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

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