within a specified
Quantitative 2.7.h 2.7.h
number of standard deviations of the number of standard deviations of the
mean using Chebyshev’s inequality mean using Chebyshev’s inequality
calculate and interpret the coefficient of calculate and interpret the coefficient of
Quantitative 2.7.i 2.7.i
variation and the Sharpe ratio variation and the Sharpe ratio
explain skewness and the meaning of a explain skewness and the meaning of a
Quantitative 2.7.j positively or negatively skewed return 2.7.j positively or negatively skewed return
describe the relative locations of the describe the relative locations of the
Quantitative 2.7.k mean, median, and mode for a 2.7.k mean, median, and mode for a
unimodal, nonsymmetrical distribution unimodal, nonsymmetrical distribution
explain measures of sample skewness explain measures of sample skewness
Quantitative 2.7.l 2.7.l
and kurtosis and kurtosis
compare the use of arithmetic and compare the use of arithmetic and
Quantitative 2.7.m geometric means when analyzing 2.7.m geometric means when analyzing
investment returns investment returns
define a random variable, an outcome, define a random variable, an outcome,
Quantitative 2.8.a an event, mutually exclusive events, 2.8.a an event, mutually exclusive events,
and exhaustive events and exhaustive events
state the two defining properties of state the two defining properties of
probability and distinguish among probability and distinguish among
empirical, subjective, and a priori empirical, subjective, and a priori
probabilities probabilities
state the probability of an event in state the probability of an event in
terms of odds for and against the event terms of odds for and against the event
distinguish between unconditional and distinguish between unconditional and
conditional probabilities conditional probabilities
explain the multiplication, addition, and explain the multiplication, addition, and
total probability rules total probability rules
calculate and interpret 1) the joint calculate and interpret 1) the joint
probability of two events, 2) the probability of two events, 2) the
probability that at least one of two probability that at least one of two
Quantitative 2.8.f events will occur, given the probability 2.8.f events will occur, given the probability
of each and the joint probability of the of each and the joint probability of the
two events, and 3) a joint probability of two events, and 3) a joint probability of
any number of independent events any number of independent events
distinguish between dependent and distinguish between dependent and
independent events independent events
calculate and interpret an unconditional calculate and interpret an unconditional
Quantitative 2.8.h probability using the total probability 2.8.h probability using the total probability
rule rule
explain the use of conditional explain the use of conditional
expectation in investment applications expectation in investment applications
explain the use of a tree diagram to explain the use of a tree diagram to
Quantitative 2.8.j 2.8.j
represent an investment problem represent an investment problem
calculate and interpret covariance and calculate and interpret covariance and
Quantitative 2.8.k 2.8.k
correlation correlation
calculate and interpret the expected calculate and interpret the expected
value, variance, and standard deviation value, variance, and standard deviation
Quantitative 2.8.l 2.8.l
of a random variable and of returns on of a random variable and of returns on
a portfolio a portfolio
calculate and interpret covariance given calculate and interpret covariance given
Quantitative 2.8.m 2.8.m
a joint probability function a joint probability function
calculate and interpret an updated calculate and interpret an updated
Quantitative 2.8.n 2.8.n
probability using Bayes’ formula probability using Bayes’ formula
identify the most appropriate method to identify the most appropriate method to
Quantitative 2.8.o solve a particular counting problem, and 2.8.o solve a particular counting problem, and
solve counting problems using factorial, solve counting problems using factorial,
combination, and permutation concepts combination, and permutation concepts
define a probability distribution and define a probability distribution and
distinguish between discrete and distinguish between discrete and
Quantitative 3.9.a 3.9.a
continuous random variables and their continuous random variables and their
probability functions probability functions
describe the set of possible outcomes of describe the set of possible outcomes of
a specified discrete random variable a specified discrete random variable
interpret a cumulative distribution interpret a cumulative distribution
function function
calculate and interpret probabilities for calculate and interpret probabilities for
Quantitative 3.9.d a random variable, given its cumulative 3.9.d a random variable, given its cumulative
distribution function distribution function
define a discrete uniform random define a discrete uniform random
Quantitative 3.9.e variable, a Bernoulli random variable, 3.9.e variable, a Bernoulli random variable,
and a binomial random variable and a binomial random variable
calculate and interpret probabilities calculate and interpret probabilities
Quantitative 3.9.f given the discrete uniform and the 3.9.f given the discrete uniform and the
binomial distribution functions binomial distribution functions
construct a binomial tree to describe construct a binomial tree to describe
stock price movement stock price movement
Quantitative 3.9.h calculate and interpret tracking error 3.9.h calculate and interpret tracking error
define the continuous uniform define the continuous uniform
distribution and calculate and interpret distribution and calculate and interpret
probabilities, given a continuous probabilities, given a continuous
uniform distribution uniform distribution
explain the key properties of the normal explain the key properties of the normal
distinguish between a univariate and a distinguish between a univariate and a
multivariate distribution, and explain multivariate distribution, and explain
Quantitative 3.9.k 3.9.k
the role of correlation in the the role of correlation in the
multivariate normal distribution multivariate normal distribution
determine the probability that a determine the probability that a
Quantitative 3.9.l normally distributed random variable 3.9.l normally distributed random variable
lies inside a given interval lies inside a given interval
define the standard normal distribution, define the standard normal distribution,
explain how to standardize a random explain how to standardize a random
Quantitative 3.9.m variable, and calculate and interpret 3.9.m variable, and calculate and interpret
probabilities using the standard normal probabilities using the standard normal
define shortfall risk, calculate the safety- define shortfall risk, calculate the safety-
first ratio, and select an optimal first ratio, and select an optimal
Quantitative 3.9.n 3.9.n
portfolio using Roy’s safety-first portfolio using Roy’s safety-first
criterion criterion
explain the relationship between normal explain the relationship between normal
and lognormal distributions and why the and lognormal distributions and why the
Quantitative 3.9.o 3.9.o
lognormal distribution is used to model lognormal distribution is used to model
asset prices asset prices
distinguish between discretely and distinguish between discretely and
continuously compounded rates of continuously compounded rates of
return, and calculate and interpret a return, and calculate and interpret a
Quantitative 3.9.p 3.9.p
continuously compounded rate of continuously compounded rate of
return, given a specific holding period return, given a specific holding period
return return
explain Monte Carlo simulation and
Wording
Quantitative 3.9.q describe its major applications and 3.9.q explain Monte Carlo simulation and
Change
limitations describe its applications and limitations
compare Monte Carlo simulation and compare Monte Carlo simulation and
Quantitative 3.9.r 3.9.r
historical simulation historical simulation
define simple random sampling and a define simple random sampling and a
sampling distribution sampling distribution
Quantitative 3.10.b explain sampling error 3.10.b explain sampling error
distinguish between simple random and distinguish between simple random and
stratified random sampling stratified random sampling
distinguish between time-series and distinguish between time-series and
cross-sectional data cross-sectional data
explain the central limit theorem and its explain the central limit theorem and its
importance importance
calculate and interpret the standard calculate and interpret the standard
error of the sample mean error of the sample mean
identify and describe desirable identify and describe desirable
properties of an estimator properties of an estimator
distinguish between a point estimate distinguish between a point estimate
Quantitative 3.10.h and a confidence interval estimate of a 3.10.h and a confidence interval estimate of a
population parameter population parameter
describe properties of Student’s t- describe properties of Student’s t-
Quantitative 3.10.i distribution and calculate and interpret 3.10.i distribution and calculate and interpret
its degrees of freedom its degrees of freedom
calculate and interpret a confidence calculate and interpret a confidence
interval for a population mean, given a interval for a population mean, given a
normal distribution with 1) a known normal distribution with 1) a known
population variance, 2) an unknown population variance, 2) an unknown
population variance, or 3) an unknown population variance, or 3) an unknown
variance and a large sample size variance and a large sample size
describe the issues regarding selection describe the issues regarding selection
of the appropriate sample size, data- of the appropriate sample size, data-
Quantitative 3.10.k mining bias, sample selection bias, 3.10.k mining bias, sample selection bias,
survivorship bias, look-ahead bias, and survivorship bias, look-ahead bias, and
time-period bias time-period bias
define a hypothesis, describe the steps define a hypothesis, describe the steps
of hypothesis testing, and describe and of hypothesis testing, and describe and
interpret the choice of the null and interpret the choice of the null and
alternative hypotheses alternative hypotheses
distinguish between one-tailed and two- distinguish between one-tailed and two-
tailed tests of hypotheses tailed tests of hypotheses
explain a test statistic, Type I and Type explain a test statistic, Type I and Type
II errors, a significance level, and how II errors, a significance level, and how
significance levels are used in significance levels are used in
hypothesis testing hypothesis testing
explain a decision rule, the power of a explain a decision rule, the power of a
test, and the relation between test, and the relation between
confidence intervals and hypothesis confidence intervals and hypothesis
tests tests
distinguish between a statistical result distinguish between a statistical result
and an economically meaningful result and an economically meaningful result
explain and interpret the p-value as it explain and interpret the p-value as it
relates to hypothesis testing relates to hypothesis testing
identify the appropriate test statistic identify the appropriate test statistic
and interpret the results for a and interpret the results for a
hypothesis test concerning the hypothesis test concerning the
population mean of both large and small population mean of both large and small
samples when the population is samples when the population is
normally or approximately distributed normally or approximately distributed
and the variance is 1) known or 2) and the variance is 1) known or 2)
unknown unknown
hypothesis test concerning the equality hypothesis test concerning the equality
of the population means of two at least of the population means of two at least
Quantitative 3.11.h 3.11.h
approximately normally distributed approximately normally distributed
populations, based on independent populations, based on independent
random samples with 1) equal or 2) random samples with 1) equal or 2)
unequal assumed variances unequal assumed variances
Quantitative 3.11.i hypothesis test concerning the mean 3.11.i hypothesis test concerning the mean
difference of two normally distributed difference of two normally distributed
populations populations
hypothesis test concerning 1) the hypothesis test concerning 1) the
variance of a normally distributed variance of a normally distributed
population, and 2) the equality of the population, and 2) the equality of the
variances of two normally distributed variances of two normally distributed
populations based on two independent populations based on two independent
random samples random samples
distinguish between parametric and distinguish between parametric and

Quantitative 3.11.k nonparametric tests and describe 3.11.k nonparametric tests and describe
situations in which the use of situations in which the use of
nonparametric tests may be appropriate nonparametric tests may be appropriate
explain principles of technical analysis, explain principles of technical analysis,
Quantitative 3.12.a its applications, and its underlying 3.12.a its applications, and its underlying
assumptions assumptions
describe the construction of different describe the construction of different
Quantitative 3.12.b types of technical analysis charts and 3.12.b types of technical analysis charts and
interpret them interpret them
explain uses of trend, support, explain uses of trend, support,
resistance lines, and change in polarity resistance lines, and change in polarity
Quantitative 3.12.d describe common chart patterns 3.12.d describe common chart patterns
describe common technical analysis describe common technical analysis
indicators (price-based, momentum indicators (price-based, momentum
oscillators, sentiment, and flow of oscillators, sentiment, and flow of
funds) funds)
explain how technical analysts use explain how technical analysts use
cycles cycles
describe the key tenets of Elliott Wave describe the key tenets of Elliott Wave
Quantitative 3.12.g Theory and the importance of Fibonacci 3.12.g Theory and the importance of Fibonacci
numbers numbers
describe intermarket analysis as it describe intermarket analysis as it
Quantitative 3.12.h relates to technical analysis and asset 3.12.h relates to technical analysis and asset
allocation allocation
Economics 4.13.a distinguish among types of markets 4.13.a distinguish among types of markets
explain the principles of demand and explain the principles of demand and
Economics 4.13.b 4.13.b
supply supply
describe causes of shifts in and describe causes of shifts in and
Economics 4.13.c movements along demand and supply 4.13.c movements along demand and supply
curves curves
describe the process of aggregating describe the process of aggregating
Economics 4.13.d 4.13.d
demand and supply curves demand and supply curves
describe the concept of equilibrium describe the concept of equilibrium
Economics 4.13.e (partial and general), and mechanisms 4.13.e (partial and general), and mechanisms
by which markets achieve equilibrium by which markets achieve equilibrium
distinguish between stable and unstable distinguish between stable and unstable
Economics 4.13.f equilibria, including price bubbles, and 4.13.f equilibria, including price bubbles, and
identify instances of such equilibria identify instances of such equilibria
calculate and interpret individual and calculate and interpret individual and
aggregate demand, and inverse demand aggregate demand, and inverse demand
Economics 4.13.g and supply functions, and interpret 4.13.g and supply functions, and interpret
individual and aggregate demand and individual and aggregate demand and
supply curves supply curves
calculate and interpret the amount of calculate and interpret the amount of
Economics 4.13.h excess demand or excess supply 4.13.h excess demand or excess supply
associated with a non-equilibrium price associated with a non-equilibrium price
describe types of auctions and calculate describe types of auctions and calculate
Economics 4.13.i 4.13.i
the winning price(s) of an auction the winning price(s) of an auction
calculate and interpret consumer calculate and interpret consumer
Economics 4.13.j surplus, producer surplus, and total 4.13.j surplus, producer surplus, and total
surplus surplus
describe how government regulation describe how government regulation
Economics 4.13.k and intervention affect demand and 4.13.k and intervention affect demand and
supply supply
forecast the effect of the introduction forecast the effect of the introduction
and the removal of a market and the removal of a market
Economics 4.13.l 4.13.l
interference (e.g., a price floor or interference (e.g., a price floor or
ceiling) on price and quantity ceiling) on price and quantity
calculate and interpret price, income, calculate and interpret price, income,
and cross-price elasticities of demand and cross-price elasticities of demand
Economics 4.13.m 4.13.m
and describe factors that affect each and describe factors that affect each
measure measure
describe consumer choice theory and describe consumer choice theory and
Economics 4.14.a 4.14.a
utility theory utility theory
describe the use of indifference curves, describe the use of indifference curves,
Economics 4.14.b opportunity sets, and budget constraints 4.14.b opportunity sets, and budget constraints
in decision making in decision making
calculate and interpret a budget calculate and interpret a budget
Economics 4.14.c 4.14.c
constraint constraint
determine a consumer’s equilibrium determine a consumer’s equilibrium
Economics 4.14.d bundle of goods based on utility 4.14.d bundle of goods based on utility
analysis analysis
Economics 4.14.e 4.14.e
compare substitution and income effects compare substitution and income effects
distinguish between normal goods and distinguish between normal goods and
Economics 4.14.f inferior goods, and explain Giffen goods 4.14.f inferior goods, and explain Giffen goods
and Veblen goods in this context and Veblen goods in this context
calculate, interpret, and compare calculate, interpret, and compare
Economics 4.15.a accounting profit, economic profit, 4.15.a accounting profit, economic profit,
normal profit, and economic rent normal profit, and economic rent
calculate and interpret and compare calculate and interpret and compare
total, average, and marginal revenue total, average, and marginal revenue
Economics 4.15.c describe a firm’s factors of production 4.15.c describe a firm’s factors of production
calculate and interpret total, average, calculate and interpret total, average,
marginal, fixed, and variable costs marginal, fixed, and variable costs
determine and describe breakeven and determine and describe breakeven and
shutdown points of production shutdown points of production
describe approaches to determining the describe approaches to determining the
Economics 4.15.f 4.15.f
profit-maximizing level of output profit-maximizing level of output
describe how economies of scale and describe how economies of scale and
Economics 4.15.g 4.15.g
diseconomies of scale affect costs diseconomies of scale affect costs
distinguish between short-run and long- distinguish between short-run and long-
Economics 4.15.h 4.15.h
run profit maximization run profit maximization
distinguish among decreasing-cost, distinguish among decreasing-cost,
constant-cost, and increasing-cost constant-cost, and increasing-cost
industries and describe the long-run industries and describe the long-run
supply of each supply of each
calculate and interpret total, marginal, calculate and interpret total, marginal,
Economics 4.15.j 4.15.j
and average product of labor and average product of labor
describe the phenomenon of diminishing describe the phenomenon of diminishing
marginal returns and calculate and marginal returns and calculate and
Economics 4.15.k 4.15.k
interpret the profit-maximizing interpret the profit-maximizing
utilization level of an input utilization level of an input
determine the optimal combination of determine the optimal combination of
Economics 4.15.l 4.15.l
resources that minimizes cost resources that minimizes cost
describe characteristics of perfect describe characteristics of perfect
Economics 4.16.a competition, monopolistic competition, 4.16.a competition, monopolistic competition,
oligopoly, and pure monopoly oligopoly, and pure monopoly
explain relationships between price, explain relationships between price,
marginal revenue, marginal cost, marginal revenue, marginal cost,
economic profit, and the elasticity of economic profit, and the elasticity of
demand under each market structure demand under each market structure
describe a firm’s supply function under describe a firm’s supply function under
each market structure each market structure
describe and determine the optimal describe and determine the optimal
Economics 4.16.d price and output for firms under each 4.16.d price and output for firms under each
market structure market structure
Economics 4.16.e explain factors affecting long-run 4.16.e explain factors affecting long-run
equilibrium under each market structure equilibrium under each market structure
describe pricing strategy under each describe pricing strategy under each
describe the use and limitations of describe the use and limitations of
Economics 4.16.g concentration measures in identifying 4.16.g concentration measures in identifying
identify the type of market structure identify the type of market structure
within which a firm operates within which a firm operates
calculate and explain gross domestic calculate and explain gross domestic
Economics 5.17.a product (GDP) using expenditure and 5.17.a product (GDP) using expenditure and
income approaches income approaches
compare the sum-of-value-added and compare the sum-of-value-added and
Economics 5.17.b value-of-final-output methods of 5.17.b value-of-final-output methods of
calculating GDP calculating GDP
compare nominal and real GDP and compare nominal and real GDP and
calculate and interpret the GDP deflator calculate and interpret the GDP deflator
Economics 5.17.d compare GDP, national income, personal 5.17.d compare GDP, national income, personal
income, and personal disposable income income, and personal disposable income
explain the fundamental relationship explain the fundamental relationship
Economics 5.17.e among saving, investment, the fiscal 5.17.e among saving, investment, the fiscal
balance, and the trade balance balance, and the trade balance
explain the IS and LM curves and how explain the IS and LM curves and how
Economics 5.17.f they combine to generate the aggregate 5.17.f they combine to generate the aggregate
demand curve demand curve
explain the aggregate supply curve in explain the aggregate supply curve in
the short run and long run the short run and long run
explain causes of movements along and explain causes of movements along and
Economics 5.17.h shifts in aggregate demand and supply 5.17.h shifts in aggregate demand and supply
curves curves
describe how fluctuations in aggregate describe how fluctuations in aggregate
demand and aggregate supply cause demand and aggregate supply cause
short-run changes in the economy and short-run changes in the economy and
the business cycle the business cycle
distinguish between the following types
of macroeconomic equilibria: long-run
Economics 5.17.j full employment, short-run recessionary New
gap, short-run inflationary gap, and
short-run stagflation
explain how a short-run macroeconomic explain how a short-run macroeconomic
Economics 5.17.j equilibrium may occur at a level above 5.17.k equilibrium may occur at a level above
or below full employment or below full employment
analyze the effect of combined changes analyze the effect of combined changes
Economics 5.17.k in aggregate supply and demand on the 5.17.l in aggregate supply and demand on the
economy economy
describe sources, measurement, and describe sources, measurement, and
Economics 5.17.l 5.17.m
sustainability of economic growth sustainability of economic growth
describe the production function describe the production function
Economics 5.17.m approach to analyzing the sources of 5.17.n approach to analyzing the sources of
economic growth economic growth
distinguish between input growth and distinguish between input growth and
Economics 5.17.n growth of total factor productivity as 5.17.o growth of total factor productivity as
components of economic growth components of economic growth
describe the business cycle and its describe the business cycle and its
phases phases
describe how resource use, housing describe how resource use, housing
sector activity, and external trade sector sector activity, and external trade sector
activity vary as an economy moves activity vary as an economy moves
through the business cycle through the business cycle
Economics 5.18.c describe theories of the business cycle 5.18.c describe theories of the business cycle
describe types of unemployment and describe types of unemployment and
measures of unemployment measures of unemployment
explain inflation, hyperinflation, explain inflation, hyperinflation,
disinflation, and deflation disinflation, and deflation
explain the construction of indices used explain the construction of indices used
to measure inflation to measure inflation
compare inflation measures, including compare inflation measures, including
their uses and limitations their uses and limitations
distinguish between cost-push and distinguish between cost-push and
demand-pull inflation demand-pull inflation
describe economic indicators, including describe economic indicators, including
their uses and limitations their uses and limitations
Economics 5.19.a compare monetary and fiscal policy 5.19.a compare monetary and fiscal policy
describe functions and definitions of describe functions and definitions of
money money
Economics 5.19.c explain the money creation process 5.19.c explain the money creation process
describe theories of the demand for and describe theories of the demand for and
supply of money supply of money
Economics 5.19.e describe the Fisher effect 5.19.e describe the Fisher effect
describe roles and objectives of central describe roles and objectives of central
banks banks
contrast the costs of expected and contrast the costs of expected and
unexpected inflation unexpected inflation
describe tools used to implement describe tools used to implement
monetary policy monetary policy
describe the monetary transmission
Economics 5.19.i New
mechanism
describe qualities of effective central describe qualities of effective central
Economics 5.19.i 5.19.j
banks banks
explain the relationships between explain the relationships between
Economics 5.19.j monetary policy and economic growth, 5.19.k monetary policy and economic growth,
inflation, interest, and exchange rates inflation, interest, and exchange rates
contrast the use of inflation, interest contrast the use of inflation, interest
Economics 5.19.k rate, and exchange rate targeting by 5.19.l rate, and exchange rate targeting by
central banks central banks
determine whether a monetary policy is determine whether a monetary policy is
Economics 5.19.l 5.19.m
expansionary or contractionary expansionary or contractionary
Economics 5.19.m describe limitations of monetary policy 5.19.n describe limitations of monetary policy
describe roles and objectives of fiscal describe roles and objectives of fiscal
Economics 5.19.n 5.19.o
policy policy
describe tools of fiscal policy, including describe tools of fiscal policy, including
Economics 5.19.o 5.19.p
their advantages and disadvantages their advantages and disadvantages
describe the arguments about whether describe the arguments about whether
Economics 5.19.p the size of a national debt relative to 5.19.q the size of a national debt relative to
GDP matters GDP matters
explain the implementation of fiscal explain the implementation of fiscal
Economics 5.19.q 5.19.r
policy and difficulties of implementation policy and difficulties of implementation
determine whether a fiscal policy is determine whether a fiscal policy is
Economics 5.19.r 5.19.s
expansionary or contractionary expansionary or contractionary
explain the interaction of monetary and explain the interaction of monetary and
Economics 5.19.s 5.19.t
fiscal policy fiscal policy
compare gross domestic product and compare gross domestic product and
gross national product gross national product
describe benefits and costs of describe benefits and costs of
international trade international trade
distinguish between comparative distinguish between comparative
advantage and absolute advantage advantage and absolute advantage
explain the Ricardian and explain the Ricardian and
Heckscher–Ohlin models of trade and Heckscher–Ohlin models of trade and
the source(s) of comparative advantage the source(s) of comparative advantage
in each model in each model
compare types of trade and capital compare types of trade and capital
Economics 6.20.e restrictions and their economic 6.20.e restrictions and their economic
implications implications
explain motivations for and advantages explain motivations for and advantages
Economics 6.20.f of trading blocs, common markets, and 6.20.f of trading blocs, common markets, and
economic unions economic unions
describe common objectives of capital
Economics 6.20.g New
restrictions imposed by governments
describe the balance of payments describe the balance of payments
Economics 6.20.g 6.20.h
accounts including their components accounts including their components
explain how decisions by consumers, explain how decisions by consumers,
Economics 6.20.h firms, and governments affect the 6.20.i firms, and governments affect the
balance of payments balance of payments
describe functions and objectives of the describe functions and objectives of the
international organizations that facilitate international organizations that facilitate
Economics 6.20.i trade, including the World Bank, the 6.20.j trade, including the World Bank, the
International Monetary Fund, and the International Monetary Fund, and the
World Trade Organization World Trade Organization
define an exchange rate, and define an exchange rate, and
distinguish between nominal and real distinguish between nominal and real
exchange rates and spot and forward exchange rates and spot and forward
exchange rates exchange rates
describe functions of and participants in describe functions of and participants in
the foreign exchange market the foreign exchange market
calculate and interpret the percentage calculate and interpret the percentage
Economics 6.21.c change in a currency relative to another 6.21.c change in a currency relative to another
currency currency
calculate and interpret currency cross- calculate and interpret currency cross-
rates rates
convert forward quotations expressed convert forward quotations expressed

on a points basis or in percentage terms on a points basis or in percentage terms
into an outright forward quotation into an outright forward quotation
explain the arbitrage relationship explain the arbitrage relationship
Economics 6.21.f between spot rates, forward rates, and 6.21.f between spot rates, forward rates, and
interest rates interest rates
calculate and interpret a forward calculate and interpret a forward
discount or premium discount or premium
calculate and interpret the forward rate calculate and interpret the forward rate
Economics 6.21.h consistent with the spot rate and the 6.21.h consistent with the spot rate and the
interest rate in each currency interest rate in each currency
Economics 6.21.i describe exchange rate regimes 6.21.i describe exchange rate regimes
explain the effects of exchange rates on explain the effects of exchange rates on
Economics 6.21.j countries’ international trade and capital 6.21.j countries’ international trade and capital
flows flows
Financial describe the roles of financial reporting describe the roles of financial reporting
7.22.a 7.22.a
Reporting and financial statement analysis and financial statement analysis
describe the roles of the key financial describe the roles of the key financial
statements (statement of financial statements (statement of financial
position, statement of comprehensive position, statement of comprehensive
Financial
7.22.b income, statement of changes in equity, 7.22.b income, statement of changes in equity,
Reporting
and statement of cash flows) in and statement of cash flows) in
evaluating a company’s performance evaluating a company’s performance
and financial position and financial position
describe the importance of financial describe the importance of financial
statement notes and supplementary statement notes and supplementary
Financial information—including disclosures of information—including disclosures of
7.22.c 7.22.c
Reporting accounting policies, methods, and accounting policies, methods, and
estimates— and management’s estimates— and management’s
commentary commentary
describe the objective of audits of describe the objective of audits of
Financial financial statements, the types of audit financial statements, the types of audit
7.22.d 7.22.d
Reporting reports, and the importance of effective reports, and the importance of effective
internal controls internal controls
identify and describe information identify and describe information
sources that analysts use in financial sources that analysts use in financial
Financial
7.22.e statement analysis besides annual 7.22.e statement analysis besides annual
Reporting
financial statements and supplementary financial statements and supplementary
information information
Financial describe the steps in the financial describe the steps in the financial
7.22.f 7.22.f
Reporting statement analysis framework statement analysis framework
explain the relationship of financial explain the relationship of financial
Financial statement elements and accounts, and statement elements and accounts, and
7.23.a 7.23.a
Reporting classify accounts into the financial classify accounts into the financial
statement elements statement elements
Financial explain the accounting equation in its explain the accounting equation in its
7.23.b 7.23.b
Reporting basic and expanded forms basic and expanded forms
describe the process of recording describe the process of recording
Financial business transactions using an business transactions using an
7.23.c 7.23.c
Reporting accounting system based on the accounting system based on the
accounting equation accounting equation
describe the need for accruals and other describe the need for accruals and other
Financial
7.23.d adjustments in preparing financial 7.23.d adjustments in preparing financial
Reporting
statements statements
describe the relationships among the describe the relationships among the
Financial income statement, balance sheet, income statement, balance sheet,
7.23.e 7.23.e
Reporting statement of cash flows, and statement statement of cash flows, and statement
of owners’ equity of owners’ equity
Financial describe the flow of information in an describe the flow of information in an
7.23.f 7.23.f
Reporting accounting system accounting system
Financial describe the use of the results of the describe the use of the results of the
7.23.g 7.23.g
Reporting accounting process in security analysis accounting process in security analysis
describe the objective of financial describe the objective of financial
Financial statements and the importance of statements and the importance of
7.24.a 7.24.a
Reporting financial reporting standards in security financial reporting standards in security
analysis and valuation analysis and valuation
describe roles and desirable attributes describe roles and desirable attributes
of financial reporting standard-setting of financial reporting standard-setting
bodies and regulatory authorities in bodies and regulatory authorities in
Financial
7.24.b establishing and enforcing reporting 7.24.b establishing and enforcing reporting
Reporting
standards, and describe the role of the standards, and describe the role of the
International Organization of Securities International Organization of Securities
Commissions Commissions
describe the status of global describe the status of global
convergence of accounting standards convergence of accounting standards
Financial
7.24.c and ongoing barriers to developing one 7.24.c and ongoing barriers to developing one
Reporting
universally accepted set of financial universally accepted set of financial
reporting standards reporting standards
describe the International Accounting describe the International Accounting
Standards Board’s conceptual Standards Board’s conceptual
framework, including the objective and framework, including the objective and
Financial qualitative characteristics of financial qualitative characteristics of financial
7.24.d 7.24.d
Reporting statements, required reporting statements, required reporting
elements, and constraints and elements, and constraints and
assumptions in preparing financial assumptions in preparing financial
describe general requirements for
Financial Wording
7.24.e describe general requirements for 7.24.e financial statements under International
Reporting Change
financial statements under IFRS Financial Reporting Standards (IFRS)
compare key concepts of financial
Financial compare key concepts of financial reporting standards under IFRS and US Wording
7.24.f 7.24.f
Reporting reporting standards under IFRS and generally accepted accounting principles Change
U.S. GAAP reporting systems (US GAAP) reporting systems
identify characteristics of a coherent identify characteristics of a coherent
Financial
7.24.g financial reporting framework and the 7.24.g financial reporting framework and the
Reporting
barriers to creating such a framework barriers to creating such a framework
describe implications for financial describe implications for financial
analysis of differing financial reporting analysis of differing financial reporting
Financial
7.24.h systems and the importance of 7.24.h systems and the importance of
Reporting
monitoring developments in financial monitoring developments in financial
reporting standards reporting standards
Financial analyze company disclosures of analyze company disclosures of
7.24.i 7.24.i
Reporting significant accounting policies significant accounting policies
describe the components of the income describe the components of the income
Financial
8.25.a statement and alternative presentation 8.25.a statement and alternative presentation
Reporting
formats of that statement formats of that statement
describe general principles of revenue describe general principles of revenue
recognition and accrual accounting, recognition and accrual accounting,
specific revenue recognition applications specific revenue recognition applications
(including accounting for long-term (including accounting for long-term
Financial
8.25.b contracts, installment sales, barter 8.25.b contracts, installment sales, barter
Reporting
transactions, gross and net reporting of transactions, gross and net reporting of
revenue), and implications of revenue revenue), and implications of revenue
recognition principles for financial recognition principles for financial
analysis analysis
calculate revenue given information that calculate revenue given information that
Financial
8.25.c might influence the choice of revenue 8.25.c might influence the choice of revenue
Reporting
recognition method recognition method
describe general principles of expense describe general principles of expense
recognition, specific expense recognition recognition, specific expense recognition
Financial
8.25.d applications, and implications of 8.25.d applications, and implications of
Reporting
expense recognition choices for financial expense recognition choices for financial
analysis analysis
describe the financial reporting describe the financial reporting
treatment and analysis of non-recurring treatment and analysis of non-recurring
Financial items (including discontinued items (including discontinued
8.25.e 8.25.e
Reporting operations, extraordinary items, operations, extraordinary items,
unusual or infrequent items) and unusual or infrequent items) and
changes in accounting standards changes in accounting standards
distinguish between the operating and distinguish between the operating and
Financial
8.25.f non-operating components of the 8.25.f non-operating components of the
Reporting
income statement income statement
describe how earnings per share is describe how earnings per share is
calculated and calculate and interpret a calculated and calculate and interpret a
Financial company’s earnings per share (both company’s earnings per share (both
8.25.g 8.25.g
Reporting basic and diluted earnings per share) basic and diluted earnings per share)
for both simple and complex capital for both simple and complex capital
structures structures
distinguish between dilutive and distinguish between dilutive and
Financial antidilutive securities, and describe the antidilutive securities, and describe the
8.25.h 8.25.h
Reporting implications of each for the earnings per implications of each for the earnings per
share calculation share calculation
Financial convert income statements to common- convert income statements to common-
8.25.i 8.25.i
Reporting size income statements size income statements
evaluate a company’s financial evaluate a company’s financial
Financial performance using common-size income performance using common-size income
8.25.j 8.25.j
Reporting statements and financial ratios based on statements and financial ratios based on
the income statement the income statement
Financial describe, calculate, and interpret describe, calculate, and interpret
8.25.k 8.25.k
Reporting comprehensive income comprehensive income
describe other comprehensive income, describe other comprehensive income,
Financial
8.25.l and identify major types of items 8.25.l and identify major types of items
Reporting
included in it included in it
Financial describe the elements of the balance describe the elements of the balance
8.26.a 8.26.a
Reporting sheet: assets, liabilities, and equity sheet: assets, liabilities, and equity
Financial describe uses and limitations of the describe uses and limitations of the
8.26.b 8.26.b
Reporting balance sheet in financial analysis balance sheet in financial analysis
Financial describe alternative formats of balance describe alternative formats of balance
8.26.c 8.26.c
Reporting sheet presentation sheet presentation
distinguish between current and non- distinguish between current and non-
Financial
8.26.d current assets, and current and non- 8.26.d current assets, and current and non-
Reporting
current liabilities current liabilities
describe different types of assets and describe different types of assets and
Financial
8.26.e liabilities and the measurement bases of 8.26.e liabilities and the measurement bases of
Reporting
each each
Financial describe the components of describe the components of
8.26.f 8.26.f
Reporting shareholders’ equity shareholders’ equity
convert balance sheets to common-size
Financial
8.26.g analyze balance sheets and statements 8.26.g balance sheets and interpret common- Separation
Reporting
of changes in equity size balance sheets
convert balance sheets to common-size
Financial
8.26.h balance sheets and interpret common- Separation
Reporting
size balance sheets
Financial calculate and interpret liquidity and calculate and interpret liquidity and
8.26.i 8.26.h
Reporting solvency ratios solvency ratios
compare cash flows from operating, compare cash flows from operating,
investing, and financing activities and investing, and financing activities and
Financial
8.27.a classify cash flow items as relating to 8.27.a classify cash flow items as relating to
Reporting
one of those three categories given a one of those three categories given a
description of the items description of the items
Financial describe how non-cash investing and describe how non-cash investing and
8.27.b 8.27.b
Reporting financing activities are reported financing activities are reported
contrast cash flow statements prepared contrast cash flow statements prepared
under International Financial Reporting under International Financial Reporting
Financial
8.27.c Standards (IFRS) and U.S. generally 8.27.c Standards (IFRS) and U.S. generally
Reporting
accepted accounting principles (U.S. accepted accounting principles (U.S.
GAAP) GAAP)
distinguish between the direct and distinguish between the direct and
Financial indirect methods of presenting cash indirect methods of presenting cash
8.27.d 8.27.d
Reporting from operating activities and describe from operating activities and describe
arguments in favor of each method arguments in favor of each method
describe how the cash flow statement is describe how the cash flow statement is
Financial
8.27.e linked to the income statement and the 8.27.e linked to the income statement and the
Reporting
balance sheet balance sheet
describe the steps in the preparation of describe the steps in the preparation of
direct and indirect cash flow direct and indirect cash flow
Financial
8.27.f statements, including how cash flows 8.27.f statements, including how cash flows
Reporting
can be computed using income can be computed using income
statement and balance sheet data statement and balance sheet data
Financial convert cash flows from the indirect to convert cash flows from the indirect to
8.27.g 8.27.g
Reporting direct method direct method
Financial analyze and interpret both reported and analyze and interpret both reported and
8.27.h 8.27.h
Reporting common-size cash flow statements common-size cash flow statements
calculate and interpret free cash flow to calculate and interpret free cash flow to
Financial the firm, free cash flow to equity, and the firm, free cash flow to equity, and
8.27.i 8.27.i
Reporting performance and coverage cash flow performance and coverage cash flow
ratios ratios
describe tools and techniques used in describe tools and techniques used in
Financial
8.28.a financial analysis, including their uses 8.28.a financial analysis, including their uses
Reporting
and limitations and limitations
classify, calculate, and interpret activity, classify, calculate, and interpret activity,
Financial
8.28.b liquidity, solvency, profitability, and 8.28.b liquidity, solvency, profitability, and
Reporting
valuation ratios valuation ratios
Financial describe relationships among ratios and describe relationships among ratios and
8.28.c 8.28.c
Reporting evaluate a company using ratio analysis evaluate a company using ratio analysis
demonstrate the application of DuPont demonstrate the application of DuPont
Financial analysis of return on equity, and analysis of return on equity, and
8.28.d 8.28.d
Reporting calculate and interpret effects of calculate and interpret effects of
changes in its components changes in its components
Financial calculate and interpret ratios used in calculate and interpret ratios used in
8.28.e 8.28.e
Reporting equity analysis and credit analysis equity analysis and credit analysis
explain the requirements for segment explain the requirements for segment
Financial
8.28.f reporting, and calculate and interpret 8.28.f reporting, and calculate and interpret
Reporting
segment ratios segment ratios
describe how ratio analysis and other describe how ratio analysis and other
Financial
8.28.g techniques can be used to model and 8.28.g techniques can be used to model and
Reporting
forecast earnings forecast earnings
distinguish between costs included in distinguish between costs included in
Financial inventories and costs recognized as inventories and costs recognised as
9.29.a 9.29.a sp
Reporting expenses in the period in which they are expenses in the period in which they are
incurred incurred
Financial describe different inventory valuation describe different inventory valuation
9.29.b 9.29.b
Reporting methods (cost formulas) methods (cost formulas)
calculate cost of sales and ending calculate cost of sales and ending
inventory using different inventory inventory using different inventory
Financial
9.29.c valuation methods and explain the 9.29.c valuation methods and explain the
Reporting
effect of the inventory valuation method effect of the inventory valuation method
choice on gross profit choice on gross profit
calculate and compare cost of sales, calculate and compare cost of sales,
Financial gross profit, and ending inventory using gross profit, and ending inventory using
9.29.d 9.29.d
Reporting perpetual and periodic inventory perpetual and periodic inventory
systems systems
compare cost of sales, ending inventory, compare cost of sales, ending inventory,
Financial
9.29.e and gross profit using different 9.29.e and gross profit using different
Reporting
inventory valuation methods inventory valuation methods
describe the measurement of inventory describe the measurement of inventory
Financial
9.29.f at the lower of cost and net realisable 9.29.f at the lower of cost and net realisable
Reporting
value value
describe the financial statement describe the financial statement
Financial
9.29.g presentation of and disclosures relating 9.29.g presentation of and disclosures relating
Reporting
to inventories to inventories
Financial calculate and interpret ratios used to calculate and interpret ratios used to
9.29.h 9.29.h
Reporting evaluate inventory management evaluate inventory management
distinguish between costs that are distinguish between costs that are
Financial
9.30.a capitalized and costs that are expensed 9.30.a capitalized and costs that are expensed
Reporting
in the period in which they are incurred in the period in which they are incurred
compare the financial reporting of the compare the financial reporting of the
Financial following types of intangible assets: following types of intangible assets:
9.30.b 9.30.b
Reporting purchased, internally developed, purchased, internally developed,
acquired in a business combination acquired in a business combination
describe the different depreciation describe the different depreciation
methods for property, plant, and methods for property, plant, and
equipment, the effect of the choice of equipment, the effect of the choice of
Financial
9.30.c depreciation method on the financial 9.30.c depreciation method on the financial
Reporting
statements, and the effects of statements, and the effects of
assumptions concerning useful life and assumptions concerning useful life and
residual value on depreciation expense residual value on depreciation expense
Financial
9.30.d 9.30.d
Reporting calculate depreciation expense calculate depreciation expense
describe the different amortization describe the different amortization
methods for intangible assets with finite methods for intangible assets with finite
lives, the effect of the choice of lives, the effect of the choice of
Financial
9.30.e amortization method on the financial 9.30.e amortization method on the financial
Reporting
statements, and the effects of statements, and the effects of
assumptions concerning useful life and assumptions concerning useful life and
residual value on amortization expense residual value on amortization expense
Financial
9.30.f 9.30.f
Reporting calculate amortization expense calculate amortization expense
Financial
9.30.g 9.30.g
Reporting describe the revaluation model describe the revaluation model
explain the imparment of property, explain the impairment of property,
Financial
9.30.h plant, and equipment and intangible 9.30.h plant, and equipment and intangible
Reporting
assets assets
explain the derecognition of property, explain the derecognition of property,
Financial
9.30.i plant, and equipment and intangible 9.30.i plant, and equipment and intangible
Reporting
assets assets
Financial presentation of and disclosures relating presentation of and disclosures relating
9.30.j 9.30.j
Reporting to property, plant, and equipment and to property, plant, and equipment and
intangible assets intangible assets
compare the financial reporting of compare the financial reporting of
Financial
9.30.k investment property with that of 9.30.k investment property with that of
Reporting
property, plant, and equipment property, plant, and equipment
describe the differences between describe the differences between
accounting profit and taxable income, accounting profit and taxable income,
Financial and define key terms, including deferred and define key terms, including deferred
9.31.a 9.31.a
Reporting tax assets, deferred tax liabilities, tax assets, deferred tax liabilities,
valuation allowance, taxes payable, and valuation allowance, taxes payable, and
income tax expense income tax expense
explain how deferred tax liabilities and explain how deferred tax liabilities and
assets are created and the factors that assets are created and the factors that
Financial determine how a company’s deferred determine how a company’s deferred
9.31.b 9.31.b
Reporting tax liabilities and assets should be tax liabilities and assets should be
treated for the purposes of financial treated for the purposes of financial
analysis analysis
Financial calculate the tax base of a company’s calculate the tax base of a company’s
9.31.c 9.31.c
Reporting assets and liabilities assets and liabilities
calculate income tax expense, income calculate income tax expense, income
taxes payable, deferred tax assets, and taxes payable, deferred tax assets, and
Financial deferred tax liabilities, and calculate and deferred tax liabilities, and calculate and
9.31.d 9.31.d
Reporting interpret the adjustment to the financial interpret the adjustment to the financial
statements related to a change in the statements related to a change in the
income tax rate income tax rate
evaluate the impact of tax rate changes evaluate the impact of tax rate changes
Financial
9.31.e on a company's financial statements 9.31.e on a company’s financial statements
Reporting
and ratios and ratios
distinguish between temporary and distinguish between temporary and
Financial
9.31.f permanent differences in pre-tax 9.31.f permanent differences in pre-tax
Reporting
accounting income and taxable income accounting income and taxable income
describe the valuation allowance for describe the valuation allowance for
Financial deferred tax assets—when it is required deferred tax assets—when it is required
9.31.g 9.31.g
Reporting and what impact it has on financial and what impact it has on financial
Financial compare a company’s deferred tax compare a company’s deferred tax
9.31.h 9.31.h
Reporting items items
analyze disclosures relating to deferred analyze disclosures relating to deferred
tax items and the effective tax rate tax items and the effective tax rate
Financial reconciliation, and explain how reconciliation, and explain how
9.31.i 9.31.i
Reporting information included in these information included in these
disclosures affects a company’s financial disclosures affects a company’s financial
statements and financial ratios statements and financial ratios
identify the key provisions of and
differences between income tax
Financial accounting under International Financial Wording
9.31.j 9.31.j
Reporting identify the key provisions of and Reporting Standards (IFRS) and US Change
differences between income tax generally accepted accounting principles
accounting under IFRS and U.S. GAAP (GAAP)
determine the initial recognition, initial determine the initial recognition, initial
Financial
9.32.a measurement and subsequent 9.32.a measurement and subsequent
Reporting
measurement of bonds measurement of bonds
describe the effective interest method describe the effective interest method
and calculate interest expense, and calculate interest expense,
Financial
9.32.b amortisation of bond 9.32.b amortisation of bond
Reporting
discounts/premiums, and interest discounts/premiums, and interest
payments payments
Financial
9.32.c 9.32.c
Reporting explain the derecognition of debt explain the derecognition of debt
Financial describe the role of debt covenants in describe the role of debt covenants in
9.32.d 9.32.d
Reporting protecting creditors protecting creditors
Financial
9.32.e presentation of and disclosures relating 9.32.e presentation of and disclosures relating
Reporting
to debt to debt
Financial explain the motivations for leasing explain motivations for leasing assets Wording
9.32.f 9.32.f
Reporting assets instead of purchasing them instead of purchasing them Change
distinguish between a finance lease and distinguish between a finance lease and
Financial an operating lease from the an operating lease from the
9.32.g 9.32.g
Reporting perspectives of the lessor and the perspectives of the lessor and the
lessee lessee
determine the initial recognition, initial determine the initial recognition, initial
Financial
9.32.h measurement, and subsequent 9.32.h measurement, and subsequent
Reporting
measurement of finance leases measurement of finance leases
Financial compare the disclosures relating to compare the disclosures relating to
9.32.i 9.32.i
Reporting finance and operating leases finance and operating leases
Financial describe defined contribution and
9.32.j Removed
Reporting defined benefit pension plans
compare the presentation and compare the presentation and
Financial
9.32.k disclosure of defined contribution and 9.32.j disclosure of defined contribution and
Reporting
defined benefit pension plans defined benefit pension plans
Financial calculate and interpret leverage and calculate and interpret leverage and
9.32.l 9.32.k
Reporting coverage ratios coverage ratios
distinguish between financial reporting
Financial quality and quality of reported results
10.33.a New
Reporting (including quality of earnings, cash flow,
and balance sheet items)
Financial describe a spectrum for assessing
10.33.b New
Reporting financial reporting quality
Financial distinguish between conservative and
10.33.c New
Reporting aggressive accounting
describe incentives that might induce a
Financial company’s executives to manage describe motivations that might cause Wording
10.33.a 10.33.d
Reporting reported earnings, financial positions, management to issue financial reports Change
and cash flows that are not high quality
Financial describe activities that will result in a
10.33.b Separation
Reporting low quality of earnings
describe the three conditions that are
Financial generally present when fraud occurs, describe conditions that are conducive
10.33.c 10.33.e Separation
Reporting including the risk factors related to to issuing low-quality, or even
these conditions fraudulent, financial reports
describe mechanisms that discipline
Financial financial reporting quality and the
10.33.f New
Reporting potential limitations of those
mechanisms
describe presentation choices, including
Financial
10.33.g non-GAAP measures, that could be used New
Reporting
to influence an analyst’s opinion
describe accounting methods (choices
Financial and estimates) that could be used to
10.33.h New
Reporting manage earnings, cash flow, and
balance sheet items
describe accounting warning signs and
Financial Wording
10.33.d describe common accounting warning 10.33.i methods for detecting manipulation of
Reporting Change
signs and methods for detecting each information in financial reports
Financial describe reasons for investors to assess
10.34.a Removed
Reporting the quality of cash flow statements
analyze and describe the following ways
to manage or manipulate the cash flow
Financial statement: stretching out payables,
10.34.b Removed
Reporting financing of payables, securitization of
receivables, issuing stock options, and
using stock buybacks
evaluate a company’s past financial evaluate a company’s past financial
Financial performance and explain how a performance and explain how a
10.35.a 10.34.a
Reporting company’s strategy is reflected in past company’s strategy is reflected in past
financial performance financial performance
Financial forecast a company’s future net income forecast a company’s future net income
10.35.b 10.34.b
Reporting and cash flow and cash flow
describe the role of financial statement describe the role of financial statement
Financial
10.35.c analysis in assessing the credit quality 10.34.c analysis in assessing the credit quality
Reporting
of a potential debt investment of a potential debt investment
describe the use of financial statement describe the use of financial statement
Financial
10.35.d analysis in screening for potential equity 10.34.d analysis in screening for potential equity
Reporting
investments investments
explain appropriate analyst adjustments explain appropriate analyst adjustments
Financial to a company’s financial statements to to a company’s financial statements to
10.35.e 10.34.e
Reporting facilitate comparison with another facilitate comparison with another
company company
describe the capital budgeting process,
Corporate including the typical steps of the describe the capital budgeting process Wording
11.36.a 11.35.a
Finance process, and distinguish among the and distinguish among the various Change
various categories of capital projects categories of capital projects
describe the basic principles of capital
Corporate Wording
11.36.b budgeting, including cash flow 11.35.b describe the basic principles of capital
Finance Change
estimation budgeting
explain how the evaluation and explain how the evaluation and
Corporate selection of capital projects is affected selection of capital projects is affected
11.36.c 11.35.c
Finance by mutually exclusive projects, project by mutually exclusive projects, project
sequencing, and capital rationing sequencing, and capital rationing
calculate and interpret the results using
each of the following methods to
evaluate a single capital project: net calculate and interpret net present
Corporate Wording
11.36.d present value (NPV), internal rate of 11.35.d value (NPV), internal rate of return
Finance Change
return (IRR), payback period, (IRR), payback period, discounted
discounted payback period, and payback period, and profitability index
profitability index (PI) (PI) of a single capital project
explain the NPV profile, compare the explain the NPV profile, compare the
NPV and IRR methods when evaluating NPV and IRR methods when evaluating
Corporate independent and mutually exclusive independent and mutually exclusive
11.36.e 11.35.e
Finance projects, and describe the problems projects, and describe the problems
associated with each of the evaluation associated with each of the evaluation
methods methods
describe expected relations among an describe expected relations among an
Corporate
11.36.f investment’s NPV, company value, and 11.35.f investment’s NPV, company value, and
Finance
share price share price
calculate and interpret the weighted calculate and interpret the weighted
Corporate
11.37.a average cost of capital (WACC) of a 11.36.a average cost of capital (WACC) of a
Finance
company company
Corporate describe how taxes affect the cost of describe how taxes affect the cost of
11.37.b 11.36.b
Finance capital from different capital sources capital from different capital sources
explain alternative methods of describe the use of target capital
Corporate calculating the weights used in the structure in estimating WACC and how Wording
11.37.c 11.36.c
Finance WACC, including the use of the target capital structure weights may be Change
company’s target capital structure determined
explain how the marginal cost of capital explain how the marginal cost of capital
Corporate and the investment opportunity and the investment opportunity
11.37.d 11.36.d
Finance schedule are used to determine the schedule are used to determine the
optimal capital budget optimal capital budget
explain the marginal cost of capital’s explain the marginal cost of capital’s
Corporate
11.37.e role in determining the net present 11.36.e role in determining the net present
Finance
value of a project value of a project
calculate and interpret the cost of debt calculate and interpret the cost of debt
Corporate
11.37.f capital using the yield-to-maturity 11.36.f capital using the yield-to-maturity
Finance
approach and the debt-rating approach approach and the debt-rating approach
calculate and interpret the cost of calculate and interpret the cost of
Corporate
11.37.g noncallable, nonconvertible preferred 11.36.g noncallable, nonconvertible preferred
Finance
stock stock
calculate and interpret the cost of calculate and interpret the cost of
equity capital using the capital asset equity capital using the capital asset
Corporate
11.37.h pricing model approach, the dividend 11.36.h pricing model approach, the dividend
Finance
discount model approach, and the bond- discount model approach, and the bond-
yield-plus risk-premium approach yield-plus risk-premium approach
Corporate calculate and interpret the beta and calculate and interpret the beta and
11.37.i 11.36.i
Finance cost of capital for a project cost of capital for a project
Corporate describe uses of country risk premiums describe uses of country risk premiums
11.37.j 11.36.j
Finance in estimating the cost of equity in estimating the cost of equity
describe the marginal cost of capital describe the marginal cost of capital
schedule, explain why it may be upward- schedule, explain why it may be upward-
Corporate
11.37.k sloping with respect to additional 11.36.k sloping with respect to additional
Finance
capital, and calculate and interpret its capital, and calculate and interpret its
break-points break-points
Corporate explain and demonstrate the correct explain and demonstrate the correct
11.37.l 11.36.l
Finance treatment of flotation costs treatment of flotation costs
define and explain leverage, business
Corporate risk, sales risk, operating risk, and define and explain leverage, business Wording
11.38.a 11.37.a
Finance financial risk, and classify a risk, given a risk, sales risk, operating risk, and Change
description financial risk, and classify a risk
calculate and interpret the degree of calculate and interpret the degree of
Corporate operating leverage, the degree of operating leverage, the degree of
11.38.b 11.37.b
Finance financial leverage, and the degree of financial leverage, and the degree of
total leverage total leverage
describe the effect of financial leverage analyze the effect of financial leverage
Corporate Wording
11.38.c on a company’s net income and return 11.37.c on a company’s net income and return
Finance Change
on equity on equity
calculate the breakeven quantity of calculate the breakeven quantity of
Corporate
11.38.d sales and determine the company's net 11.37.d sales and determine the company’s net
Finance
income at various sales levels income at various sales levels
Corporate calculate and interpret the operating calculate and interpret the operating
11.38.e 11.37.e
Finance breakeven quantity of sales breakeven quantity of sales
describe regular cash dividends, extra
describe regular cash dividends, extra dividends, liquidating dividends, stock
Corporate dividends, stock dividends, stock splits, dividends, stock splits, and reverse Wording
11.39.a 11.38.a
Finance and reverse stock splits, including their stock splits, including their expected Change
expected effect on shareholders’ wealth effect on shareholders’ wealth and a
and a company’s financial ratios company’s financial ratios
describe dividend payment chronology, describe dividend payment chronology,
Corporate including the significance of declaration, including the significance of declaration,
11.39.b 11.38.b
Finance holder-of-record, ex-dividend, and holder-of-record, ex-dividend, and
payment dates payment dates
Corporate
11.39.c 11.38.c
Finance compare share repurchase methods compare share repurchase methods
calculate and compare the effect of a calculate and compare the effect of a
share repurchase on earnings per share share repurchase on earnings per share
Corporate when 1) the repurchase is financed with when 1) the repurchase is financed with
11.39.d 11.38.d
Finance the company’s excess cash and 2) the the company’s excess cash and 2) the
company uses debt to finance the company uses debt to finance the
repurchase repurchase
Corporate calculate the effect of a share calculate the effect of a share
11.39.e 11.38.e
Finance repurchase on book value per share repurchase on book value per share
explain why a cash dividend and a share explain why a cash dividend and a share
repurchase of the same amount are repurchase of the same amount are
Corporate
11.39.f equivalent in terms of the effect on 11.38.f equivalent in terms of the effect on
Finance
shareholders’ wealth, all else being shareholders’ wealth, all else being
equal equal
describe primary and secondary sources describe primary and secondary sources
Corporate
11.40.a of liquidity and factors that influence a 11.39.a of liquidity and factors that influence a
Finance
company’s liquidity position company’s liquidity position
Corporate compare a company’s liquidity compare a company’s liquidity
11.40.b 11.39.b
Finance measures with those of peer companies measures with those of peer companies
evaluate working capital effectiveness of evaluate working capital effectiveness of
a company based on its operating and a company based on its operating and
Corporate
11.40.c cash conversion cycles, and compare 11.39.c cash conversion cycles, and compare
Finance
the company’s effectiveness with that of the company’s effectiveness with that of
peer companies peer companies
describe how different types of cash describe how different types of cash
Corporate
11.40.d flows affect a company’s net daily cash 11.39.d flows affect a company’s net daily cash
Finance
position position
calculate and interpret comparable calculate and interpret comparable
yields on various securities, compare yields on various securities, compare
Corporate
11.40.e portfolio returns against a standard 11.39.e portfolio returns against a standard
Finance
benchmark, and evaluate a company’s benchmark, and evaluate a company’s
short-term investment policy guidelines short-term investment policy guidelines
evaluate a company’s management of evaluate a company’s management of
Corporate accounts receivable, inventory, and accounts receivable, inventory, and
11.40.f 11.39.f
Finance accounts payable over time and accounts payable over time and
compared to peer companies compared to peer companies
evaluate the choices of short-term evaluate the choices of short-term
Corporate
11.40.g funding available to a company and 11.39.g funding available to a company and
Finance
recommend a financing method recommend a financing method
Corporate
11.41.a 11.40.a
Finance define corporate governance define corporate governance
describe practices related to board and describe practices related to board and
committee independence, experience, committee independence, experience,
Corporate compensation, external consultants, compensation, external consultants,
11.41.b 11.40.b
Finance and frequency of elections, and and frequency of elections, and
determine whether they are supportive determine whether they are supportive
of shareowner protection of shareowner protection
describe board independence and describe board independence and
Corporate explain the importance of independent explain the importance of independent
11.41.c 11.40.c
Finance board members in corporate board members in corporate
governance governance
identify factors that an analyst should identify factors that an analyst should
Corporate
11.41.d consider when evaluating the 11.40.d consider when evaluating the
Finance
qualifications of board members qualifications of board members
describe responsibilities of the audit, describe responsibilities of the audit,
compensation, and nominations compensation, and nominations
Corporate committees and identify factors an committees and identify factors an
11.41.e 11.40.e
Finance investor should consider when investor should consider when
evaluating the quality of each evaluating the quality of each
committee committee
explain provisions that should be describe provisions that should be
Corporate Wording
11.41.f included in a strong corporate code of 11.40.f included in a strong corporate code of
Finance Change
ethics ethics
evaluate, from a shareowner’s evaluate, from a shareowner’s
perspective, company policies related to perspective, company policies related to
Corporate
11.41.g voting rules, shareowner sponsored 11.40.g voting rules, shareowner sponsored
Finance
proposals, common stock classes, and proposals, common stock classes, and
takeover defenses takeover defenses
Portfolio describe the portfolio approach to describe the portfolio approach to
12.42.a 12.41.a
Management investing investing
describe types of investors and describe types of investors and
Portfolio
12.42.b distinctive characteristics and needs of 12.41.b distinctive characteristics and needs of
Management
each each
Portfolio describe defined contribution and describe defined contribution and
12.42.c 12.41.c
Management defined benefit pension plans defined benefit pension plans
Portfolio describe the steps in the portfolio describe the steps in the portfolio
12.42.d 12.41.d
Management management process management process
describe mutual funds and compare describe mutual funds and compare
Portfolio
12.42.e them with other pooled investment 12.41.e them with other pooled investment
Management
products products
calculate and interpret major return calculate and interpret major return
Portfolio
12.43.a measures and describe their appropriate 12.42.a measures and describe their appropriate
Management
uses uses
describe characteristics of the major describe characteristics of the major
Portfolio
12.43.b asset classes that investors consider in 12.42.b asset classes that investors consider in
Management
forming portfolios forming portfolios
calculate and interpret the mean, calculate and interpret the mean,
Portfolio variance, and covariance (or variance, and covariance (or
12.43.c 12.42.c
Management correlation) of asset returns based on correlation) of asset returns based on
historical data historical data
Portfolio explain risk aversion and its implications explain risk aversion and its implications
12.43.d 12.42.d
Management for portfolio selection for portfolio selection
Portfolio calculate and interpret portfolio calculate and interpret portfolio
12.43.e 12.42.e
Management standard deviation standard deviation
describe the effect on a portfolio’s risk describe the effect on a portfolio’s risk
Portfolio
12.43.f of investing in assets that are less than 12.42.f of investing in assets that are less than
Management
perfectly correlated perfectly correlated
describe and interpret the minimum- describe and interpret the minimum-
Portfolio variance and efficient frontiers of risky variance and efficient frontiers of risky
12.43.g 12.42.g
Management assets and the global minimum-variance assets and the global minimum-variance
portfolio portfolio
discuss the selection of an optimal discuss the selection of an optimal
Portfolio portfolio, given an investor’s utility (or portfolio, given an investor’s utility (or
12.43.h 12.42.h
Management risk aversion) and the capital allocation risk aversion) and the capital allocation
line line
describe the implications of combining a describe the implications of combining a
Portfolio
12.44.a risk-free asset with a portfolio of risky 12.43.a risk-free asset with a portfolio of risky
Management
assets assets
Portfolio explain the capital allocation line (CAL) explain the capital allocation line (CAL)
12.44.b 12.43.b
Management and the capital market line (CML) and the capital market line (CML)
explain systematic and nonsystematic explain systematic and nonsystematic
Portfolio risk, including why an investor should risk, including why an investor should
12.44.c 12.43.c
Management not expect to receive additional return not expect to receive additional return
for bearing nonsystematic risk for bearing nonsystematic risk
explain return generating models explain return generating models
Portfolio
12.44.d (including the market model) and their 12.43.d (including the market model) and their
Management
uses uses
Portfolio
12.44.e 12.43.e
Management calculate and interpret beta calculate and interpret beta
explain the capital asset pricing model explain the capital asset pricing model
Portfolio
12.44.f (CAPM), including its assumptions, and 12.43.f (CAPM), including its assumptions, and
Management
the security market line (SML) the security market line (SML)
Portfolio calculate and interpret the expected calculate and interpret the expected
12.44.g 12.43.g
Management return of an asset using the CAPM return of an asset using the CAPM
Portfolio describe and demonstrate applications describe and demonstrate applications
12.44.h 12.43.h
Management of the CAPM and the SML of the CAPM and the SML
Portfolio describe the reasons for a written describe the reasons for a written
12.45.a 12.44.a
Management investment policy statement (IPS) investment policy statement (IPS)
Portfolio describe the major components of an describe the major components of an
12.45.b 12.44.b
Management IPS IPS
Portfolio describe risk and return objectives and describe risk and return objectives and
12.45.c 12.44.c
Management how they may be developed for a client how they may be developed for a client
distinguish between the willingness and distinguish between the willingness and
Portfolio the ability (capacity) to take risk in the ability (capacity) to take risk in
12.45.d 12.44.d
Management analyzing an investor’s financial risk analyzing an investor’s financial risk
tolerance tolerance
describe the investment constraints of describe the investment constraints of
liquidity, time horizon, tax concerns, liquidity, time horizon, tax concerns,
Portfolio
12.45.e legal and regulatory factors, and unique 12.44.e legal and regulatory factors, and unique
Management
circumstances and their implications for circumstances and their implications for
the choice of portfolio assets the choice of portfolio assets
Portfolio explain the specification of asset classes explain the specification of asset classes
12.45.f 12.44.f
Management in relation to asset allocation in relation to asset allocation
discuss the principles of portfolio describe the principles of portfolio
Portfolio Wording
12.45.g construction and the role of asset 12.44.g construction and the role of asset
Management Change
allocation in relation to the IPS allocation in relation to the IPS
explain the main functions of the explain the main functions of the
Equity 13.46.a 13.45.a
financial system financial system
describe classifications of assets and describe classifications of assets and
Equity 13.46.b 13.45.b
markets markets
describe the major types of securities, describe the major types of securities,
currencies, contracts, commodities, and currencies, contracts, commodities, and
Equity 13.46.c real assets that trade in organized 13.45.c real assets that trade in organized
markets, including their distinguishing markets, including their distinguishing
characteristics and major subtypes characteristics and major subtypes
describe types of financial describe types of financial
Equity 13.46.d intermediaries and services that they 13.45.d intermediaries and services that they
provide provide
compare positions an investor can take compare positions an investor can take
Equity 13.46.e 13.45.e
in an asset in an asset
calculate and interpret the leverage calculate and interpret the leverage
ratio, the rate of return on a margin ratio, the rate of return on a margin
Equity 13.46.f transaction, and the security price at 13.45.f transaction, and the security price at
which the investor would receive a which the investor would receive a
margin call margin call
compare execution, validity, and compare execution, validity, and
Equity 13.46.g 13.45.g
clearing instructions clearing instructions
Equity 13.46.h 13.45.h
compare market orders with limit orders compare market orders with limit orders
define primary and secondary markets define primary and secondary markets
Equity 13.46.i and explain how secondary markets 13.45.i and explain how secondary markets
support primary markets support primary markets
describe how securities, contracts, and describe how securities, contracts, and
Equity 13.46.j currencies are traded in quote-driven, 13.45.j currencies are traded in quote-driven,
order-driven, and brokered markets order-driven, and brokered markets
describe characteristics of a well- describe characteristics of a well-
Equity 13.46.k 13.45.k
functioning financial system functioning financial system
Equity 13.46.l describe objectives of market regulation 13.45.l describe objectives of market regulation
Equity 13.47.a describe a security market index 13.46.a describe a security market index
calculate and interpret the value, price calculate and interpret the value, price
Equity 13.47.b 13.46.b
return, and total return of an index return, and total return of an index
describe the choices and issues in index describe the choices and issues in index
Equity 13.47.c 13.46.c
construction and management construction and management
compare the different weighting compare the different weighting
Equity 13.47.d 13.46.d
methods used in index construction methods used in index construction
calculate and analyze the value and calculate and analyze the value and
Equity 13.47.e return of an index given its weighting 13.46.e return of an index given its weighting
method method
describe rebalancing and reconstitution describe rebalancing and reconstitution
Equity 13.47.f 13.46.f
of an index of an index
Equity 13.47.g describe uses of security market indices 13.46.g describe uses of security market indices
Equity 13.47.h describe types of equity indices 13.46.h describe types of equity indices
Equity 13.47.i describe types of fixed-income indices 13.46.i describe types of fixed-income indices
describe indices representing alternative describe indices representing alternative
Equity 13.47.j 13.46.j
investments investments
compare types of security market compare types of security market
Equity 13.47.k 13.46.k
indices indices
describe market efficiency and related describe market efficiency and related
Equity 13.48.a concepts, including their importance to 13.47.a concepts, including their importance to
investment practitioners investment practitioners
distinguish between market value and distinguish between market value and
Equity 13.48.b 13.47.b
intrinsic value intrinsic value
explain factors that affect a market’s explain factors that affect a market’s
Equity 13.48.c 13.47.c
efficiency efficiency
contrast weak-form, semi-strong-form, contrast weak-form, semi-strong-form,
Equity 13.48.d 13.47.d
and strong-form market efficiency and strong-form market efficiency
explain the implications of each form of explain the implications of each form of
market efficiency for fundamental market efficiency for fundamental
Equity 13.48.e analysis, technical analysis, and the 13.47.e analysis, technical analysis, and the
choice between active and passive choice between active and passive
portfolio management portfolio management
Equity 13.48.f describe selected market anomalies 13.47.f describe selected market anomalies
contrast the behavioral finance view of contrast the behavioral finance view of
Equity 13.48.g investor behavior to that of traditional 13.47.g investor behavior to that of traditional
finance finance
describe characteristics of types of describe characteristics of types of
Equity 14.49.a 14.48.a
equity securities equity securities
describe differences in voting rights and describe differences in voting rights and
Equity 14.49.b other ownership characteristics among 14.48.b other ownership characteristics among
different equity classes different equity classes
distinguish between public and private distinguish between public and private
Equity 14.49.c 14.48.c
describe methods for investing in non- describe methods for investing in non-
Equity 14.49.d 14.48.d
domestic equity securities domestic equity securities
compare the risk and return compare the risk and return
Equity 14.49.e characteristics of different types of 14.48.e characteristics of different types of
explain the role of equity securities in explain the role of equity securities in
Equity 14.49.f 14.48.f
the financing of a company’s assets the financing of a company’s assets
distinguish between the market value distinguish between the market value
Equity 14.49.g 14.48.g
and book value of equity securities and book value of equity securities
compare a company’s cost of equity, its compare a company’s cost of equity, its
Equity 14.49.h (accounting) return on equity, and 14.48.h (accounting) return on equity, and
investors’ required rates of return investors’ required rates of return
explain uses of industry analysis and explain uses of industry analysis and
Equity 14.50.a the relation of industry analysis to 14.49.a the relation of industry analysis to
company analysis company analysis
compare methods by which companies compare methods by which companies
can be grouped, current industry can be grouped, current industry
Equity 14.50.b classification systems, and classify a 14.49.b classification systems, and classify a
company, given a description of its company, given a description of its
activities and the classification system activities and the classification system
explain the factors that affect the explain the factors that affect the
sensitivity of a company to the business sensitivity of a company to the business
Equity 14.50.c cycle and the uses and limitations of 14.49.c cycle and the uses and limitations of
industry and company descriptors such industry and company descriptors such
as “growth,” “defensive,” and “cyclical” as “growth,” “defensive,” and “cyclical”
explain the relation of “peer group,” as explain how “peer group” as used in
Wording
Equity 14.50.d used in equity valuation, to a company’s 14.49.d equity valuation relates to a company’s
Change
industry classification industry classification
describe the elements that need to be describe the elements that need to be
Equity 14.50.e 14.49.e
covered in a thorough industry analysis covered in a thorough industry analysis
describe the principles of strategic describe the principles of strategic
Equity 14.50.f 14.49.f
analysis of an industry analysis of an industry
explain the effects of barriers to entry, explain the effects of barriers to entry,
industry concentration, industry industry concentration, industry
Equity 14.50.g 14.49.g
capacity, and market share stability on capacity, and market share stability on
pricing power and return on capital pricing power and return on capital
describe product and industry life cycle describe product and industry life cycle
models, classify an industry as to life models, classify an industry as to life
cycle phase (embryonic, growth, cycle phase (embryonic, growth,
Equity 14.50.h shakeout, maturity, and decline), and 14.49.h shakeout, maturity, and decline), and
describe limitations of the life-cycle describe limitations of the life-cycle
concept in forecasting industry concept in forecasting industry
performance performance
compare characteristics of compare characteristics of
Equity 14.50.i representative industries from the 14.49.i representative industries from the
various economic sectors various economic sectors
describe demographic, governmental, describe demographic, governmental,
Equity 14.50.j social, and technological influences on 14.49.j social, and technological influences on
industry growth, profitability, and risk industry growth, profitability, and risk
Equity 14.50.k describe the elements that should be 14.49.k describe the elements that should be
covered in a thorough company analysis covered in a thorough company analysis
evaluate whether a security, given its evaluate whether a security, given its
current market price and a value current market price and a value
Equity 14.51.a 14.50.a
estimate, is overvalued, fairly valued, or estimate, is overvalued, fairly valued, or
undervalued by the market undervalued by the market
describe major categories of equity describe major categories of equity
Equity 14.51.b 14.50.b
valuation models valuation models
explain the rationale for using present explain the rationale for using present
value models to value equity and value models to value equity and
Equity 14.51.c 14.50.c
describe the dividend discount and free- describe the dividend discount and free-
cash-flow-to-equity models cash-flow-to-equity models
Equity 14.51.d calculate the intrinsic value of a non- 14.50.d calculate the intrinsic value of a non-
callable, non-convertible preferred stock callable, non-convertible preferred stock
calculate and interpret the intrinsic calculate and interpret the intrinsic
value of an equity security based on the value of an equity security based on the
Equity 14.51.e Gordon (constant) growth dividend 14.50.e Gordon (constant) growth dividend
discount model or a two-stage dividend discount model or a two-stage dividend
discount model, as appropriate discount model, as appropriate
identify companies for which the identify companies for which the
Equity 14.51.f constant growth or a multistage 14.50.f constant growth or a multistage
dividend discount model is appropriate dividend discount model is appropriate
explain the rationale for using price explain the rationale for using price
multiples to value equity and distinguish multiples to value equity and distinguish
Equity 14.51.g between multiples based on 14.50.g between multiples based on
comparables versus multiples based on comparables versus multiples based on
fundamentals fundamentals
calculate and interpret the following calculate and interpret the following
multiples: price to earnings, price to an multiples: price to earnings, price to an
Equity 14.51.h 14.50.h
estimate of operating cash flow, price to estimate of operating cash flow, price to
sales, and price to book value sales, and price to book value
describe enterprise value multiples and describe enterprise value multiples and
Equity 14.51.i 14.50.i
their use in estimating equity value their use in estimating equity value
describe asset-based valuation models describe asset-based valuation models
Equity 14.51.j 14.50.j
and their use in estimating equity value and their use in estimating equity value
explain advantages and disadvantages explain advantages and disadvantages
Equity 14.51.k 14.50.k
of each category of valuation model of each category of valuation model
describe the basic features of a fixed- describe the basic features of a fixed-
Fixed Income 15.52.a 15.51.a
income security income security
Fixed Income 15.52.b describe functions of a bond indenture 15.51.b describe functions of a bond indenture
compare affirmative and negative compare affirmative and negative
Fixed Income 15.52.c covenants and identify examples of 15.51.c covenants and identify examples of
each each
describe how legal, regulatory, and tax describe how legal, regulatory, and tax
Fixed Income 15.52.d considerations affect the issuance and 15.51.d considerations affect the issuance and
trading of fixed-income securities trading of fixed-income securities
describe how cash flows of fixed-income describe how cash flows of fixed-income
Fixed Income 15.52.e 15.51.e
securities are structured securities are structured
describe contingency provisions describe contingency provisions
affecting the timing and/or nature of affecting the timing and/or nature of
Fixed Income 15.52.f cash flows of fixed-income securities 15.51.f cash flows of fixed-income securities
and identify whether such provisions and identify whether such provisions
benefit the borrower or the lender benefit the borrower or the lender
describe classifications of global fixed- describe classifications of global fixed-
income markets income markets
describe the use of interbank offered describe the use of interbank offered
Fixed Income 15.53.b rates as reference rates in floating-rate 15.52.b rates as reference rates in floating-rate
debt debt
describe mechanisms available for describe mechanisms available for
Fixed Income 15.53.c 15.52.c
issuing bonds in primary markets issuing bonds in primary markets
Fixed Income 15.53.d describe secondary markets for bonds 15.52.d describe secondary markets for bonds
describe securities issued by sovereign describe securities issued by sovereign
governments, non-sovereign governments, non-sovereign
governments, government agencies, governments, government agencies,
and supranational entities and supranational entities
describe types of debt issued by describe types of debt issued by
Fixed Income 15.53.f 15.52.f
corporations corporations
describe short-term funding alternatives describe short-term funding alternatives
Fixed Income 15.53.g 15.52.g
available to banks available to banks
describe repurchase agreements (repos) describe repurchase agreements (repos)
Fixed Income 15.53.h and their importance to investors who 15.52.h and their importance to investors who
borrow short term borrow short term
calculate a bond’s price given a market calculate a bond’s price given a market
discount rate discount rate
identify the relationships among a identify the relationships among a

Fixed Income 15.54.b 15.53.b
bond’s price, coupon rate, maturity, and bond’s price, coupon rate, maturity, and
market discount rate (yield-to-maturity) market discount rate (yield-to-maturity)
define spot rates and calculate the price define spot rates and calculate the price
of a bond using spot rates of a bond using spot rates
describe and calculate the flat price, describe and calculate the flat price,
Fixed Income 15.54.d accrued interest, and the full price of a 15.53.d accrued interest, and the full price of a
bond bond
Fixed Income 15.54.e describe matrix pricing 15.53.e describe matrix pricing
calculate and interpret yield measures calculate and interpret yield measures
Fixed Income 15.54.f for fixed-rate bonds, floating-rate notes, 15.53.f for fixed-rate bonds, floating-rate notes,
and money market instruments and money market instruments
define and compare the spot curve, define and compare the spot curve,
Fixed Income 15.54.g yield curve on coupon bonds, par curve, 15.53.g yield curve on coupon bonds, par curve,
and forward curve and forward curve
define forward rates and calculate spot define forward rates and calculate spot
rates from forward rates, forward rates rates from forward rates, forward rates
Fixed Income 15.54.h 15.53.h
from spot rates, and the price of a bond from spot rates, and the price of a bond
using forward rates using forward rates
compare, calculate, and interpret yield compare, calculate, and interpret yield
Fixed Income 15.54.i 15.53.i
spread measures spread measures
explain benefits of securitization for
Fixed Income 15.54.a New
economies and financial markets
describe the securitization process,
including the parties to the process, the
Fixed Income 15.54.b New
roles they play, and the legal structures
involved
describe types and characteristics of
Fixed Income 15.54.c residential mortgage loans that are New
typically securitized
residential mortgage-backed securities,
Fixed Income 15.54.d New
and explain the cash flows and credit
risk for each type
explain the motivation for creating
securitized structures with multiple
Fixed Income 15.54.e tranches (e.g., collateralized mortgage New
obligations), and the characteristics and
risks of securitized structures
describe the characteristics and risks of
Fixed Income 15.54.f New
commercial mortgage-backed securities
non-mortgage asset-backed securities,
Fixed Income 15.54.g New
including the cash flows and credit risk
of each type
Fixed Income 15.54.h describe collateralized debt obligations, New

including their cash flows and credit risk
calculate and interpret the sources of calculate and interpret the sources of
Fixed Income 16.55.a return from investing in a fixed-rate 16.55.a return from investing in a fixed-rate
bond bond
define, calculate, and interpret define, calculate, and interpret
Fixed Income 16.55.b Macaulay, modified, and effective 16.55.b Macaulay, modified, and effective
durations durations
explain why effective duration is the explain why effective duration is the
most appropriate measure of interest most appropriate measure of interest
rate risk for bonds with embedded rate risk for bonds with embedded
options options
define key rate duration and describe
the key use of key rate durations in
Fixed Income 16.55.d measuring the sensitivity of bonds to New
changes in the shape of the benchmark
yield curve
explain how a bond’s maturity, coupon, explain how a bond’s maturity, coupon,
Fixed Income 16.55.d embedded options, and yield level affect 16.55.e embedded options, and yield level affect
its interest rate risk its interest rate risk
calculate the duration of a portfolio and calculate the duration of a portfolio and
Fixed Income 16.55.e explain the limitations of portfolio 16.55.f explain the limitations of portfolio
duration duration
calculate and interpret the money calculate and interpret the money
Fixed Income 16.55.f duration of a bond and price value of a 16.55.g duration of a bond and price value of a
basis point (PVBP) basis point (PVBP)
calculate and interpret approximate calculate and interpret approximate
Fixed Income 16.55.g convexity and distinguish between 16.55.h convexity and distinguish between
approximate and effective convexity approximate and effective convexity
estimate the percentage price change of estimate the percentage price change of
a bond for a specified change in yield, a bond for a specified change in yield,
Fixed Income 16.55.h 16.55.i
given the bond’s approximate duration given the bond’s approximate duration
and convexity and convexity
describe how the term structure of yield describe how the term structure of yield
Fixed Income 16.55.i volatility affects the interest rate risk of 16.55.j volatility affects the interest rate risk of
a bond a bond
describe the relationships among a describe the relationships among a
Fixed Income 16.55.j bond’s holding period return, its 16.55.k bond’s holding period return, its
duration, and the investment horizon duration, and the investment horizon
explain how changes in credit spread explain how changes in credit spread
and liquid affect yield-to-maturity of a and liquidity affect yield-to-maturity of
Fixed Income 16.55.k bond and how duration and convexity 16.55.l a bond and how duration and convexity
can be used to estimate the price effect can be used to estimate the price effect
of the changes of the changes
describe credit risk and credit-related describe credit risk and credit-related
risks affecting corporate bonds risks affecting corporate bonds
describe seniority rankings of corporate describe seniority rankings of corporate
debt and explain the potential violation debt and explain the potential violation
Fixed Income 16.56.b 16.56.b
of the priority of claims in a bankruptcy of the priority of claims in a bankruptcy
proceeding proceeding
distinguish between corporate issuer distinguish between corporate issuer
credit ratings and issue credit ratings credit ratings and issue credit ratings
and describe the rating agency practice and describe the rating agency practice
of “notching” of “notching”
explain risks in relying on ratings from explain risks in relying on ratings from
Fixed Income 16.56.d 16.56.d
credit rating agencies credit rating agencies
explain the components of traditional explain the components of traditional
credit analysis credit analysis
calculate and interpret financial ratios calculate and interpret financial ratios
Fixed Income 16.56.f 16.56.f
used in credit analysis used in credit analysis
evaluate the credit quality of a evaluate the credit quality of a
corporate bond issuer and a bond of corporate bond issuer and a bond of
Fixed Income 16.56.g 16.56.g
that issuer, given key financial ratios of that issuer, given key financial ratios of
the issuer and the industry the issuer and the industry
describe factors that influence the level describe factors that influence the level
Fixed Income 16.56.h 16.56.h
and volatility of yield spreads and volatility of yield spreads
calculate the return impact of spread calculate the return impact of spread
Fixed Income 16.56.i 16.56.i
changes changes
explain special considerations when explain special considerations when
evaluating the credit of high yield, evaluating the credit of high yield,
Fixed Income 16.56.j 16.56.j
sovereign, and municipal debt issuers sovereign, and municipal debt issuers
and issues and issues
define a derivative, and distinguish define a derivative, and distinguish
Derivatives 17.57.a between exchange-traded and over-the- 17.57.a between exchange-traded and over-the-
counter derivatives counter derivatives
contrast forward commitments with contrast forward commitments with
Derivatives 17.57.b 17.57.b
contingent claims contingent claims
define forward contracts, futures define forward contracts, futures
contracts, options (calls and puts), contracts, options (calls and puts),
Derivatives 17.57.c 17.57.c
swaps, and credit derivatives, and swaps, and credit derivatives, and
compare their basic characteristics compare their basic characteristics
describe purposes of, and controversies describe purposes of, and controversies
Derivatives 17.57.d 17.57.d
related to, derivative markets related to, derivative markets
explain arbitrage and the role it plays in explain arbitrage and the role it plays in
Derivatives 17.57.e determining prices and promoting 17.57.e determining prices and promoting
market efficiency market efficiency
explain how the concepts of arbitrage,
Derivatives 17.58.a replication, and risk neutrality are used New
in pricing derivatives
distinguish between value and price of
Derivatives 17.58.b New
forward and futures contracts
explain how the value and price of a
forward contract are determined at
Derivatives 17.58.c New
expiration, during the life of the
contract, and at initiation
describe monetary and nonmonetary
benefits and costs associated with
Derivatives 17.58.d holding the underlying asset, and New
explain how they affect the value and
price of a forward contract
define a forward rate agreement and
Derivatives 17.58.e New
describe its uses
explain why forward and futures prices
Derivatives 17.58.f New
differ
explain how swap contracts are similar
Derivatives 17.58.g to but different from a series of forward New
contracts
distinguish between the value and price
Derivatives 17.58.h New
of swaps
explain how the value of a European
Derivatives 17.58.i New
option is determined at expiration
explain the exercise value, time value,
Derivatives 17.58.j New
and moneyness of an option
identify the factors that determine the
value of an option, and explain how
Derivatives 17.58.k New
each factor affects the value of an
option
explain put–call parity for European
Derivatives 17.58.l New
options
explain put–call–forward parity for
Derivatives 17.58.m New
European options
explain how the value of an option is
Derivatives 17.58.n determined using a one-period binomial New
model
explain under which circumstances the
Derivatives 17.58.o values of European and American New
options differ
explain delivery/settlement and default
Derivatives 17.58.a risk for both long and short positions in Removed
a forward contract
describe the procedures for settling a
forward contract at expiration, and how
Derivatives 17.58.b Removed
termination prior to expiration can
affect credit risk
distinguish between a dealer and an end
Derivatives 17.58.c Removed
user of a forward contract
describe characteristics of equity
Derivatives 17.58.d forward contracts and forward contracts Removed
on zero-coupon and coupon bonds
describe characteristics of the
Derivatives 17.58.e Eurodollar time deposit market, and Removed
define LIBOR and Euribor
describe forward rate agreements
Derivatives 17.58.f (FRAs) and calculate the gain/loss on a Removed
FRA
calculate and interpret the payoff of a
Derivatives 17.58.g FRA and explain each of the component Removed
terms of the payoff formula
describe characteristics of currency
Derivatives 17.58.h Removed
forward contracts
describe the characteristics of futures
Derivatives 17.59.a Removed
contracts
compare futures contracts and forward
contracts
distinguish between margin in the
securities markets and margin in the
futures markets, and explain the role of
initial margin, maintenance margin,
variation margin, and settlement in
futures trading
describe price limits and the process of
marking to market, and calculate and
Derivatives 17.59.d interpret the margin balance, given the Removed
previous day’s balance and the change
in the futures price
describe how a futures contract can be
Derivatives 17.59.e Removed
terminated at or prior to expiration
describe characteristics of the following
types of futures contracts: Treasury bill,
Derivatives 17.59.f Removed
Eurodollar, Treasury bond, stock index,
and currency
Derivatives 17.60.a describe call and put options Removed
distinguish between European and
American options
define the concept of moneyness of an
option
compare exchange-traded options and
Derivatives 17.60.d Removed
over-the-counter options
identify the types of options in terms of
Derivatives 17.60.e Removed
the underlying instruments
compare interest rate options with
Derivatives 17.60.f Removed
forward rate agreements (FRAs)
define interest rate caps, floors, and
Derivatives 17.60.g Removed
collars
calculate and interpret option payoffs
Derivatives 17.60.h and explain how interest rate options Removed
differ from other types of options
define intrinsic value and time value,
Derivatives 17.60.i Removed
and explain their relationship
determine the minimum and maximum
Derivatives 17.60.j values of European options and Removed
American options
calculate and interpret the lowest prices
of European and American calls and
Derivatives 17.60.k Removed
puts based on the rules for minimum
values and lower bounds
explain how option prices are affected
Derivatives 17.60.l by the exercise price and the time to Removed
expiration
explain put–call parity for European
options, and explain how put–call parity
Derivatives 17.60.m Removed
is related to arbitrage and the
construction of synthetic options
explain how cash flows on the
Derivatives 17.60.n underlying asset affect put–call parity Removed
and the lower bounds of option prices
determine the directional effect of an
Derivatives 17.60.o interest rate change or volatility change Removed
on an option’s price
describe characteristics of swap
Derivatives 17.61.a contracts and explain how swaps are Removed
terminated
describe, calculate, and interpret the
payments of currency swaps, plain
vanilla interest rate swaps, and equity
swaps
determine the value at expiration, the determine the value at expiration, the
profit, maximum profit, maximum loss, profit, maximum profit, maximum loss,
breakeven underlying price at breakeven underlying price at
expiration, and payoff graph of the expiration, and payoff graph of the
Derivatives 17.62.a 17.59.a
strategies of buying and selling calls strategies of buying and selling calls
and puts and determine the potential and puts and determine the potential
outcomes for investors using these outcomes for investors using these
strategies strategies
determine the value at expiration, determine the value at expiration,
profit, maximum profit, maximum loss, profit, maximum profit, maximum loss,
breakeven underlying price at breakeven underlying price at
expiration, and payoff graph of a expiration, and payoff graph of a
Derivatives 17.62.b 17.59.b
covered call strategy and a protective covered call strategy and a protective
put strategy, and explain the risk put strategy, and explain the risk
management application of each management application of each
strategy strategy
Alternative compare alternative investments with compare alternative investments with
18.63.a 18.60.a
Investments traditional investments traditional investments
Alternative describe categories of alternative describe categories of alternative
18.63.b 18.60.b
Investments investments investments
describe potential benefits of alternative describe potential benefits of alternative
Alternative
18.63.c investments in the context of portfolio 18.60.c investments in the context of portfolio
Investments
management management
describe hedge funds, private equity, describe hedge funds, private equity,
real estate, commodities, and other real estate, commodities, and other
Alternative alternative investments, including, as alternative investments, including, as
18.63.d 18.60.d
Investments applicable, strategies, sub-categories, applicable, strategies, sub-categories,
potential benefits and risks, fee potential benefits and risks, fee
structures, and due diligence structures, and due diligence
describe issues in valuing, and describe issues in valuing, and
Alternative calculating returns on, hedge funds, calculating returns on, hedge funds,
18.63.e 18.60.e
Investments private equity, real estate, and private equity, real estate, and
commodities commodities
describe, calculate, and interpret describe, calculate, and interpret
Alternative
18.63.f management and incentive fees and net- 18.60.f management and incentive fees and net-
Investments
of-fees returns to hedge funds of-fees returns to hedge funds
Alternative describe risk management of alternative describe risk management of alternative
18.63.g 18.60.g
Investments investments investments

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CFA Level 1 - LOS Changes 2014 - 2015

distinguish between parametric and distinguish between parametric and

convert forward quotations expressed convert forward quotations expressed

identify the relationships among a identify the relationships among a

Fixed Income 15.54.h describe collateralized debt obligations, New

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