CFA Level I - LOS Changes 2017 - 2018 - Passing · PDF fileCFA Level I - LOS Changes 2017 -...

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CFA Level I - LOS Changes 2017 - 2018

Topic LOS Level I - 2017 (534 LOS) LOS Level I - 2018 (529 LOS) ComparedEthics 1.1.a explain ethics 1.1.a explain ethics

Ethics 1.1.b describe the role of a code of ethics in defining a profession

1.1.b describe the role of a code of ethics in defining a profession

Ethics 1.1.cidentify challenges to ethical behavior

1.1.c identify challenges to ethical behavior

Ethics 1.1.d describe the need for high ethical standards in the investment industry

1.1.ddescribe the need for high ethical standards in the investment industry

Ethics 1.1.e distinguish between ethical and legal standards

1.1.e distinguish between ethical and legal standards

Ethics 1.1.f describe and apply a framework for ethical decision making

1.1.f describe and apply a framework for ethical decision making

Ethics 1.2.a

describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards

1.2.a

describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards

Ethics 1.2.b state the six components of the Code of Ethics and the seven Standards of Professional Conduct

1.2.b state the six components of the Code of Ethics and the seven Standards of Professional Conduct

Ethics 1.2.c

explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard

1.2.c

explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard

Ethics 1.3.a

demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity

1.3.a

demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity

Ethics 1.3.b

distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards

1.3.b

distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards


Topic LOS Level I - 2017 (534 LOS) LOS Level I - 2018 (529 LOS) Compared

Ethics 1.3.c

recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct

1.3.c

recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct

Ethics 1.4.a

explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards

1.4.a

explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards

Ethics 1.4.bexplain the construction and purpose of composites in performance reporting

1.4.bexplain the construction and purpose of composites in performance reporting

Ethics 1.4.c explain the requirements for verification

1.4.c explain the requirements for verification

Ethics 1.5.adescribe the key features of the GIPS standards and the fundamentals of compliance

1.5.adescribe the key features of the GIPS standards and the fundamentals of compliance

Ethics 1.5.b

describe the scope of the GIPS standards with respect to an investment firm’s definition and historical performance record

1.5.b

describe the scope of the GIPS standards with respect to an investment firm’s definition and historical performance record

Ethics 1.5.c

explain how the GIPS standards are implemented in countries with existing standards for performance reporting and describe the appropriate response when the GIPS standards and local regulations conflict

1.5.c

explain how the GIPS standards are implemented in countries with existing standards for performance reporting and describe the appropriate response when the GIPS standards and local regulations conflict

Ethics 1.5.d describe the nine major sections of the GIPS standards

1.5.d describe the nine major sections of the GIPS standards

Quantitative 2.6.ainterpret interest rates as required rates of return, discount rates, or opportunity costs

2.6.ainterpret interest rates as required rates of return, discount rates, or opportunity costs

Quantitative 2.6.b

explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk

2.6.b

explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk



Quantitative 2.6.c

calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding

2.6.c

calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding

Quantitative 2.6.dsolve time value of money problems for different frequencies of compounding

2.6.dsolve time value of money problems for different frequencies of compounding

Quantitative 2.6.e

calculate and interpret the future value (FV) and present value (PV) of a single sum of money, an ordinary annuity, an annuity due, a perpetuity (PV only), and a series of unequal cash flows

2.6.e

calculate and interpret the future value (FV) and present value (PV) of a single sum of money, an ordinary annuity, an annuity due, a perpetuity (PV only), and a series of unequal cash flows

Quantitative 2.6.fdemonstrate the use of a time line in modeling and solving time value of money problems

2.6.fdemonstrate the use of a time line in modeling and solving time value of money problems

Quantitative 2.7.a

calculate and interpret the net present value (NPV) and the internal rate of return (IRR) of an investment

2.7.a

calculate and interpret the net present value (NPV) and the internal rate of return (IRR) of an investment

Quantitative 2.7.bcontrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule

2.7.bcontrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule

Quantitative 2.7.c calculate and interpret a holding period return (total return)

2.7.c calculate and interpret a holding period return (total return)

Quantitative 2.7.d

calculate and compare the money-weighted and time-weighted rates of return of a portfolio and evaluate the performance of portfolios based on these measures

2.7.d

calculate and compare the money-weighted and time-weighted rates of return of a portfolio and evaluate the performance of portfolios based on these measures

Quantitative 2.7.e

calculate and interpret the bank discount yield, holding period yield, effective annual yield, and money market yield for US Treasury bills and other money market instruments

2.7.e

calculate and interpret the bank discount yield, holding period yield, effective annual yield, and money market yield for US Treasury bills and other money market instruments

Quantitative 2.7.f

convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields

2.7.f

convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields



Quantitative 2.8.a

distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the types of measurement scales

2.8.a

distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the types of measurement scales

Quantitative 2.8.bdefine a parameter, a sample statistic, and a frequency distribution

2.8.bdefine a parameter, a sample statistic, and a frequency distribution

Quantitative 2.8.c

calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution

2.8.c

calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution

Quantitative 2.8.ddescribe the properties of a data set presented as a histogram or a frequency polygon

2.8.ddescribe the properties of a data set presented as a histogram or a frequency polygon

Quantitative 2.8.e

calculate and interpret measures of central tendency, including the population mean, sample mean, arithmetic mean, weighted average or mean, geometric mean, harmonic mean, median, and mode

2.8.e

calculate and interpret measures of central tendency, including the population mean, sample mean, arithmetic mean, weighted average or mean, geometric mean, harmonic mean, median, and mode

Quantitative 2.8.f calculate and interpret quartiles, quintiles, deciles, and percentiles

2.8.f calculate and interpret quartiles, quintiles, deciles, and percentiles

Quantitative 2.8.g

calculate and interpret 1) a range and a mean absolute deviation and 2) the variance and standard deviation of a population and of a sample

2.8.g

calculate and interpret 1) a range and a mean absolute deviation and 2) the variance and standard deviation of a population and of a sample

Quantitative 2.8.h

calculate and interpret the proportion of observations falling within a specified number of standard deviations of the mean using Chebyshev’s inequality

2.8.h

calculate and interpret the proportion of observations falling within a specified number of standard deviations of the mean using Chebyshev’s inequality

Quantitative 2.8.icalculate and interpret the coefficient of variation and the Sharpe ratio

2.8.icalculate and interpret the coefficient of variation and the Sharpe ratio

Quantitative 2.8.j

explain skewness and the meaning of a positively or negatively skewed return distribution

2.8.j

explain skewness and the meaning of a positively or negatively skewed return distribution



Quantitative 2.8.k

describe the relative locations of the mean, median, and mode for a unimodal, nonsymmetrical distribution

2.8.k

describe the relative locations of the mean, median, and mode for a unimodal, nonsymmetrical distribution

Quantitative 2.8.l explain measures of sample skewness and kurtosis

2.8.l explain measures of sample skewness and kurtosis

Quantitative 2.8.mcompare the use of arithmetic and geometric means when analyzing investment returns

2.8.mcompare the use of arithmetic and geometric means when analyzing investment returns

Quantitative 2.9.a

define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events

2.9.a

define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events

Quantitative 2.9.b

state the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities

2.9.b

state the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities

Quantitative 2.9.cstate the probability of an event in terms of odds for and against the event

2.9.cstate the probability of an event in terms of odds for and against the event

Quantitative 2.9.d distinguish between unconditional and conditional probabilities

2.9.d distinguish between unconditional and conditional probabilities

Quantitative 2.9.eexplain the multiplication, addition, and total probability rules

2.9.eexplain the multiplication, addition, and total probability rules

Quantitative 2.9.f

calculate and interpret 1) the joint probability of two events, 2) the probability that at least one of two events will occur, given the probability of each and the joint probability of the two events, and 3) a joint probability of any number of independent events

2.9.f

calculate and interpret 1) the joint probability of two events, 2) the probability that at least one of two events will occur, given the probability of each and the joint probability of the two events, and 3) a joint probability of any number of independent events

Quantitative 2.9.g distinguish between dependent and independent events

2.9.g distinguish between dependent and independent events

Quantitative 2.9.hcalculate and interpret an unconditional probability using the total probability rule

2.9.hcalculate and interpret an unconditional probability using the total probability rule



Quantitative 2.9.iexplain the use of conditional expectation in investment applications

2.9.iexplain the use of conditional expectation in investment applications

Quantitative 2.9.jexplain the use of a tree diagram to represent an investment problem

2.9.jexplain the use of a tree diagram to represent an investment problem

Quantitative 2.9.k calculate and interpret covariance and correlation

2.9.k calculate and interpret covariance and correlation

Quantitative 2.9.l

calculate and interpret the expected value, variance, and standard deviation of a random variable and of returns on a portfolio

2.9.l

calculate and interpret the expected value, variance, and standard deviation of a random variable and of returns on a portfolio

Quantitative 2.9.m calculate and interpret covariance given a joint probability function

2.9.m calculate and interpret covariance given a joint probability function

Quantitative 2.9.n calculate and interpret an updated probability using Bayes’ formula

2.9.n calculate and interpret an updated probability using Bayes’ formula

Quantitative 2.9.o

identify the most appropriate method to solve a particular counting problem and solve counting problems using factorial, combination, and permutation concepts

2.9.o

identify the most appropriate method to solve a particular counting problem and solve counting problems using factorial, combination, and permutation concepts

Quantitative 3.10.a

define a probability distribution and distinguish between discrete and continuous random variables and their probability functions

3.10.a

define a probability distribution and distinguish between discrete and continuous random variables and their probability functions

Quantitative 3.10.bdescribe the set of possible outcomes of a specified discrete random variable

3.10.bdescribe the set of possible outcomes of a specified discrete random variable

Quantitative 3.10.c interpret a cumulative distribution function

3.10.c interpret a cumulative distribution function

Quantitative 3.10.d

calculate and interpret probabilities for a random variable, given its cumulative distribution function

3.10.d

calculate and interpret probabilities for a random variable, given its cumulative distribution function

Quantitative 3.10.e

define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable

3.10.e

define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable



Quantitative 3.10.f

calculate and interpret probabilities given the discrete uniform and the binomial distribution functions

3.10.f

calculate and interpret probabilities given the discrete uniform and the binomial distribution functions

Quantitative 3.10.g construct a binomial tree to describe stock price movement

3.10.g construct a binomial tree to describe stock price movement

Quantitative 3.10.h calculate and interpret tracking error

Removed

Quantitative 3.10.i

define the continuous uniform distribution and calculate and interpret probabilities, given a continuous uniform distribution

3.10.h

define the continuous uniform distribution and calculate and interpret probabilities, given a continuous uniform distribution

Quantitative 3.10.j explain the key properties of the normal distribution

3.10.i explain the key properties of the normal distribution

Quantitative 3.10.k

distinguish between a univariate and a multivariate distribution and explain the role of correlation in the multivariate normal distribution

3.10.j

distinguish between a univariate and a multivariate distribution and explain the role of correlation in the multivariate normal distribution

Quantitative 3.10.l

determine the probability that a normally distributed random variable lies inside a given interval

3.10.k

determine the probability that a normally distributed random variable lies inside a given interval

Quantitative 3.10.m

define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret probabilities using the standard normal distribution

3.10.l

define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret probabilities using the standard normal distribution

Quantitative 3.10.n

define shortfall risk, calculate the safety-first ratio, and select an optimal portfolio using Roy’s safety-first criterion

3.10.m

define shortfall risk, calculate the safety-first ratio, and select an optimal portfolio using Roy’s safety-first criterion

Quantitative 3.10.o

explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices

3.10.n

explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices



Quantitative 3.10.p

distinguish between discretely and continuously compounded rates of return and calculate and interpret a continuously compounded rate of return, given a specific holding period return

3.10.o

distinguish between discretely and continuously compounded rates of return and calculate and interpret a continuously compounded rate of return, given a specific holding period return

Quantitative 3.10.qexplain Monte Carlo simulation and describe its applications and limitations

3.10.pexplain Monte Carlo simulation and describe its applications and limitations

Quantitative 3.10.r compare Monte Carlo simulation and historical simulation

3.10.q compare Monte Carlo simulation and historical simulation

Quantitative 3.11.a define simple random sampling and a sampling distribution

3.11.a define simple random sampling and a sampling distribution

Quantitative 3.11.b explain sampling error 3.11.b explain sampling error

Quantitative 3.11.cdistinguish between simple random and stratified random sampling

3.11.cdistinguish between simple random and stratified random sampling

Quantitative 3.11.d distinguish between time-series and cross-sectional data

3.11.d distinguish between time-series and cross-sectional data

Quantitative 3.11.e explain the central limit theorem and its importance

3.11.e explain the central limit theorem and its importance

Quantitative 3.11.fcalculate and interpret the standard error of the sample mean

3.11.fcalculate and interpret the standard error of the sample mean

Quantitative 3.11.g identify and describe desirable properties of an estimator

3.11.g identify and describe desirable properties of an estimator

Quantitative 3.11.h

distinguish between a point estimate and a confidence interval estimate of a population parameter

3.11.h

distinguish between a point estimate and a confidence interval estimate of a population parameter

Quantitative 3.11.idescribe properties of Student’s t-distribution and calculate and interpret its degrees of freedom

3.11.idescribe properties of Student’s t-distribution and calculate and interpret its degrees of freedom

Quantitative 3.11.j

calculate and interpret a confidence interval for a population mean, given a normal distribution with 1) a known population variance, 2) an unknown population variance, or 3) an unknown variance and a large sample size

3.11.j

calculate and interpret a confidence interval for a population mean, given a normal distribution with 1) a known population variance, 2) an unknown population variance, or 3) an unknown population variance and a large sample size

Wording Change



Quantitative 3.11.k

describe the issues regarding selection of the appropriate sample size, data-mining bias, sample selection bias, survivorship bias, look-ahead bias, and time-period bias

3.11.k

describe the issues regarding selection of the appropriate sample size, data-mining bias, sample selection bias, survivorship bias, look-ahead bias, and time-period bias

Quantitative 3.12.a

define a hypothesis, describe the steps of hypothesis testing, and describe and interpret the choice of the null and alternative hypotheses

3.12.a

define a hypothesis, describe the steps of hypothesis testing, and describe and interpret the choice of the null and alternative hypotheses

Quantitative 3.12.b distinguish between one-tailed and two-tailed tests of hypotheses

3.12.b distinguish between one-tailed and two-tailed tests of hypotheses

Quantitative 3.12.c

explain a test statistic, Type I and Type II errors, a significance level, and how significance levels are used in hypothesis testing

3.12.c

explain a test statistic, Type I and Type II errors, a significance level, and how significance levels are used in hypothesis testing

Quantitative 3.12.d

explain a decision rule, the power of a test, and the relation between confidence intervals and hypothesis tests

3.12.d

explain a decision rule, the power of a test, and the relation between confidence intervals and hypothesis tests

Quantitative 3.12.edistinguish between a statistical result and an economically meaningful result

3.12.edistinguish between a statistical result and an economically meaningful result

Quantitative 3.12.f explain and interpret the p-value as it relates to hypothesis testing

3.12.f explain and interpret the p-value as it relates to hypothesis testing

Quantitative 3.12.g

identify the appropriate test statistic and interpret the results for a hypothesis test concerning the population mean of both large and small samples when the population is normally or approximately normally distributed and the variance is 1) known or 2) unknown

3.12.g

identify the appropriate test statistic and interpret the results for a hypothesis test concerning the population mean of both large and small samples when the population is normally or approximately normally distributed and the variance is 1) known or 2) unknown



Quantitative 3.12.h

identify the appropriate test statistic and interpret the results for a hypothesis test concerning the equality of the population means of two at least approximately normally distributed populations, based on independent random samples with 1) equal or 2) unequal assumed variances

3.12.h

identify the appropriate test statistic and interpret the results for a hypothesis test concerning the equality of the population means of two at least approximately normally distributed populations, based on independent random samples with 1) equal or 2) unequal assumed variances

Quantitative 3.12.i

identify the appropriate test statistic and interpret the results for a hypothesis test concerning the mean difference of two normally distributed populations

3.12.i

identify the appropriate test statistic and interpret the results for a hypothesis test concerning the mean difference of two normally distributed populations

Quantitative 3.12.j

identify the appropriate test statistic and interpret the results for a hypothesis test concerning 1) the variance of a normally distributed population, and 2) the equality of the variances of two normally distributed populations based on two independent random samples

3.12.j

identify the appropriate test statistic and interpret the results for a hypothesis test concerning 1) the variance of a normally distributed population, and 2) the equality of the variances of two normally distributed populations based on two independent random samples

Quantitative 3.12.k

distinguish between parametric and nonparametric tests and describe situations in which the use of nonparametric tests may be appropriate

3.12.k

distinguish between parametric and nonparametric tests and describe situations in which the use of nonparametric tests may be appropriate

Quantitative 3.13.aexplain principles of technical analysis, its applications, and its underlying assumptions

3.13.aexplain principles of technical analysis, its applications, and its underlying assumptions

Quantitative 3.13.b describe the construction of different types of technical analysis charts and interpret them

3.13.b describe the construction of different types of technical analysis charts and interpret them

Quantitative 3.13.cexplain uses of trend, support, resistance lines, and change in polarity

3.13.cexplain uses of trend, support, resistance lines, and change in polarity

Quantitative 3.13.d describe common chart patterns 3.13.d describe common chart patterns



Quantitative 3.13.e

describe common technical analysis indicators (price-based, momentum oscillators, sentiment, and flow of funds)

3.13.e

describe common technical analysis indicators (price-based, momentum oscillators, sentiment, and flow of funds)

Quantitative 3.13.f explain how technical analysts use cycles

3.13.f explain how technical analysts use cycles

Quantitative 3.13.gdescribe the key tenets of Elliott Wave Theory and the importance of Fibonacci numbers

3.13.gdescribe the key tenets of Elliott Wave Theory and the importance of Fibonacci numbers

Quantitative 3.13.hdescribe intermarket analysis as it relates to technical analysis and asset allocation

3.13.hdescribe intermarket analysis as it relates to technical analysis and asset allocation

Economics 4.14.a

calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure

4.14.a

calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure

Economics 4.14.b compare substitution and income effects

4.14.b compare substitution and income effects

Economics 4.14.c distinguish between normal goods and inferior goods

4.14.c distinguish between normal goods and inferior goods

Economics 4.14.d describe the phenomenon of diminishing marginal returns

4.14.d describe the phenomenon of diminishing marginal returns

Economics 4.14.edetermine and describe breakeven and shutdown points of production

4.14.edetermine and interpret breakeven and shutdown points of production

Wording Change

Economics 4.14.fdescribe how economies of scale and diseconomies of scale affect costs

4.14.fdescribe how economies of scale and diseconomies of scale affect costs

Economics 4.15.a

describe characteristics of perfect competition, monopolistic competition, oligopoly, and pure monopoly

4.15.a

describe characteristics of perfect competition, monopolistic competition, oligopoly, and pure monopoly

Economics 4.15.b

explain relationships between price, marginal revenue, marginal cost, economic profit, and the elasticity of demand under each market structure

4.15.b

explain relationships between price, marginal revenue, marginal cost, economic profit, and the elasticity of demand under each market structure

Economics 4.15.c describe a firm’s supply function under each market structure

4.15.c describe a firm’s supply function under each market structure



Economics 4.15.ddescribe and determine the optimal price and output for firms under each market structure

4.15.ddescribe and determine the optimal price and output for firms under each market structure

Economics 4.15.eexplain factors affecting long-run equilibrium under each market structure

4.15.eexplain factors affecting long-run equilibrium under each market structure

Economics 4.15.f describe pricing strategy under each market structure

4.15.f describe pricing strategy under each market structure

Economics 4.15.gdescribe the use and limitations of concentration measures in identifying market structure

4.15.gdescribe the use and limitations of concentration measures in identifying market structure

Economics 4.15.hidentify the type of market structure within which a firm operates

4.15.hidentify the type of market structure within which a firm operates

Economics 4.16.a

calculate and explain gross domestic product (GDP) using expenditure and income approaches

4.16.a

calculate and explain gross domestic product (GDP) using expenditure and income approaches

Economics 4.16.bcompare the sum-of-value-added and value-of-final-output methods of calculating GDP

4.16.bcompare the sum-of-value-added and value-of-final-output methods of calculating GDP

Economics 4.16.ccompare nominal and real GDP and calculate and interpret the GDP deflator

4.16.ccompare nominal and real GDP and calculate and interpret the GDP deflator

Economics 4.16.dcompare GDP, national income, personal income, and personal disposable income

4.16.dcompare GDP, national income, personal income, and personal disposable income

Economics 4.16.e

explain the fundamental relationship among saving, investment, the fiscal balance, and the trade balance

4.16.e

explain the fundamental relationship among saving, investment, the fiscal balance, and the trade balance

Economics 4.16.fexplain the IS and LM curves and how they combine to generate the aggregate demand curve

4.16.fexplain the IS and LM curves and how they combine to generate the aggregate demand curve

Economics 4.16.gexplain the aggregate supply curve in the short run and long run

4.16.gexplain the aggregate supply curve in the short run and long run

Economics 4.16.hexplain causes of movements along and shifts in aggregate demand and supply curves

4.16.hexplain causes of movements along and shifts in aggregate demand and supply curves



Economics 4.16.i

describe how fluctuations in aggregate demand and aggregate supply cause short-run changes in the economy and the business cycle

4.16.i

describe how fluctuations in aggregate demand and aggregate supply cause short-run changes in the economy and the business cycle

Economics 4.16.j

distinguish between the following types of macroeconomic equilibria: long-run full employment, short-run recessionary gap, short-run inflationary gap, and short-run stagflation

4.16.j

distinguish between the following types of macroeconomic equilibria: long-run full employment, short-run recessionary gap, short-run inflationary gap, and short-run stagflation

Economics 4.16.k

explain how a short-run macroeconomic equilibrium may occur at a level above or below full employment

4.16.k

explain how a short-run macroeconomic equilibrium may occur at a level above or below full employment

Economics 4.16.lanalyze the effect of combined changes in aggregate supply and demand on the economy

4.16.lanalyze the effect of combined changes in aggregate supply and demand on the economy

Economics 4.16.mdescribe sources, measurement, and sustainability of economic growth

4.16.mdescribe sources, measurement, and sustainability of economic growth

Economics 4.16.ndescribe the production function approach to analyzing the sources of economic growth

4.16.ndescribe the production function approach to analyzing the sources of economic growth

Economics 4.16.o

distinguish between input growth and growth of total factor productivity as components of economic growth

4.16.o

distinguish between input growth and growth of total factor productivity as components of economic growth

Economics 4.17.a describe the business cycle and its phases

4.17.a describe the business cycle and its phases

Economics 4.17.b

describe how resource use, housing sector activity, and external trade sector activity vary as an economy moves through the business cycle

4.17.b

describe how resource use, housing sector activity, and external trade sector activity vary as an economy moves through the business cycle

Economics 4.17.c describe theories of the business cycle

4.17.c describe theories of the business cycle

Economics 4.17.ddescribe types of unemployment and compare measures of unemployment

4.17.ddescribe types of unemployment and compare measures of unemployment



Economics 4.17.e explain inflation, hyperinflation, disinflation, and deflation

4.17.e explain inflation, hyperinflation, disinflation, and deflation

Economics 4.17.f explain the construction of indices used to measure inflation

4.17.f explain the construction of indexes used to measure inflation

Wording Change

Economics 4.17.gcompare inflation measures, including their uses and limitations

4.17.gcompare inflation measures, including their uses and limitations

Economics 4.17.h distinguish between cost-push and demand-pull inflation

4.17.h distinguish between cost-push and demand-pull inflation

Economics 4.17.iinterpret a set of economic indicators and describe their uses and limitations

4.17.iinterpret a set of economic indicators and describe their uses and limitations

Economics 5.18.a compare monetary and fiscal policy

5.18.a compare monetary and fiscal policy

Economics 5.18.b describe functions and definitions of money

5.18.b describe functions and definitions of money

Economics 5.18.c explain the money creation process

5.18.c explain the money creation process

Economics 5.18.d describe theories of the demand for and supply of money

5.18.d describe theories of the demand for and supply of money

Economics 5.18.e describe the Fisher effect 5.18.e describe the Fisher effect

Economics 5.18.f describe roles and objectives of central banks

5.18.f describe roles and objectives of central banks

Economics 5.18.g contrast the costs of expected and unexpected inflation

5.18.g contrast the costs of expected and unexpected inflation

Economics 5.18.h describe tools used to implement monetary policy

5.18.h describe tools used to implement monetary policy

Economics 5.18.i describe the monetary transmission mechanism

5.18.i describe the monetary transmission mechanism

Economics 5.18.j describe qualities of effective central banks

5.18.j describe qualities of effective central banks

Economics 5.18.k

explain the relationships between monetary policy and economic growth, inflation, interest, and exchange rates

5.18.k

explain the relationships between monetary policy and economic growth, inflation, interest, and exchange rates

Economics 5.18.lcontrast the use of inflation, interest rate, and exchange rate targeting by central banks

5.18.lcontrast the use of inflation, interest rate, and exchange rate targeting by central banks

Economics 5.18.mdetermine whether a monetary policy is expansionary or contractionary

5.18.mdetermine whether a monetary policy is expansionary or contractionary



Economics 5.18.n describe limitations of monetary policy

5.18.n describe limitations of monetary policy

Economics 5.18.o describe roles and objectives of fiscal policy

5.18.o describe roles and objectives of fiscal policy

Economics 5.18.pdescribe tools of fiscal policy, including their advantages and disadvantages

5.18.pdescribe tools of fiscal policy, including their advantages and disadvantages

Economics 5.18.qdescribe the arguments about whether the size of a national debt relative to GDP matters

5.18.qdescribe the arguments about whether the size of a national debt relative to GDP matters

Economics 5.18.rexplain the implementation of fiscal policy and difficulties of implementation

5.18.rexplain the implementation of fiscal policy and difficulties of implementation

Economics 5.18.s determine whether a fiscal policy is expansionary or contractionary

5.18.s determine whether a fiscal policy is expansionary or contractionary

Economics 5.18.t explain the interaction of monetary and fiscal policy

5.18.t explain the interaction of monetary and fiscal policy

Economics 5.19.a compare gross domestic product and gross national product

5.19.a compare gross domestic product and gross national product

Economics 5.19.b describe benefits and costs of international trade

5.19.b describe benefits and costs of international trade

Economics 5.19.cdistinguish between comparative advantage and absolute advantage

5.19.cdistinguish between comparative advantage and absolute advantage

Economics 5.19.d

explain the Ricardian and Heckscher–Ohlin models of trade and the source(s) of comparative advantage in each model

5.19.d

compare the Ricardian and Heckscher–Ohlin models of trade and the source(s) of comparative advantage in each model

Wording Change

Economics 5.19.ecompare types of trade and capital restrictions and their economic implications

5.19.ecompare types of trade and capital restrictions and their economic implications

Economics 5.19.f

explain motivations for and advantages of trading blocs, common markets, and economic unions

5.19.f

explain motivations for and advantages of trading blocs, common markets, and economic unions

Economics 5.19.gdescribe common objectives of capital restrictions imposed by governments

5.19.gdescribe common objectives of capital restrictions imposed by governments

Economics 5.19.hdescribe the balance of payments accounts including their components

5.19.hdescribe the balance of payments accounts including their components



Economics 5.19.i

explain how decisions by consumers, firms, and governments affect the balance of payments

5.19.i

explain how decisions by consumers, firms, and governments affect the balance of payments

Economics 5.19.j

describe functions and objectives of the international organizations that facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization

5.19.j

describe functions and objectives of the international organizations that facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization

Economics 5.20.a

define an exchange rate and distinguish between nominal and real exchange rates and spot and forward exchange rates

5.20.a

define an exchange rate and distinguish between nominal and real exchange rates and spot and forward exchange rates

Economics 5.20.bdescribe functions of and participants in the foreign exchange market

5.20.bdescribe functions of and participants in the foreign exchange market

Economics 5.20.ccalculate and interpret the percentage change in a currency relative to another currency

5.20.ccalculate and interpret the percentage change in a currency relative to another currency

Economics 5.20.d calculate and interpret currency cross-rates

5.20.d calculate and interpret currency cross-rates

Economics 5.20.e

convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation

5.20.e

convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation

Economics 5.20.fexplain the arbitrage relationship between spot rates, forward rates, and interest rates

5.20.fexplain the arbitrage relationship between spot rates, forward rates, and interest rates

Economics 5.20.g calculate and interpret a forward discount or premium

5.20.g calculate and interpret a forward discount or premium

Economics 5.20.h

calculate and interpret the forward rate consistent with the spot rate and the interest rate in each currency

5.20.h

calculate and interpret the forward rate consistent with the spot rate and the interest rate in each currency

Economics 5.20.i describe exchange rate regimes 5.20.i describe exchange rate regimes

Economics 5.20.jexplain the effects of exchange rates on countries’ international trade and capital flows

5.20.jexplain the effects of exchange rates on countries’ international trade and capital flows



Financial Reporting 6.21.a

describe the roles of financial reporting and financial statement analysis

6.21.adescribe the roles of financial reporting and financial statement analysis

Financial Reporting

6.21.b

describe the roles of the statement of financial position, statement of comprehensive income, statement of changes in equity, and statement of cash flows in evaluating a company’s performance and financial position

6.21.b

describe the roles of the statement of financial position, statement of comprehensive income, statement of changes in equity, and statement of cash flows in evaluating a company’s performance and financial position

Financial Reporting 6.21.c

describe the importance of financial statement notes and supplementary information—including disclosures of accounting policies, methods, and estimates— and management’s commentary

6.21.c

describe the importance of financial statement notes and supplementary information—including disclosures of accounting policies, methods, and estimates— and management’s commentary

Financial Reporting

6.21.d

describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls

6.21.d

describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls

Financial Reporting

6.21.e

identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information

6.21.e

identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information

Financial Reporting

6.21.f describe the steps in the financial statement analysis framework

6.21.f describe the steps in the financial statement analysis framework


describe how business activities are classified for financial reporting purposes

6.22.adescribe how business activities are classified for financial reporting purposes

Financial Reporting 6.22.b

explain the relationship of financial statement elements and accounts, and classify accounts into the financial statement elements

6.22.b

explain the relationship of financial statement elements and accounts, and classify accounts into the financial statement elements

Financial Reporting

6.22.c explain the accounting equation in its basic and expanded forms

6.22.c explain the accounting equation in its basic and expanded forms



Financial Reporting

6.22.d describe the process of recording business transactions using an accounting system based on the accounting equation

6.22.d

describe the process of recording business transactions using an accounting system based on the accounting equation

Financial Reporting 6.22.e

describe the need for accruals and valuation adjustments in preparing financial statements

6.22.edescribe the need for accruals and valuation adjustments in preparing financial statements

Financial Reporting

6.22.f

describe the relationships among the income statement, balance sheet, statement of cash flows, and statement of owners’ equity

6.22.f

describe the relationships among the income statement, balance sheet, statement of cash flows, and statement of owners’ equity

Financial Reporting

6.22.g describe the flow of information in an accounting system

6.22.g describe the flow of information in an accounting system

Financial Reporting 6.22.h

describe the use of the results of the accounting process in security analysis

6.22.hdescribe the use of the results of the accounting process in security analysis

Financial Reporting

6.23.a

describe the objective of financial statements and the importance of financial reporting standards in security analysis and valuation

6.23.a

describe the objective of financial statements and the importance of financial reporting standards in security analysis and valuation


describe roles and desirable attributes of financial reporting standard-setting bodies and regulatory authorities in establishing and enforcing reporting standards, and describe the role of the International Organization of Securities Commissions

6.23.b

describe roles and desirable attributes of financial reporting standard-setting bodies and regulatory authorities in establishing and enforcing reporting standards, and describe the role of the International Organization of Securities Commissions

Financial Reporting

6.23.c

describe the status of global convergence of accounting standards and ongoing barriers to developing one universally accepted set of financial reporting standards

6.23.c

describe the status of global convergence of accounting standards and ongoing barriers to developing one universally accepted set of financial reporting standards



Financial Reporting 6.23.d

describe the International Accounting Standards Board’s conceptual framework, including the objective and qualitative characteristics of financial statements, required reporting elements, and constraints and assumptions in preparing financial statements

6.23.d

describe the International Accounting Standards Board’s conceptual framework, including the objective and qualitative characteristics of financial statements, required reporting elements, and constraints and assumptions in preparing financial statements

Financial Reporting

6.23.e

describe general requirements for financial statements under International Financial Reporting Standards (IFRS)

6.23.e

describe general requirements for financial statements under International Financial Reporting Standards (IFRS)

Financial Reporting 6.23.f

compare key concepts of financial reporting standards under IFRS and US generally accepted accounting principles (US GAAP) reporting systems

6.23.f

compare key concepts of financial reporting standards under IFRS and US generally accepted accounting principles (US GAAP) reporting systems

Financial Reporting

6.23.g

identify characteristics of a coherent financial reporting framework and the barriers to creating such a framework

6.23.g

identify characteristics of a coherent financial reporting framework and the barriers to creating such a framework

Financial Reporting

6.23.h

describe implications for financial analysis of differing financial reporting systems and the importance of monitoring developments in financial reporting standards

6.23.h

describe implications for financial analysis of differing financial reporting systems and the importance of monitoring developments in financial reporting standards

Financial Reporting

6.23.i analyze company disclosures of significant accounting policies

6.23.i analyze company disclosures of significant accounting policies

Financial Reporting

7.24.a

describe the components of the income statement and alternative presentation formats of that statement

7.24.a

describe the components of the income statement and alternative presentation formats of that statement




describe general principles of revenue recognition and accrual accounting, specific revenue recognition applications (including accounting for long-term contracts, installment sales, barter transactions, gross and net reporting of revenue), and implications of revenue recognition principles for financial analysis

7.24.b

describe general principles of revenue recognition and accrual accounting, specific revenue recognition applications (including accounting for long-term contracts, installment sales, barter transactions, gross and net reporting of revenue), and implications of revenue recognition principles for financial analysis

Financial Reporting

7.24.c

calculate revenue given information that might influence the choice of revenue recognition method

7.24.c

calculate revenue given information that might influence the choice of revenue recognition method


describe key aspects of the converged accounting standards for revenue recognition issued by the International Accounting Standards Board and Financial Accounting Standards Board in May 2014

7.24.d

describe key aspects of the converged accounting standards for revenue recognition issued by the International Accounting Standards Board and Financial Accounting Standards Board in May 2014

Financial Reporting

7.24.e

describe general principles of expense recognition, specific expense recognition applications, and implications of expense recognition choices for financial analysis

7.24.e

describe general principles of expense recognition, specific expense recognition applications, and implications of expense recognition choices for financial analysis

Financial Reporting

7.24.f

describe the financial reporting treatment and analysis of non-recurring items (including discontinued operations, unusual or infrequent items) and changes in accounting policies

7.24.f

describe the financial reporting treatment and analysis of non-recurring items (including discontinued operations, unusual or infrequent items) and changes in accounting policies

Financial Reporting 7.24.g

distinguish between the operating and non-operating components of the income statement

7.24.gdistinguish between the operating and non-operating components of the income statement




describe how earnings per share is calculated and calculate and interpret a company’s earnings per share (both basic and diluted earnings per share) for both simple and complex capital structures

7.24.h

describe how earnings per share is calculated and calculate and interpret a company’s earnings per share (both basic and diluted earnings per share) for both simple and complex capital structures

Financial Reporting 7.24.i

distinguish between dilutive and antidilutive securities and describe the implications of each for the earnings per share calculation

7.24.i

distinguish between dilutive and antidilutive securities and describe the implications of each for the earnings per share calculation

Financial Reporting

7.24.j convert income statements to common-size income statements

7.24.j convert income statements to common-size income statements

Financial Reporting 7.24.k

evaluate a company’s financial performance using common-size income statements and financial ratios based on the income statement

7.24.k

evaluate a company’s financial performance using common-size income statements and financial ratios based on the income statement

Financial Reporting

7.24.l describe, calculate, and interpret comprehensive income

7.24.l describe, calculate, and interpret comprehensive income

Financial Reporting 7.24.m

describe other comprehensive income and identify major types of items included in it

7.24.mdescribe other comprehensive income and identify major types of items included in it


describe the elements of the balance sheet: assets, liabilities, and equity

7.25.adescribe the elements of the balance sheet: assets, liabilities, and equity


describe uses and limitations of the balance sheet in financial analysis

7.25.bdescribe uses and limitations of the balance sheet in financial analysis

Financial Reporting

7.25.c describe alternative formats of balance sheet presentation

7.25.c describe alternative formats of balance sheet presentation


distinguish between current and non-current assets and current and non-current liabilities

7.25.ddistinguish between current and non-current assets and current and non-current liabilities


describe different types of assets and liabilities and the measurement bases of each

7.25.edescribe different types of assets and liabilities and the measurement bases of each

Financial Reporting

7.25.f describe the components of shareholders’ equity

7.25.f describe the components of shareholders’ equity



Financial Reporting

7.25.g

convert balance sheets to common-size balance sheets and interpret common-size balance sheets

7.25.g

convert balance sheets to common-size balance sheets and interpret common-size balance sheets

Financial Reporting

7.25.h calculate and interpret liquidity and solvency ratios

7.25.h calculate and interpret liquidity and solvency ratios

Financial Reporting

7.26.a

compare cash flows from operating, investing, and financing activities and classify cash flow items as relating to one of those three categories given a description of the items

7.26.a

compare cash flows from operating, investing, and financing activities and classify cash flow items as relating to one of those three categories given a description of the items


describe how non-cash investing and financing activities are reported

7.26.bdescribe how non-cash investing and financing activities are reported


contrast cash flow statements prepared under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (US GAAP)

7.26.c

contrast cash flow statements prepared under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (US GAAP)


distinguish between the direct and indirect methods of presenting cash from operating activities and describe arguments in favor of each method

7.26.d

distinguish between the direct and indirect methods of presenting cash from operating activities and describe arguments in favor of each method


describe how the cash flow statement is linked to the income statement and the balance sheet

7.26.edescribe how the cash flow statement is linked to the income statement and the balance sheet

Financial Reporting

7.26.f

describe the steps in the preparation of direct and indirect cash flow statements, including how cash flows can be computed using income statement and balance sheet data

7.26.f

describe the steps in the preparation of direct and indirect cash flow statements, including how cash flows can be computed using income statement and balance sheet data

Financial Reporting

7.26.g convert cash flows from the indirect to direct method

7.26.g convert cash flows from the indirect to direct method


analyze and interpret both reported and common-size cash flow statements

7.26.hanalyze and interpret both reported and common-size cash flow statements



Financial Reporting

7.26.i

calculate and interpret free cash flow to the firm, free cash flow to equity, and performance and coverage cash flow ratios

7.26.i

calculate and interpret free cash flow to the firm, free cash flow to equity, and performance and coverage cash flow ratios

Financial Reporting

7.27.a

describe tools and techniques used in financial analysis, including their uses and limitations

7.27.a

describe tools and techniques used in financial analysis, including their uses and limitations


classify, calculate, and interpret activity, liquidity, solvency, profitability, and valuation ratios

7.27.bclassify, calculate, and interpret activity, liquidity, solvency, profitability, and valuation ratios


describe relationships among ratios and evaluate a company using ratio analysis

7.27.cdescribe relationships among ratios and evaluate a company using ratio analysis


demonstrate the application of DuPont analysis of return on equity and calculate and interpret effects of changes in its components

7.27.d

demonstrate the application of DuPont analysis of return on equity and calculate and interpret effects of changes in its components


calculate and interpret ratios used in equity analysis and credit analysis

7.27.ecalculate and interpret ratios used in equity analysis and credit analysis


explain the requirements for segment reporting and calculate and interpret segment ratios

7.27.fexplain the requirements for segment reporting and calculate and interpret segment ratios


describe how ratio analysis and other techniques can be used to model and forecast earnings

7.27.gdescribe how ratio analysis and other techniques can be used to model and forecast earnings

Financial Reporting

8.28.a

distinguish between costs included in inventories and costs recognised as expenses in the period in which they are incurred

8.28.a

distinguish between costs included in inventories and costs recognised as expenses in the period in which they are incurred

Financial Reporting 8.28.b describe different inventory

valuation methods (cost formulas)8.28.b describe different inventory

valuation methods (cost formulas)

Financial Reporting

8.28.c

calculate and compare cost of sales, gross profit, and ending inventory using different inventory valuation methods and using perpetual and periodic inventory systems

8.28.c

calculate and compare cost of sales, gross profit, and ending inventory using different inventory valuation methods and using perpetual and periodic inventory systems



Financial Reporting

8.28.d

calculate and explain how inflation and deflation of inventory costs affect the financial statements and ratios of companies that use different inventory valuation methods

8.28.d

calculate and explain how inflation and deflation of inventory costs affect the financial statements and ratios of companies that use different inventory valuation methods


explain LIFO reserve and LIFO liquidation and their effects on financial statements and ratios

8.28.eexplain LIFO reserve and LIFO liquidation and their effects on financial statements and ratios


convert a company’s reported financial statements from LIFO to FIFO for purposes of comparison

8.28.fconvert a company’s reported financial statements from LIFO to FIFO for purposes of comparison


describe the measurement of inventory at the lower of cost and net realisable value

8.28.gdescribe the measurement of inventory at the lower of cost and net realisable value

Financial Reporting

8.28.h describe implications of valuing inventory at net realisable value for financial statements and ratios

8.28.h describe implications of valuing inventory at net realisable value for financial statements and ratios


describe the financial statement presentation of and disclosures relating to inventories

8.28.idescribe the financial statement presentation of and disclosures relating to inventories

Financial Reporting 8.28.j

explain issues that analysts should consider when examining a company’s inventory disclosures and other sources of information

8.28.jexplain issues that analysts should consider when examining a company’s inventory disclosures and other sources of information

Financial Reporting

8.28.k

calculate and compare ratios of companies, including companies that use different inventory methods

8.28.k

calculate and compare ratios of companies, including companies that use different inventory methods

Financial Reporting 8.28.l

analyze and compare the financial statements of companies, including companies that use different inventory methods

8.28.lanalyze and compare the financial statements of companies, including companies that use different inventory methods

Financial Reporting

8.29.a

distinguish between costs that are capitalised and costs that are expensed in the period in which they are incurred

8.29.a

distinguish between costs that are capitalised and costs that are expensed in the period in which they are incurred




compare the financial reporting of the following types of intangible assets: purchased, internally developed, acquired in a business combination

8.29.b

compare the financial reporting of the following types of intangible assets: purchased, internally developed, acquired in a business combination


explain and evaluate how capitalising versus expensing costs in the period in which they are incurred affects financial statements and ratios

8.29.c

explain and evaluate how capitalising versus expensing costs in the period in which they are incurred affects financial statements and ratios


describe the different depreciation methods for property, plant, and equipment and calculate depreciation expense

8.29.ddescribe the different depreciation methods for property, plant, and equipment and calculate depreciation expense

Financial Reporting

8.29.e

describe how the choice of depreciation method and assumptions concerning useful life and residual value affect depreciation expense, financial statements, and ratios

8.29.e

describe how the choice of depreciation method and assumptions concerning useful life and residual value affect depreciation expense, financial statements, and ratios


describe the different amortisation methods for intangible assets with finite lives and calculate amortisation expense

8.29.f

describe the different amortisation methods for intangible assets with finite lives and calculate amortisation expense

Financial Reporting

8.29.g

describe how the choice of amortisation method and assumptions concerning useful life and residual value affect amortisation expense, financial statements, and ratios

8.29.g

describe how the choice of amortisation method and assumptions concerning useful life and residual value affect amortisation expense, financial statements, and ratios

Financial Reporting

8.29.hdescribe the revaluation model

8.29.hdescribe the revaluation model


explain the impairment of property, plant, and equipment and intangible assets

8.29.iexplain the impairment of property, plant, and equipment and intangible assets


explain the derecognition of property, plant, and equipment and intangible assets

8.29.jexplain the derecognition of property, plant, and equipment and intangible assets



Financial Reporting

8.29.k

explain and evaluate how impairment, revaluation, and derecognition of property, plant, and equipment and intangible assets affect financial statements and ratios

8.29.k

explain and evaluate how impairment, revaluation, and derecognition of property, plant, and equipment and intangible assets affect financial statements and ratios

Financial Reporting

8.29.l

describe the financial statement presentation of and disclosures relating to property, plant, and equipment and intangible assets

8.29.l

describe the financial statement presentation of and disclosures relating to property, plant, and equipment and intangible assets

Financial Reporting

8.29.m

analyze and interpret financial statement disclosures regarding property, plant, and equipment and intangible assets

8.29.m

analyze and interpret financial statement disclosures regarding property, plant, and equipment and intangible assets

Financial Reporting 8.29.n

compare the financial reporting of investment property with that of property, plant, and equipment

8.29.ncompare the financial reporting of investment property with that of property, plant, and equipment

Financial Reporting

8.29.o

explain and evaluate how leasing rather than purchasing assets affects financial statements and ratios

8.29.o

explain and evaluate how leasing rather than purchasing assets affects financial statements and ratios

Financial Reporting 8.29.p

explain and evaluate how finance leases and operating leases affect financial statements and ratios from the perspective of both the lessor and the lessee

8.29.p

explain and evaluate how finance leases and operating leases affect financial statements and ratios from the perspective of both the lessor and the lessee


describe the differences between accounting profit and taxable income and define key terms, including deferred tax assets, deferred tax liabilities, valuation allowance, taxes payable, and income tax expense

8.30.a

describe the differences between accounting profit and taxable income and define key terms, including deferred tax assets, deferred tax liabilities, valuation allowance, taxes payable, and income tax expense


explain how deferred tax liabilities and assets are created and the factors that determine how a company’s deferred tax liabilities and assets should be treated for the purposes of financial analysis

8.30.b

explain how deferred tax liabilities and assets are created and the factors that determine how a company’s deferred tax liabilities and assets should be treated for the purposes of financial analysis


Topic LOS Level I - 2017 (534 LOS) LOS Level I - 2018 (529 LOS) ComparedFinancial Reporting

8.30.c calculate the tax base of a company’s assets and liabilities

8.30.c calculate the tax base of a company’s assets and liabilities


calculate income tax expense, income taxes payable, deferred tax assets, and deferred tax liabilities, and calculate and interpret the adjustment to the financial statements related to a change in the income tax rate

8.30.d

calculate income tax expense, income taxes payable, deferred tax assets, and deferred tax liabilities, and calculate and interpret the adjustment to the financial statements related to a change in the income tax rate


evaluate the impact of tax rate changes on a company’s financial statements and ratios

8.30.eevaluate the effect of tax rate changes on a company’s financial statements and ratios

Wording Change

Financial Reporting

8.30.f

distinguish between temporary and permanent differences in pre-tax accounting income and taxable income

8.30.f

distinguish between temporary and permanent differences in pre-tax accounting income and taxable income

Financial Reporting

8.30.g

describe the valuation allowance for deferred tax assets—when it is required and what impact it has on financial statements

8.30.g

describe the valuation allowance for deferred tax assets—when it is required and what effect it has on financial statements

Wording Change


explain recognition and measurement of current and deferred tax items

8.30.hexplain recognition and measurement of current and deferred tax items


analyze disclosures relating to deferred tax items and the effective tax rate reconciliation and explain how information included in these disclosures affects a company’s financial statements and financial ratios

8.30.i

analyze disclosures relating to deferred tax items and the effective tax rate reconciliation and explain how information included in these disclosures affects a company’s financial statements and financial ratios

Financial Reporting

8.30.j

identify the key provisions of and differences between income tax accounting under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP)

8.30.j

identify the key provisions of and differences between income tax accounting under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP)

Financial Reporting

8.31.a

determine the initial recognition, initial measurement and subsequent measurement of bonds

8.31.a

determine the initial recognition, initial measurement and subsequent measurement of bonds




describe the effective interest method and calculate interest expense, amortisation of bond discounts/premiums, and interest payments

8.31.b

describe the effective interest method and calculate interest expense, amortisation of bond discounts/premiums, and interest payments

Financial Reporting

8.31.cexplain the derecognition of debt

8.31.cexplain the derecognition of debt

Financial Reporting

8.31.d describe the role of debt covenants in protecting creditors

8.31.d describe the role of debt covenants in protecting creditors


describe the financial statement presentation of and disclosures relating to debt

8.31.edescribe the financial statement presentation of and disclosures relating to debt

Financial Reporting 8.31.f explain motivations for leasing

assets instead of purchasing them8.31.f explain motivations for leasing

assets instead of purchasing them

Financial Reporting

8.31.g

distinguish between a finance lease and an operating lease from the perspectives of the lessor and the lessee

8.31.g

distinguish between a finance lease and an operating lease from the perspectives of the lessor and the lessee

Financial Reporting

8.31.h

determine the initial recognition, initial measurement, and subsequent measurement of finance leases

8.31.h

determine the initial recognition, initial measurement, and subsequent measurement of finance leases

Financial Reporting

8.31.i compare the disclosures relating to finance and operating leases

8.31.i compare the disclosures relating to finance and operating leases


compare the presentation and disclosure of defined contribution and defined benefit pension plans

8.31.jcompare the presentation and disclosure of defined contribution and defined benefit pension plans

Financial Reporting

8.31.k calculate and interpret leverage and coverage ratios

8.31.k calculate and interpret leverage and coverage ratios


distinguish between financial reporting quality and quality of reported results (including quality of earnings, cash flow, and balance sheet items)

9.32.a

distinguish between financial reporting quality and quality of reported results (including quality of earnings, cash flow, and balance sheet items)

Financial Reporting

9.32.b describe a spectrum for assessing financial reporting quality

9.32.b describe a spectrum for assessing financial reporting quality

Financial Reporting

9.32.c distinguish between conservative and aggressive accounting

9.32.c distinguish between conservative and aggressive accounting



Financial Reporting

9.32.d

describe motivations that might cause management to issue financial reports that are not high quality

9.32.d

describe motivations that might cause management to issue financial reports that are not high quality

Financial Reporting

9.32.e

describe conditions that are conducive to issuing low-quality, or even fraudulent, financial reports

9.32.e

describe conditions that are conducive to issuing low-quality, or even fraudulent, financial reports

Financial Reporting

9.32.f

describe mechanisms that discipline financial reporting quality and the potential limitations of those mechanisms

9.32.f

describe mechanisms that discipline financial reporting quality and the potential limitations of those mechanisms

Financial Reporting

9.32.g

describe presentation choices, including non-GAAP measures, that could be used to influence an analyst’s opinion

9.32.g

describe presentation choices, including non-GAAP measures, that could be used to influence an analyst’s opinion


describe accounting methods (choices and estimates) that could be used to manage earnings, cash flow, and balance sheet items

9.32.hdescribe accounting methods (choices and estimates) that could be used to manage earnings, cash flow, and balance sheet items

Financial Reporting

9.32.i

describe accounting warning signs and methods for detecting manipulation of information in financial reports

9.32.i

describe accounting warning signs and methods for detecting manipulation of information in financial reports


evaluate a company’s past financial performance and explain how a company’s strategy is reflected in past financial performance

9.33.a

evaluate a company’s past financial performance and explain how a company’s strategy is reflected in past financial performance

Financial Reporting

9.33.b forecast a company’s future net income and cash flow

9.33.b forecast a company’s future net income and cash flow

Financial Reporting

9.33.c

describe the role of financial statement analysis in assessing the credit quality of a potential debt investment

9.33.c

describe the role of financial statement analysis in assessing the credit quality of a potential debt investment


describe the use of financial statement analysis in screening for potential equity investments

9.33.ddescribe the use of financial statement analysis in screening for potential equity investments




explain appropriate analyst adjustments to a company’s financial statements to facilitate comparison with another company

9.33.eexplain appropriate analyst adjustments to a company’s financial statements to facilitate comparison with another company

Corporate Finance

10.34.adescribe corporate governance

10.34.adescribe corporate governance

Corporate Finance 10.34.b

describe a company’s stakeholder groups and compare interests of stakeholder groups

10.34.bdescribe a company’s stakeholder groups and compare interests of stakeholder groups

Corporate Finance

10.34.c

describe principal–agent and other relationships in corporate governance and the conflicts that may arise in these relationships

10.34.c

describe principal–agent and other relationships in corporate governance and the conflicts that may arise in these relationships

Corporate Finance

10.34.ddescribe stakeholder management

10.34.ddescribe stakeholder management

Corporate Finance 10.34.e

describe mechanisms to manage stakeholder relationships and mitigate associated risks

10.34.edescribe mechanisms to manage stakeholder relationships and mitigate associated risks

Corporate Finance

10.34.f

describe functions and responsibilities of a company’s board of directors and its committees

10.34.f

describe functions and responsibilities of a company’s board of directors and its committees

Corporate Finance

10.34.g

describe market and non-market factors that can affect stakeholder relationships and corporate governance

10.34.g

describe market and non-market factors that can affect stakeholder relationships and corporate governance

Corporate Finance

10.34.h

identify potential risks of poor corporate governance and stakeholder management and identify benefits from effective corporate governance and stakeholder management

10.34.h

identify potential risks of poor corporate governance and stakeholder management and identify benefits from effective corporate governance and stakeholder management

Corporate Finance 10.34.i

describe factors relevant to the analysis of corporate governance and stakeholder management

10.34.idescribe factors relevant to the analysis of corporate governance and stakeholder management

Corporate Finance 10.34.j

describe environmental and social considerations in investment analysis

10.34.jdescribe environmental and social considerations in investment analysis



Corporate Finance

10.34.k

describe how environmental, social, and governance factors may be used in investment analysis

10.34.k

describe how environmental, social, and governance factors may be used in investment analysis

Corporate Finance

10.35.a

describe the capital budgeting process and distinguish among the various categories of capital projects

10.35.a

describe the capital budgeting process and distinguish among the various categories of capital projects

Corporate Finance

10.35.b describe the basic principles of capital budgeting

10.35.b describe the basic principles of capital budgeting

Corporate Finance 10.35.c

explain how the evaluation and selection of capital projects is affected by mutually exclusive projects, project sequencing, and capital rationing

10.35.c

explain how the evaluation and selection of capital projects is affected by mutually exclusive projects, project sequencing, and capital rationing

Corporate Finance

10.35.d

calculate and interpret net present value (NPV), internal rate of return (IRR), payback period, discounted payback period, and profitability index (PI) of a single capital project

10.35.d

calculate and interpret net present value (NPV), internal rate of return (IRR), payback period, discounted payback period, and profitability index (PI) of a single capital project


explain the NPV profile, compare the NPV and IRR methods when evaluating independent and mutually exclusive projects, and describe the problems associated with each of the evaluation methods

10.35.e

explain the NPV profile, compare the NPV and IRR methods when evaluating independent and mutually exclusive projects, and describe the problems associated with each of the evaluation methods

Corporate Finance 10.35.f

describe expected relations among an investment’s NPV, company value, and share price

10.35.fdescribe expected relations among an investment’s NPV, company value, and share price

Corporate Finance 10.36.a

calculate and interpret the weighted average cost of capital (WACC) of a company

10.36.acalculate and interpret the weighted average cost of capital (WACC) of a company


describe how taxes affect the cost of capital from different capital sources

10.36.bdescribe how taxes affect the cost of capital from different capital sources

Corporate Finance

10.36.c

describe the use of target capital structure in estimating WACC and how target capital structure weights may be determined

10.36.c

describe the use of target capital structure in estimating WACC and how target capital structure weights may be determined



Corporate Finance 10.36.d

explain how the marginal cost of capital and the investment opportunity schedule are used to determine the optimal capital budget

10.36.d

explain how the marginal cost of capital and the investment opportunity schedule are used to determine the optimal capital budget


explain the marginal cost of capital’s role in determining the net present value of a project

10.36.eexplain the marginal cost of capital’s role in determining the net present value of a project

Corporate Finance

10.36.f

calculate and interpret the cost of debt capital using the yield-to-maturity approach and the debt-rating approach

10.36.f

calculate and interpret the cost of debt capital using the yield-to-maturity approach and the debt-rating approach

Corporate Finance 10.36.g

calculate and interpret the cost of noncallable, nonconvertible preferred stock

10.36.gcalculate and interpret the cost of noncallable, nonconvertible preferred stock

Corporate Finance

10.36.h

calculate and interpret the cost of equity capital using the capital asset pricing model approach, the dividend discount model approach, and the bond-yield-plus risk-premium approach

10.36.h

calculate and interpret the cost of equity capital using the capital asset pricing model approach, the dividend discount model approach, and the bond-yield-plus risk-premium approach

Corporate Finance

10.36.i calculate and interpret the beta and cost of capital for a project

10.36.i calculate and interpret the beta and cost of capital for a project

Corporate Finance 10.36.j

describe uses of country risk premiums in estimating the cost of equity

10.36.jdescribe uses of country risk premiums in estimating the cost of equity

Corporate Finance

10.36.k

describe the marginal cost of capital schedule, explain why it may be upward-sloping with respect to additional capital, and calculate and interpret its break-points

10.36.k

describe the marginal cost of capital schedule, explain why it may be upward-sloping with respect to additional capital, and calculate and interpret its break-points

Corporate Finance 10.36.l

explain and demonstrate the correct treatment of flotation costs

10.36.lexplain and demonstrate the correct treatment of flotation costs

Corporate Finance

11.37.a

define and explain leverage, business risk, sales risk, operating risk, and financial risk and classify a risk

11.37.a

define and explain leverage, business risk, sales risk, operating risk, and financial risk and classify a risk



Corporate Finance

11.37.b

calculate and interpret the degree of operating leverage, the degree of financial leverage, and the degree of total leverage

11.37.b

calculate and interpret the degree of operating leverage, the degree of financial leverage, and the degree of total leverage

Corporate Finance 11.37.c

analyze the effect of financial leverage on a company’s net income and return on equity

11.37.canalyze the effect of financial leverage on a company’s net income and return on equity

Corporate Finance

11.37.d

calculate the breakeven quantity of sales and determine the company’s net income at various sales levels

11.37.d

calculate the breakeven quantity of sales and determine the company’s net income at various sales levels


calculate and interpret the operating breakeven quantity of sales

11.37.ecalculate and interpret the operating breakeven quantity of sales

Corporate Finance 11.38.a

describe regular cash dividends, extra dividends, liquidating dividends, stock dividends, stock splits, and reverse stock splits, including their expected effect on shareholders’ wealth and a company’s financial ratios

Removed


describe dividend payment chronology, including the significance of declaration, holder-of-record, ex-dividend, and payment dates

Removed

Corporate Finance

11.38.c compare share repurchase methods

Removed


calculate and compare the effect of a share repurchase on earnings per share when 1) the repurchase is financed with the company’s excess cash and 2) the company uses debt to finance the repurchase

Removed


calculate the effect of a share repurchase on book value per share

Removed




explain why a cash dividend and a share repurchase of the same amount are equivalent in terms of the effect on shareholders’ wealth, all else being equal

Removed

Corporate Finance

11.39.a

describe primary and secondary sources of liquidity and factors that influence a company’s liquidity position

11.38.a

describe primary and secondary sources of liquidity and factors that influence a company’s liquidity position


compare a company’s liquidity measures with those of peer companies

11.38.bcompare a company’s liquidity measures with those of peer companies

Corporate Finance

11.39.c

evaluate working capital effectiveness of a company based on its operating and cash conversion cycles and compare the company’s effectiveness with that of peer companies

11.38.c

evaluate working capital effectiveness of a company based on its operating and cash conversion cycles and compare the company’s effectiveness with that of peer companies


describe how different types of cash flows affect a company’s net daily cash position

11.38.ddescribe how different types of cash flows affect a company’s net daily cash position


calculate and interpret comparable yields on various securities, compare portfolio returns against a standard benchmark, and evaluate a company’s short-term investment policy guidelines

11.38.e

calculate and interpret comparable yields on various securities, compare portfolio returns against a standard benchmark, and evaluate a company’s short-term investment policy guidelines


evaluate a company’s management of accounts receivable, inventory, and accounts payable over time and compared to peer companies

11.38.f

evaluate a company’s management of accounts receivable, inventory, and accounts payable over time and compared to peer companies

Corporate Finance

11.39.g

evaluate the choices of short-term funding available to a company and recommend a financing method

11.38.g

evaluate the choices of short-term funding available to a company and recommend a financing method

Portfolio Management

12.40.a describe the portfolio approach to investing

12.39.a describe the portfolio approach to investing



Portfolio Management 12.40.b

describe types of investors and distinctive characteristics and needs of each

12.39.bdescribe types of investors and distinctive characteristics and needs of each


12.40.c describe defined contribution and defined benefit pension plans

12.39.c describe defined contribution and defined benefit pension plans


12.40.d describe the steps in the portfolio management process

12.39.d describe the steps in the portfolio management process

Portfolio Management 12.40.e

describe mutual funds and compare them with other pooled investment products

12.39.edescribe mutual funds and compare them with other pooled investment products


12.41.adefine risk management

12.40.adefine risk management


12.41.b describe features of a risk management framework

12.40.b describe features of a risk management framework

Portfolio Management 12.41.c

define risk governance and describe elements of effective risk governance

12.40.cdefine risk governance and describe elements of effective risk governance


12.41.d explain how risk tolerance affects risk management

12.40.d explain how risk tolerance affects risk management


12.41.e describe risk budgeting and its role in risk governance

12.40.e describe risk budgeting and its role in risk governance

Portfolio Management 12.41.f

identify financial and non-financial sources of risk and describe how they may interact

12.40.fidentify financial and non-financial sources of risk and describe how they may interact


12.41.g

describe methods for measuring and modifying risk exposures and factors to consider in choosing among the methods

12.40.g

describe methods for measuring and modifying risk exposures and factors to consider in choosing among the methods

Portfolio Management 12.42.a

calculate and interpret major return measures and describe their appropriate uses

12.41.acalculate and interpret major return measures and describe their appropriate uses


describe characteristics of the major asset classes that investors consider in forming portfolios

12.41.bdescribe characteristics of the major asset classes that investors consider in forming portfolios


12.42.c

calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data

12.41.c

calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data


12.42.d explain risk aversion and its implications for portfolio selection

12.41.d explain risk aversion and its implications for portfolio selection


Topic LOS Level I - 2017 (534 LOS) LOS Level I - 2018 (529 LOS) ComparedPortfolio Management

12.42.e calculate and interpret portfolio standard deviation

12.41.e calculate and interpret portfolio standard deviation


describe the effect on a portfolio’s risk of investing in assets that are less than perfectly correlated

12.41.fdescribe the effect on a portfolio’s risk of investing in assets that are less than perfectly correlated

Portfolio Management 12.42.g

describe and interpret the minimum-variance and efficient frontiers of risky assets and the global minimum-variance portfolio

12.41.gdescribe and interpret the minimum-variance and efficient frontiers of risky assets and the global minimum-variance portfolio


12.42.h

explain the selection of an optimal portfolio, given an investor’s utility (or risk aversion) and the capital allocation line

12.41.h

explain the selection of an optimal portfolio, given an investor’s utility (or risk aversion) and the capital allocation line

Portfolio Management 12.43.a

describe the implications of combining a risk-free asset with a portfolio of risky assets

12.42.adescribe the implications of combining a risk-free asset with a portfolio of risky assets


explain the capital allocation line (CAL) and the capital market line (CML)

12.42.bexplain the capital allocation line (CAL) and the capital market line (CML)


explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk

12.42.c

explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk

Portfolio Management 12.43.d

explain return generating models (including the market model) and their uses

12.42.dexplain return generating models (including the market model) and their uses


12.43.ecalculate and interpret beta

12.42.ecalculate and interpret beta


12.43.f

explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML)

12.42.f

explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML)


calculate and interpret the expected return of an asset using the CAPM

12.42.gcalculate and interpret the expected return of an asset using the CAPM

Portfolio Management 12.43.h

describe and demonstrate applications of the CAPM and the SML

12.42.hdescribe and demonstrate applications of the CAPM and the SML



Portfolio Management 12.42.i

calculate and interpret the Sharpe ratio, Treynor ratio, M2, and Jensen’s alpha

New

Portfolio Management 12.44.a describe the reasons for a written

investment policy statement (IPS)12.43.a describe the reasons for a written

investment policy statement (IPS)Portfolio Management

12.44.b describe the major components of an IPS

12.43.b describe the major components of an IPS


describe risk and return objectives and how they may be developed for a client

12.43.cdescribe risk and return objectives and how they may be developed for a client

Portfolio Management 12.44.d

distinguish between the willingness and the ability (capacity) to take risk in analyzing an investor’s financial risk tolerance

12.43.d

distinguish between the willingness and the ability (capacity) to take risk in analyzing an investor’s financial risk tolerance

Portfolio Management 12.44.e

describe the investment constraints of liquidity, time horizon, tax concerns, legal and regulatory factors, and unique circumstances and their implications for the choice of portfolio assets

12.43.e

describe the investment constraints of liquidity, time horizon, tax concerns, legal and regulatory factors, and unique circumstances and their implications for the choice of portfolio assets


explain the specification of asset classes in relation to asset allocation

12.43.fexplain the specification of asset classes in relation to asset allocation


describe the principles of portfolio construction and the role of asset allocation in relation to the IPS

12.43.gdescribe the principles of portfolio construction and the role of asset allocation in relation to the IPS

Equity 13.45.a explain the main functions of the financial system

13.44.a explain the main functions of the financial system

Equity 13.45.b describe classifications of assets and markets

13.44.b describe classifications of assets and markets

Equity 13.45.c

describe the major types of securities, currencies, contracts, commodities, and real assets that trade in organized markets, including their distinguishing characteristics and major subtypes

13.44.c

describe the major types of securities, currencies, contracts, commodities, and real assets that trade in organized markets, including their distinguishing characteristics and major subtypes



Equity 13.45.ddescribe types of financial intermediaries and services that they provide

13.44.ddescribe types of financial intermediaries and services that they provide

Equity 13.45.e compare positions an investor can take in an asset

13.44.e compare positions an investor can take in an asset

Equity 13.45.f

calculate and interpret the leverage ratio, the rate of return on a margin transaction, and the security price at which the investor would receive a margin call

13.44.f

calculate and interpret the leverage ratio, the rate of return on a margin transaction, and the security price at which the investor would receive a margin call

Equity 13.45.g compare execution, validity, and clearing instructions

13.44.g compare execution, validity, and clearing instructions

Equity 13.45.h compare market orders with limit orders

13.44.h compare market orders with limit orders

Equity 13.45.i

define primary and secondary markets and explain how secondary markets support primary markets

13.44.i

define primary and secondary markets and explain how secondary markets support primary markets

Equity 13.45.j

describe how securities, contracts, and currencies are traded in quote-driven, order-driven, and brokered markets

13.44.j

describe how securities, contracts, and currencies are traded in quote-driven, order-driven, and brokered markets

Equity 13.45.k describe characteristics of a well-functioning financial system

13.44.k describe characteristics of a well-functioning financial system

Equity 13.45.l describe objectives of market regulation

13.44.l describe objectives of market regulation

Equity 13.46.a describe a security market index 13.45.a describe a security market index

Equity 13.46.bcalculate and interpret the value, price return, and total return of an index

13.45.bcalculate and interpret the value, price return, and total return of an index

Equity 13.46.cdescribe the choices and issues in index construction and management

13.45.cdescribe the choices and issues in index construction and management

Equity 13.46.dcompare the different weighting methods used in index construction

13.45.dcompare the different weighting methods used in index construction

Equity 13.46.ecalculate and analyze the value and return of an index given its weighting method

13.45.ecalculate and analyze the value and return of an index given its weighting method



Equity 13.46.f describe rebalancing and reconstitution of an index

13.45.f describe rebalancing and reconstitution of an index

Equity 13.46.g describe uses of security market indices

13.45.g describe uses of security market indexes

Wording Change

Equity 13.46.hdescribe types of equity indices

13.45.hdescribe types of equity indexes

Wording Change

Equity 13.46.i describe types of fixed-income indices

13.45.i describe types of fixed-income indexes

Wording Change

Equity 13.46.j describe indices representing alternative investments

13.45.j describe indexes representing alternative investments

Wording Change

Equity 13.46.k compare types of security market indices

13.45.k compare types of security market indexes

Wording Change

Equity 13.47.a

describe market efficiency and related concepts, including their importance to investment practitioners

13.46.a

describe market efficiency and related concepts, including their importance to investment practitioners

Equity 13.47.b distinguish between market value and intrinsic value

13.46.b distinguish between market value and intrinsic value

Equity 13.47.c explain factors that affect a market’s efficiency

13.46.c explain factors that affect a market’s efficiency

Equity 13.47.dcontrast weak-form, semi-strong-form, and strong-form market efficiency

13.46.dcontrast weak-form, semi-strong-form, and strong-form market efficiency

Equity 13.47.e

explain the implications of each form of market efficiency for fundamental analysis, technical analysis, and the choice between active and passive portfolio management

13.46.e

explain the implications of each form of market efficiency for fundamental analysis, technical analysis, and the choice between active and passive portfolio management

Equity 13.47.f describe market anomalies 13.46.f describe market anomalies

Equity 13.47.gdescribe behavioral finance and its potential relevance to understanding market anomalies

13.46.gdescribe behavioral finance and its potential relevance to understanding market anomalies

Equity 14.48.a describe characteristics of types of equity securities

14.47.a describe characteristics of types of equity securities

Equity 14.48.b

describe differences in voting rights and other ownership characteristics among different equity classes

14.47.b

describe differences in voting rights and other ownership characteristics among different equity classes

Equity 14.48.c distinguish between public and private equity securities

14.47.c distinguish between public and private equity securities



Equity 14.48.d describe methods for investing in non-domestic equity securities

14.47.d describe methods for investing in non-domestic equity securities

Equity 14.48.ecompare the risk and return characteristics of different types of equity securities

14.47.ecompare the risk and return characteristics of different types of equity securities

Equity 14.48.fexplain the role of equity securities in the financing of a company’s assets

14.47.fexplain the role of equity securities in the financing of a company’s assets

Equity 14.48.gdistinguish between the market value and book value of equity securities

14.47.gdistinguish between the market value and book value of equity securities

Equity 14.48.h

compare a company’s cost of equity, its (accounting) return on equity, and investors’ required rates of return

14.47.h

compare a company’s cost of equity, its (accounting) return on equity, and investors’ required rates of return

Equity 14.49.aexplain uses of industry analysis and the relation of industry analysis to company analysis

14.48.aexplain uses of industry analysis and the relation of industry analysis to company analysis

Equity 14.49.b

compare methods by which companies can be grouped, current industry classification systems, and classify a company, given a description of its activities and the classification system

14.48.b

compare methods by which companies can be grouped, current industry classification systems, and classify a company, given a description of its activities and the classification system

Equity 14.49.c

explain the factors that affect the sensitivity of a company to the business cycle and the uses and limitations of industry and company descriptors such as “growth,” “defensive,” and “cyclical”

14.48.c

explain the factors that affect the sensitivity of a company to the business cycle and the uses and limitations of industry and company descriptors such as “growth,” “defensive,” and “cyclical”

Equity 14.49.d

explain how a company’s industry classification can be used to identify a potential “peer group” for equity valuation

14.48.d

explain how a company’s industry classification can be used to identify a potential “peer group” for equity valuation

Equity 14.49.edescribe the elements that need to be covered in a thorough industry analysis

14.48.edescribe the elements that need to be covered in a thorough industry analysis

Equity 14.49.f describe the principles of strategic analysis of an industry

14.48.f describe the principles of strategic analysis of an industry



Equity 14.49.g

explain the effects of barriers to entry, industry concentration, industry capacity, and market share stability on pricing power and price competition

14.48.g

explain the effects of barriers to entry, industry concentration, industry capacity, and market share stability on pricing power and price competition

Equity 14.49.h

describe industry life cycle models, classify an industry as to life cycle stage, and describe limitations of the life-cycle concept in forecasting industry performance

14.48.h

describe industry life cycle models, classify an industry as to life cycle stage, and describe limitations of the life-cycle concept in forecasting industry performance

Equity 14.49.icompare characteristics of representative industries from the various economic sectors

14.48.icompare characteristics of representative industries from the various economic sectors

Equity 14.49.j

describe macroeconomic, technological, demographic, governmental, and social influences on industry growth, profitability, and risk

14.48.j

describe macroeconomic, technological, demographic, governmental, and social influences on industry growth, profitability, and risk

Equity 14.49.kdescribe the elements that should be covered in a thorough company analysis

14.48.kdescribe the elements that should be covered in a thorough company analysis

Equity 14.50.a

evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued, or undervalued by the market

14.49.a

evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued, or undervalued by the market

Equity 14.50.b describe major categories of equity valuation models

14.49.b describe major categories of equity valuation models

Equity 14.49.c

describe regular cash dividends, extra dividends, stock dividends, stock splits, reverse stock splits, and share repurchases

New

Equity 14.49.d describe dividend payment chronology

New

Equity 14.50.c

explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models

14.49.e

explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models



Equity 14.50.dcalculate the intrinsic value of a non-callable, non-convertible preferred stock

14.49.fcalculate the intrinsic value of a non-callable, non-convertible preferred stock

Equity 14.50.e

calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate

14.49.g

calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate

Equity 14.50.f

identify characteristics of companies for which the constant growth or a multi-stage dividend discount model is appropriate

14.49.h

identify characteristics of companies for which the constant growth or a multi-stage dividend discount model is appropriate

Equity 14.50.g

explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals, and the use of multiples based on comparables

14.49.i

explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals, and the use of multiples based on comparables

Equity 14.50.h

calculate and interpret the following multiples: price to earnings, price to an estimate of operating cash flow, price to sales, and price to book value

14.49.j

calculate and interpret the following multiples: price to earnings, price to an estimate of operating cash flow, price to sales, and price to book value

Equity 14.50.idescribe enterprise value multiples and their use in estimating equity value

14.49.kdescribe enterprise value multiples and their use in estimating equity value

Equity 14.50.jdescribe asset-based valuation models and their use in estimating equity value

14.49.ldescribe asset-based valuation models and their use in estimating equity value

Equity 14.50.kexplain advantages and disadvantages of each category of valuation model

14.49.mexplain advantages and disadvantages of each category of valuation model

Fixed Income 15.51.a describe basic features of a fixed-income security

15.50.a describe basic features of a fixed-income security

Fixed Income 15.51.b describe content of a bond indenture

15.50.b describe content of a bond indenture

Fixed Income 15.51.ccompare affirmative and negative covenants and identify examples of each

15.50.ccompare affirmative and negative covenants and identify examples of each



Fixed Income 15.51.d

describe how legal, regulatory, and tax considerations affect the issuance and trading of fixed-income securities

15.50.d

describe how legal, regulatory, and tax considerations affect the issuance and trading of fixed-income securities

Fixed Income 15.51.e describe how cash flows of fixed-income securities are structured

15.50.e describe how cash flows of fixed-income securities are structured

Fixed Income 15.51.f

describe contingency provisions affecting the timing and/or nature of cash flows of fixed-income securities and identify whether such provisions benefit the borrower or the lender

15.50.f

describe contingency provisions affecting the timing and/or nature of cash flows of fixed-income securities and identify whether such provisions benefit the borrower or the lender

Fixed Income 15.52.a describe classifications of global fixed-income markets

15.51.a describe classifications of global fixed-income markets

Fixed Income 15.52.bdescribe the use of interbank offered rates as reference rates in floating-rate debt

15.51.bdescribe the use of interbank offered rates as reference rates in floating-rate debt

Fixed Income 15.52.c describe mechanisms available for issuing bonds in primary markets

15.51.c describe mechanisms available for issuing bonds in primary markets

Fixed Income 15.52.d describe secondary markets for bonds

15.51.d describe secondary markets for bonds

Fixed Income 15.52.e describe securities issued by sovereign governments

15.51.e describe securities issued by sovereign governments


describe securities issued by non-sovereign governments, quasi-government entities, and supranational agencies

15.51.f

describe securities issued by non-sovereign governments, quasi-government entities, and supranational agencies

Fixed Income 15.52.g describe types of debt issued by corporations

15.51.g describe types of debt issued by corporations

Fixed Income 15.51.h describe structured financial instruments

New

Fixed Income 15.52.h describe short-term funding alternatives available to banks

15.51.i describe short-term funding alternatives available to banks

Fixed Income 15.52.idescribe repurchase agreements (repos) and the risks associated with them

15.51.jdescribe repurchase agreements (repos) and the risks associated with them

Fixed Income 15.53.a calculate a bond’s price given a market discount rate

15.52.a calculate a bond’s price given a market discount rate



Fixed Income 15.53.b

identify the relationships among a bond’s price, coupon rate, maturity, and market discount rate (yield-to-maturity)

15.52.b

identify the relationships among a bond’s price, coupon rate, maturity, and market discount rate (yield-to-maturity)

Fixed Income 15.53.cdefine spot rates and calculate the price of a bond using spot rates

15.52.cdefine spot rates and calculate the price of a bond using spot rates

Fixed Income 15.53.ddescribe and calculate the flat price, accrued interest, and the full price of a bond

15.52.ddescribe and calculate the flat price, accrued interest, and the full price of a bond

Fixed Income 15.53.e describe matrix pricing 15.52.e describe matrix pricing


calculate and interpret yield measures for fixed-rate bonds, floating-rate notes, and money market instruments

15.52.f

calculate and interpret yield measures for fixed-rate bonds, floating-rate notes, and money market instruments

Fixed Income 15.53.g

define and compare the spot curve, yield curve on coupon bonds, par curve, and forward curve

15.52.g

define and compare the spot curve, yield curve on coupon bonds, par curve, and forward curve

Fixed Income 15.53.h

define forward rates and calculate spot rates from forward rates, forward rates from spot rates, and the price of a bond using forward rates

15.52.h

define forward rates and calculate spot rates from forward rates, forward rates from spot rates, and the price of a bond using forward rates

Fixed Income 15.53.i compare, calculate, and interpret yield spread measures

15.52.i compare, calculate, and interpret yield spread measures

Fixed Income 15.54.aexplain benefits of securitization for economies and financial markets

15.53.aexplain benefits of securitization for economies and financial markets

Fixed Income 15.54.bdescribe securitization, including the parties involved in the process and the roles they play

15.53.bdescribe securitization, including the parties involved in the process and the roles they play

Fixed Income 15.54.cdescribe typical structures of securitizations, including credit tranching and time tranching

15.53.cdescribe typical structures of securitizations, including credit tranching and time tranching

Fixed Income 15.54.ddescribe types and characteristics of residential mortgage loans that are typically securitized

15.53.ddescribe types and characteristics of residential mortgage loans that are typically securitized



Fixed Income 15.54.e

describe types and characteristics of residential mortgage-backed securities, including mortgage pass-through securities and collateralized mortgage obligations, and explain the cash flows and risks for each type

15.53.e

describe types and characteristics of residential mortgage-backed securities, including mortgage pass-through securities and collateralized mortgage obligations, and explain the cash flows and risks for each type

Fixed Income 15.54.fdefine prepayment risk and describe the prepayment risk of mortgage-backed securities

15.53.fdefine prepayment risk and describe the prepayment risk of mortgage-backed securities

Fixed Income 15.54.gdescribe characteristics and risks of commercial mortgage-backed securities

15.53.gdescribe characteristics and risks of commercial mortgage-backed securities


describe types and characteristics of non-mortgage asset-backed securities, including the cash flows and risks of each type

15.53.h

describe types and characteristics of non-mortgage asset-backed securities, including the cash flows and risks of each type

Fixed Income 15.54.idescribe collateralized debt obligations, including their cash flows and risks

15.53.idescribe collateralized debt obligations, including their cash flows and risks

Fixed Income 16.55.acalculate and interpret the sources of return from investing in a fixed-rate bond

16.54.acalculate and interpret the sources of return from investing in a fixed-rate bond

Fixed Income 16.55.bdefine, calculate, and interpret Macaulay, modified, and effective durations

16.54.bdefine, calculate, and interpret Macaulay, modified, and effective durations

Fixed Income 16.55.c

explain why effective duration is the most appropriate measure of interest rate risk for bonds with embedded options

16.54.c

explain why effective duration is the most appropriate measure of interest rate risk for bonds with embedded options


define key rate duration and describe the use of key rate durations in measuring the sensitivity of bonds to changes in the shape of the benchmark yield curve

16.54.d

define key rate duration and describe the use of key rate durations in measuring the sensitivity of bonds to changes in the shape of the benchmark yield curve

Fixed Income 16.55.eexplain how a bond’s maturity, coupon, and yield level affect its interest rate risk

16.54.eexplain how a bond’s maturity, coupon, and yield level affect its interest rate risk



Fixed Income 16.55.fcalculate the duration of a portfolio and explain the limitations of portfolio duration

16.54.fcalculate the duration of a portfolio and explain the limitations of portfolio duration

Fixed Income 16.55.gcalculate and interpret the money duration of a bond and price value of a basis point (PVBP)

16.54.gcalculate and interpret the money duration of a bond and price value of a basis point (PVBP)


calculate and interpret approximate convexity and distinguish between approximate and effective convexity

16.54.h

calculate and interpret approximate convexity and distinguish between approximate and effective convexity

Fixed Income 16.55.i

estimate the percentage price change of a bond for a specified change in yield, given the bond’s approximate duration and convexity

16.54.i

estimate the percentage price change of a bond for a specified change in yield, given the bond’s approximate duration and convexity

Fixed Income 16.55.jdescribe how the term structure of yield volatility affects the interest rate risk of a bond

16.54.jdescribe how the term structure of yield volatility affects the interest rate risk of a bond

Fixed Income 16.55.k

describe the relationships among a bond’s holding period return, its duration, and the investment horizon

16.54.k

describe the relationships among a bond’s holding period return, its duration, and the investment horizon

Fixed Income 16.55.l

explain how changes in credit spread and liquidity affect yield-to-maturity of a bond and how duration and convexity can be used to estimate the price effect of the changes

16.54.l

explain how changes in credit spread and liquidity affect yield-to-maturity of a bond and how duration and convexity can be used to estimate the price effect of the changes

Fixed Income 16.56.adescribe credit risk and credit-related risks affecting corporate bonds

16.55.adescribe credit risk and credit-related risks affecting corporate bonds

Fixed Income 16.56.bdescribe default probability and loss severity as components of credit risk

16.55.bdescribe default probability and loss severity as components of credit risk

Fixed Income 16.56.c

describe seniority rankings of corporate debt and explain the potential violation of the priority of claims in a bankruptcy proceeding

16.55.c

describe seniority rankings of corporate debt and explain the potential violation of the priority of claims in a bankruptcy proceeding




distinguish between corporate issuer credit ratings and issue credit ratings and describe the rating agency practice of “notching”

16.55.d

distinguish between corporate issuer credit ratings and issue credit ratings and describe the rating agency practice of “notching”

Fixed Income 16.56.e explain risks in relying on ratings from credit rating agencies

16.55.e explain risks in relying on ratings from credit rating agencies


explain the four Cs (Capacity, Collateral, Covenants, and Character) of traditional credit analysis

16.55.f

explain the four Cs (Capacity, Collateral, Covenants, and Character) of traditional credit analysis

Fixed Income 16.56.g calculate and interpret financial ratios used in credit analysis

16.55.g calculate and interpret financial ratios used in credit analysis


evaluate the credit quality of a corporate bond issuer and a bond of that issuer, given key financial ratios of the issuer and the industry

16.55.h

evaluate the credit quality of a corporate bond issuer and a bond of that issuer, given key financial ratios of the issuer and the industry

Fixed Income 16.56.idescribe factors that influence the level and volatility of yield spreads

16.55.idescribe factors that influence the level and volatility of yield spreads

Fixed Income 16.56.j

explain special considerations when evaluating the credit of high yield, sovereign, and non-sovereign government debt issuers and issues

16.55.j

explain special considerations when evaluating the credit of high yield, sovereign, and non-sovereign government debt issuers and issues

Derivatives 17.57.a define a derivative and distinguish between exchange-traded and over-the- counter derivatives

17.56.a define a derivative and distinguish between exchange-traded and over-the- counter derivatives

Derivatives 17.57.b contrast forward commitments with contingent claims

17.56.b contrast forward commitments with contingent claims

Derivatives 17.57.c

define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics

17.56.c

define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics

Derivatives 17.57.ddescribe purposes of, and controversies related to, derivative markets

17.56.ddescribe purposes of, and controversies related to, derivative markets



Derivatives 17.57.eexplain arbitrage and the role it plays in determining prices and promoting market efficiency

17.56.eexplain arbitrage and the role it plays in determining prices and promoting market efficiency

Derivatives 17.58.a

explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives

17.57.a

explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives

Derivatives 17.58.bdistinguish between value and price of forward and futures contracts

17.57.bdistinguish between value and price of forward and futures contracts

Derivatives 17.58.cexplain how the value and price of a forward contract are determined at expiration, during the life of the contract, and at initiation

17.57.cexplain how the value and price of a forward contract are determined at expiration, during the life of the contract, and at initiation

Derivatives 17.58.d

describe monetary and nonmonetary benefits and costs associated with holding the underlying asset and explain how they affect the value and price of a forward contract

17.57.d

describe monetary and nonmonetary benefits and costs associated with holding the underlying asset and explain how they affect the value and price of a forward contract

Derivatives 17.58.e define a forward rate agreement and describe its uses

17.57.e define a forward rate agreement and describe its uses

Derivatives 17.58.f explain why forward and futures prices differ

17.57.f explain why forward and futures prices differ

Derivatives 17.58.gexplain how swap contracts are similar to but different from a series of forward contracts

17.57.gexplain how swap contracts are similar to but different from a series of forward contracts

Derivatives 17.58.h distinguish between the value and price of swaps

17.57.h distinguish between the value and price of swaps

Derivatives 17.58.iexplain how the value of a European option is determined at expiration

17.57.iexplain how the value of a European option is determined at expiration

Derivatives 17.58.jexplain the exercise value, time value, and moneyness of an option

17.57.jexplain the exercise value, time value, and moneyness of an option

Derivatives 17.58.k

identify the factors that determine the value of an option and explain how each factor affects the value of an option

17.57.k

identify the factors that determine the value of an option and explain how each factor affects the value of an option



Derivatives 17.58.l explain put–call parity for European options

17.57.l explain put–call parity for European options

Derivatives 17.58.m explain put–call–forward parity for European options

17.57.m explain put–call–forward parity for European options

Derivatives 17.58.nexplain how the value of an option is determined using a one-period binomial model

17.57.nexplain how the value of an option is determined using a one-period binomial model

Derivatives 17.58.o

explain under which circumstances the values of European and American options differ

17.57.o

explain under which circumstances the values of European and American options differ

Derivatives 17.59.a

determine the value at expiration, the profit, maximum profit, maximum loss, breakeven underlying price at expiration, and payoff graph of the strategies of buying and selling calls and puts and determine the potential outcomes for investors using these strategies

Removed

Derivatives 17.59.b

determine the value at expiration, profit, maximum profit, maximum loss, breakeven underlying price at expiration, and payoff graph of a covered call strategy and a protective put strategy, and explain the risk management application of each strategy

Removed

Alternative Investments

18.60.a compare alternative investments with traditional investments

18.58.a compare alternative investments with traditional investments


18.60.b describe categories of alternative investments

18.58.b describe categories of alternative investments

Alternative Investments 18.60.c

describe potential benefits of alternative investments in the context of portfolio management

18.58.cdescribe potential benefits of alternative investments in the context of portfolio management




18.60.d

describe hedge funds, private equity, real estate, commodities, infrastructure, and other alternative investments, including, as applicable, strategies, sub-categories, potential benefits and risks, fee structures, and due diligence

18.58.d

describe hedge funds, private equity, real estate, commodities, infrastructure, and other alternative investments, including, as applicable, strategies, sub-categories, potential benefits and risks, fee structures, and due diligence


18.60.e

describe, calculate, and interpret management and incentive fees and net-of-fees returns to hedge funds

18.58.e

describe, calculate, and interpret management and incentive fees and net-of-fees returns to hedge funds


18.60.f

describe issues in valuing and calculating returns on hedge funds, private equity, real estate, commodities, and infrastructure

18.58.f

describe issues in valuing and calculating returns on hedge funds, private equity, real estate, commodities, and infrastructure


18.60.g describe risk management of alternative investments

18.58.g describe risk management of alternative investments

Date post:	20-Mar-2018
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