2022 CFA Program Curriculum Level I Financial Statement Analysis AND Corporate Issuers

✍ Scribed by CFA Institute

• Publisher: Wiley
• Year: 2021
• Tongue: English
• Leaves: 713
• Edition: 1
• Category: Library

✦ Synopsis

Prepare for success on the 2022 CFA Level I exam with the latest official CFA^® Program Curriculum.

The 2022 CFA Program Curriculum Level I Box Set contains all the material you need to succeed on the Level I CFA exam in 2022. This set includes the full official curriculum for Level I and is part of the larger CFA Candidate Body of Knowledge (CBOK).

Highly visual and intuitively organized, this box set allows you to:

• Learn from financial thought leaders.
• Access market-relevant instruction.
• Gain critical knowledge and skills.

The set also includes practice questions to assist with your recall of key terms, concepts, and formulas.

Perfect for anyone preparing for the 2022 Level I CFA exam, the 2022 CFA Program Curriculum Level I Box Set is a must-have resource for those seeking the foundational skills required to become a Chartered Financial Analyst^®.

✦ Table of Contents

How to Use the CFA Program Curriculum
Background on the CBOK
Organization of the Curriculum
Features of the Curriculum
Designing Your Personal Study Program
CFA Institute Learning Ecosystem (LES)
Prep Providers
Feedback
Financial Statement Analysis
6
Financial Statement Analysis (2)
17
Understanding Income Statements
Introduction
Components and Format of the Income Statement
Revenue Recognition
3.1 General Principles
3.2 Accounting Standards for Revenue Recognition
Expense Recognition: General Principles
4.1 General Principles
Issues in Expense Recognition: Doubtful Accounts, Warranties
5.1 Doubtful Accounts
5.2 Warranties
Issues in Expense Recognition: Depreciation and Amortization
Implications for Financial Analysts: Expense Recognition
Non-­Recurring Items and Non-­Operating Items: Discontinued Operations and Unusual or Infrequent items
8.1 Discontinued Operations
8.2 Unusual or Infrequent Items
Non-­Recurring Items: Changes in Accounting Policy
Non-­Operating Items
Earnings Per Share and Capital Structure and Basic EPS
11.1 Simple versus Complex Capital Structure
11.2 Basic EPS
Diluted EPS: the If-­Converted Method
12.1 Diluted EPS When a Company Has Convertible Preferred Stock Outstanding
12.2 Diluted EPS When a Company Has Convertible Debt Outstanding
Diluted EPS: the Treasury Stock Method
Other Issues with Diluted EPS and Changes in EPS
14.1 Changes in EPS
Common-­Size Analysis of the Income Statement
15.1 Common-­Size Analysis of the Income Statement
Income Statement Ratios
Comprehensive Income
Summary
Practice Problems
Solutions
18
Understanding Balance Sheets
Introduction and Components of the Balance Sheet
1.1 Components and Format of the Balance Sheet
1.2 Balance Sheet Components
Current and Non-­Current Classification
Liquidity-­Based Presentation
Current Assets: Cash and Cash Equivalents, Marketable Securities and Trade Receivables
4.1 Current Assets
Current Assets: Inventories and Other Current Assets
5.1 Other Current Assets
Current liabilities
Non-­Current Assets: Property, Plant and Equipment and Investment Property
7.1 Property, Plant, and Equipment
7.2 Investment Property
Non-­Current Assets: Intangible Assets
8.1 Identifiable Intangibles
Non-­Current Assets: Goodwill
Non-­Current Assets: Financial Assets
Non-­Current Assets: Deferred Tax Assets
Non-­Current Liabilities
12.1 Long-­term Financial Liabilities
12.2 Deferred Tax Liabilities
Components of Equity
13.1 Components of Equity
Statement of Changes in Equity
Common Size Analysis of Balance Sheet
15.1 Common-­Size Analysis of the Balance Sheet
Balance Sheet Ratios
Summary
Practice Problems
Solutions
19
Understanding Cash Flow Statements
Introduction
Classification Of Cash Flows and Non-­Cash Activities
2.1 Classification of Cash Flows and Non-­Cash Activities
Cash Flow Statement: Differences Between IFRS and US GAAP
Cash Flow Statement: Direct and Indirect Methods for Reporting Cash Flow from Operating Activities
Cash Flow Statement: Indirect Method Under IFRS
Cash Flow Statement: Direct Method Under IFRS
Cash Flow Statement: Direct Method Under US GAAP
Cash Flow Statement: Indirect Method Under US GAAP
Linkages of Cash Flow Statement with the Income Statement and Balance Sheet
9.1 Linkages of the Cash Flow Statement with the Income Statement and Balance Sheet
Preparing the Cash Flow Statement: The Direct Method for Operating Activities
10.1 Operating Activities: Direct Method
Preparing the Cash Flow Statement: Investing Activities
Preparing the Cash Flow Statement: Financing Activities
12.1 Long-­Term Debt and Common Stock
12.2 Dividends
Preparing the Cash Flow Statement: Overall Statement of Cash Flows Under the Direct Method
Preparing the Cash Flow Statement: Overall Statement of Cash Flows Under the Indirect Method
Conversion of Cash Flows from the Indirect to Direct Method
Cash Flow Statement Analysis: Evaluation of Sources and Uses of Cash
16.1 Evaluation of the Sources and Uses of Cash
Cash Flow Statement Analysis: Common Size Analysis
Cash Flow Statement Analysis: Free Cash Flow to Firm and Free Cash Flow to Equity
Cash Flow Statement Analysis: Cash Flow Ratios
Summary
Practice Problems
Solutions
20
Financial Analysis Techniques
Introduction
1.1 The Financial Analysis Process
Analytical Tools and Techniques
Financial Ratio Analysis
3.1 The Universe of Ratios
3.2 Value, Purposes, and Limitations of Ratio Analysis
3.3 Sources of Ratios
Common Size Balance Sheets and Income Statements
4.1 Common-­Size Analysis of the Balance Sheet
4.2 Common-­Size Analysis of the Income Statement
Cross-­Sectional, Trend Analysis & Relationships in Financial Statements
5.1 Trend Analysis6
5.2 Relationships among Financial Statements
The Use of Graphs and Regression Analysis
6.1 Regression Analysis
Common Ratio Categories & Interpretation and Context
7.1 Interpretation and Context
Activity Ratios
8.1 Calculation of Activity Ratios
8.2 Interpretation of Activity Ratios
Liquidity Ratios
9.1 Calculation of Liquidity Ratios
9.2 Interpretation of Liquidity Ratios
Solvency Ratios
10.1 Calculation of Solvency Ratios
10.2 Interpretation of Solvency Ratios
Profitability Ratios
11.1 Calculation of Profitability Ratios
11.2 Interpretation of Profitability Ratios
Integrated Financial Ratio Analysis
12.1 The Overall Ratio Picture: Examples
DuPont Analysis: The Decomposition of ROE
Equity Analysis and Valuation Ratios
14.1 Valuation Ratios
Industry-­Specific Financial Ratios
Research on Financial Ratios in Credit and Equity Analysis
Credit Analysis
17.1 The Credit Rating Process
17.2 Historical Research on Ratios in Credit Analysis
Business and Geographic Segments
18.1 Segment Reporting Requirements
18.2 Segment Ratios
Model Building and Forecasting
Summary
Practice Problems
Solutions
7
Financial Statement Analysis (3)
21
Inventories
Introduction
Cost of inventories
Inventory valuation methods
3.1 Specific Identification
3.2 First-­In, First-­Out (FIFO)
3.3 Weighted Average Cost
3.4 Last-­In, First-­Out (LIFO)
Calculations of cost of sales, gross profit, and ending inventory
Periodic versus perpetual inventory systems
Comparison of inventory valuation methods
The LIFO method and LIFO reserve
7.1 LIFO Reserve
LIFO liquidations
Inventory method changes
Inventory adjustments
Evaluation of inventory management: Disclosures & ratios
11.1 Presentation and Disclosure
11.2 Inventory Ratios
Illustrations of inventory analysis: Adjusting LIFO to FIFO
Illustrations of inventory analysis: Impacts of writedowns
Summary
Practice Problems
Solutions
22
Long-­Lived Assets
Introduction & Acquisition of Property, Plant and Equipment
1.1 Introduction
1.2 Acquisition of Long-­Lived Assets
1.3 Property, Plant, and Equipment
Acquisition of Intangible Assets
2.1 Intangible Assets Purchased in Situations Other Than Business Combinations
2.2 Intangible Assets Developed Internally
2.3 Intangible Assets Acquired in a Business Combination
Capitalization versus Expensing: Impact on Financial Statements and Ratios
Capitalisation of Interest Costs
Capitalisation of Interest and Internal Development Costs
Depreciation of Long-­Lived Assets: Methods and Calculation
6.1 Depreciation Methods and Calculation of Depreciation Expense
Amortisation of Long-­Lived Assets: Methods and Calculation
The Revaluation Model
Impairment of Assets
9.1 Impairment of Property, Plant, and Equipment
9.2 Impairment of Intangible Assets with a Finite Life
9.3 Impairment of Intangibles with Indefinite Lives
9.4 Impairment of Long-­Lived Assets Held for Sale
9.5 Reversals of Impairments of Long-­Lived Assets
Derecognition
10.1 Sale of Long-­Lived Assets
10.2 Long-­Lived Assets Disposed of Other Than by a Sale
Presentation and Disclosure Requirements
Using Disclosures in Analysis
Investment Property
Summary
Practice Problems
Solutions
23
Income Taxes
Introduction
Differences Between Accounting Profit and Taxable Income
Current and Deferred Tax Assets and Liabilities
3.1 Deferred Tax Assets and Liabilities
Determining the Tax Base of Assets and Liabilities
4.1 Determining the Tax Base of an Asset
4.2 Determining the Tax Base of a Liability
Changes in Income Tax Rates
Temporary and Permanent Differences Between Taxable and Accounting Profit
6.1 Taxable Temporary Differences
6.2 Deductible Temporary Differences
6.3 Examples of Taxable and Deductible Temporary Differences
Exceptions to the Usual Rules for Temporary Differences
7.1 Business Combinations and Deferred Taxes
7.2 Investments in Subsidiaries, Branches, Associates and Interests in Joint Ventures
Unused Tax Losses and Tax Credits
Recognition and Measurement of Current and Deferred Tax
9.1 Recognition of a Valuation Allowance
9.2 Recognition of Current and Deferred Tax Charged Directly to Equity
Presentation and Disclosure
Comparison of IFRS and US GAAP
Summary
Practice Problems
Solutions
24
Non-­Current (Long-­Term) Liabilities
Introduction
Bonds Payable & Accounting for Bond Issuance
2.1 Accounting for Bond Issuance
Accounting for Bond Amortisation, Interest Expense, and Interest Payments
Accounting for Bonds at Fair Value
Derecognition of Debt
Debt Covenants
Presentation and Disclosure of Long-­Term Debt
Leases
8.1 Examples of Leases
8.2 Advantages of Leasing
8.3 Lease Classification as Finance or Operating
8.4 Financial Reporting of Leases
8.5 Lessee Accounting—IFRS
8.6 Lessee Accounting—US GAAP
8.7 Lessor Accounting
Introduction to Pensions and Other Post-­Employment Benefits
Evaluating Solvency: Leverage and Coverage Ratios
Summary
Practice Problems
Solutions
8
Financial Statement Analysis (4)
25
Financial Reporting Quality
Introduction & Conceptual Overview
1.1 Conceptual Overview
GAAP, Decision Useful Financial Reporting
2.1 GAAP, Decision-­Useful, but Sustainable?
Biased Accounting Choices
3.1 Within GAAP, but “Earnings Management”
Departures from GAAP
Differentiate between Conservative and Aggressive Accounting
5.1 Conservatism in Accounting Standards
5.2 Bias in the Application of Accounting Standards
Context for Assessing Financial Reporting Quality: Motivations and Conditions Conducive to Issuing Low Quality Financial Reports
6.1 Motivations
6.2 Conditions Conducive to Issuing Low-­Quality Financial Reports
Mechanisms That Discipline Financial Reporting Quality
7.1 Market Regulatory Authorities
7.2 Auditors
7.3 Private Contracting
Detection of Financial Reporting Quality Issues: Introduction & Presentation Choices
8.1 Presentation Choices
Accounting Choices and Estimates and How Accounting Choices and Estimates Affect Earnings and Balance Sheets
9.1 How Accounting Choices and Estimates Affect Earnings and Balance Sheets
How Choices that Affect the Cash Flow Statement
Choices that Affect Financial Reporting
Warning Signs
1) Pay attention to revenue.
2) Pay attention to signals from inventories.
3) Pay attention to capitalization policies and deferred costs.
4) Pay attention to the relationship of cash flow and net income.
5) Other potential warnings signs.
Summary
Practice Problems
Solutions
26
Applications of Financial Statement Analysis
Introduction & Evaluating Past Financial Performance
1.1 Application: Evaluating Past Financial Performance
Application: Projecting Future Financial Performance as an Input to Market Based Valuation
2.1 Projecting Performance: An Input to Market-­Based Valuation
Projecting Multiple-­Period Performance
Application: Assessing Credit Risk
Screening for Potential Equity Investments
Framework for Analyst Adjustments & Adjustments to Investments & Adjustments to Inventory
6.1 A Framework for Analyst Adjustments
6.2 Analyst Adjustments Related to Investments
6.3 Analyst Adjustments Related to Inventory
Adjustments Related to Property, Plant, and Equipment
Adjustments Related to Goodwill
Summary
Practice Problems
Solutions
Corporate Issuers
9
Corporate Issuers (1)
27
Introduction to Corporate Governance and Other ESG Considerations
Introduction and Overview of Corporate Governance
1.1 Corporate Governance Overview
Stakeholder Groups
2.1 Stakeholder Groups
Principal–Agent and Other Relationships in Corporate Governance
3.1 Shareholder and Manager/Director Relationships
3.2 Controlling and Minority Shareholder Relationships
3.3 Manager and Board Relationships
3.4 Shareholder versus Creditor Interests
3.5 Other Stakeholder Conflicts
Overview and Mechanisms of Stakeholder Management
4.1 Overview of Stakeholder Management
4.2 Mechanisms of Stakeholder Management
Mechanisms to Mitigate Associated Stakeholder Risks
5.1 Employee Laws and Contracts
5.2 Contractual Agreements with Customers and Suppliers
5.3 Laws and Regulations
Company Boards and Committees
6.1 Composition of the Board of Directors
6.2 Functions and Responsibilities of the Board
6.3 Board of Directors Committees
Relevant Factors in Analyzing Corporate Governance and Stakeholder Management
7.1 Market Factors
7.2 Non-­Market Factors
Risks and Benefits of Corporate Governance and Stakeholder Management
8.1 Risks of Poor Governance and Stakeholder Management
8.2 Benefits of Effective Governance and Stakeholder Management
Factors Relevant to Corporate Governance and Stakeholder Management Analysis
9.1 Economic Ownership and Voting Control
9.2 Board of Directors Representation
9.3 Remuneration and Company Performance
9.4 Investors in the Company
9.5 Strength of Shareholders’ Rights
9.6 Managing Long-­Term Risks
9.7 Summary of Analyst Considerations
ESG Considerations for Investors and Analysts
10.1 Introduction to Environmental, Social, and Governance issues
10.2 ESG Investment Strategies
10.3 ESG Investment Approaches
10.4 Catalysts for Growth in ESG Investing
10.5 ESG Market Overview
10.6 ESG Factors in Investment Analysis
Summary
Practice Problems
Solutions
28
Uses of Capital
Introduction
The Capital Allocation Process
Investment Decision Criteria
3.1 Net Present Value
3.2 Internal Rate of Return
3.3 Corporate Usage of Capital Allocation Methods
Real Options
4.1 Timing Options
4.2 Sizing Options
4.3 Flexibility Options
4.4 Fundamental Options
Common Capital Allocation Pitfalls
Summary
Practice Problems
Solutions
29
Sources of Capital
Introduction
Corporate Financing Options
2.1 Internal Financing
2.2 Financial Intermediaries
2.3 Capital Markets
2.4 Other Financing
2.5 Considerations Affecting Financing Choices
Managing and Measuring Liquidity
3.1 Defining Liquidity Management
3.2 Measuring Liquidity
Evaluating Short-­Term Financing Choices
Summary
Practice Problems
Solutions