apptuto cfa l1 los changes 2016
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CFA® Course of Study Changes 2016
Level I
July 2015
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CFA Level I Curriculum Changes 2016 The CFA Institute has now released the Level I Course of Study for 2016, and there are a number of changes from 2015. We have reviewed and compared the new Learning Objective Statements (LOS) to help Candidates who are either repeating or using prior year materials. While it is important to know the whole curriculum thoroughly, always make sure you have a particularly good understanding of any new Readings or LOS as there is always a high chance that new material may be tested. If you have any comments please contact us at learn@apptuto.com
Summary of Changes • 1 new Reading has been added to Study Session 12; Portfolio Management. • 9 out of the 18 Study Sessions have been affected by changing LOS. • In total 29 new LOS have been added, while 23 have been amended, and 8 have been removed. • There has been no change in the exam weighting of subjects in 2016.
Exam Weighting Summary 2016 In 2016 the CFA Institute has indicated that there has been no change in exam weightings. 2015 In the previous year, 2015 there was minimal movement in the weightings, resulting with a greater emphasis on Portfolio Management, which increased from 5% up to 7% and Alternative Investments (up to 4%).
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1 Study Session 1: Ethical and Professional Standards
1.1 Reading Text Changes There are no changes in the 2016 curriculum from 2015. Note that last year (2015) was the first year Readings 1 & 2 referred to the 11th Edition of the Standards of Practice Handbook, rather than the 10th Edition (used for the 2014 curriculum). Comment: The Eleventh edition, effective July 1 2014, updates to the Code and Standards and Handbook include the following1:
• The Code of Ethics now includes language that aligns with the mission of CFA Institute and reflects an investment professional's responsibility to protect the integrity of capital markets for the betterment of society.
• Standard IV(C): Responsibilities of Supervisors now focuses on the need for supervisors to take positive steps to promote compliance rather than just preventing violations.
• Standard V(B): Communication with Clients and Prospective Clients now includes a requirement to address risks and limitations as part of the investment process.
• Standard VII(A) now reflects the growth in educational programs of CFA Institute by encompassing additional programs beyond the CFA examination.
• The Handbook chapter “Ethics and the Investment Industry” expands the discussion on the importance of ethical conduct within the industry. The integrity of capital markets and its participants is vital to maintaining levels of efficiencies and trust that ultimately benefit society.
• Throughout the Handbook, guidance enhancements and new examples were added to cover a variety of current practices occurring within the investment industry such as social media usage and reliance upon quantitative models and processes.
1.2 LOS Changes NO CHANGE FROM 2015
1.3 Exam Weighting Change NO CHANGE FROM 2015
1 http://www.cfainstitute.org/ethics/codes/ethics/pages/periodic_review.aspx
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2 Study Session 2: Quantitative Methods - Basic Concepts
2.1 Reading Text Changes NO CHANGE FROM 2015
2.2 LOS Changes NO CHANGE FROM 2015
2.3 Exam Weighting Change NO CHANGE FROM 2015
3 Study Session 3: Quantitative Methods – Application
3.1 Reading Text Changes NO CHANGE FROM 2015
3.2 LOS Changes NO CHANGE FROM 2015
3.3 Exam Weighting Change NO CHANGE FROM 2015
4 Study Session 4: Economics
4.1 Reading Text Changes NO CHANGE FROM 2015
4.2 LOS Changes NO CHANGE FROM 2015
4.3 Exam Weighting Change NO CHANGE FROM 2015
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5 Study Session 5: Economics – Macroeconomic Analysis
5.1 Reading Text Changes NO CHANGE FROM 2015
5.2 LOS Changes NO CHANGE FROM 2015
5.3 Exam Weighting Change NO CHANGE FROM 2015
6 Study Session 6: Economics – Economics in a Global Context
6.1 Reading Text Changes NO CHANGE FROM 2015
6.2 LOS Changes NO CHANGE FROM 2015
6.3 Exam Weighting Change NO CHANGE FROM 2015
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7 Study Session 7: Financial Reporting and Analysis – An Introduction
7.1 Reading Text Changes NO CHANGE FROM 2015
7.2 LOS Changes 7.2.1 Reading 22: Financial Statement Analysis: An Introduction LOS Change type 2015 Syllabus 2016 Syllabus
b.
Partial Change: Remove
Word
Describe the roles of the key financial statements (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;
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;
7.2.2 Reading 23: Financial Reporting Mechanics
LOS Change type 2015 Syllabus 2016 Syllabus
a. New - Describe how business activities are classified for financial reporting purposes;
e
Partial Change:
Word Addition
Describe the need for accruals and other adjustments in preparing financial statements
Describe the need for accruals and valuation adjustments in preparing financial statements
The new LOS above has impacted the lettering for the remaining LOS in Reading 23. For example LOS a. in 2015 is now LOS b. in 2016.
7.3 Exam Weighting Change NO CHANGE FROM 2015
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8 Study Session 8: Financial Reporting and Analysis – Income Statements, Balance Sheets, and Cash Flow Statements
8.1 Reading Text Changes NO CHANGE FROM 2015
8.2 LOS Changes 8.2.1 Reading 25: Understanding Income Sheets LOS Change type 2015 Syllabus 2016 Syllabus
d. New - Describe key aspects of the converged accounting standards issued by the International Accounting Standards Board and Financial Accounting Standards Board in May 2014;
8.1 Exam Weighting Change NO CHANGE FROM 2015
9 Study Session 9: Financial Reporting and Analysis – Inventories, Long-lived Assets, Income Taxes, and Non-current Liabilities
9.1 Reading Text Changes NO CHANGE FROM 2015
9.2 LOS Changes
9.2.1 Reading 29: Inventories LOS Change type 2015 Syllabus 2016 Syllabus
c.
Partial Change:
Removal & Addition
Calculate cost of sales and ending inventory using different inventory valuation methods and explain the effect of the inventory valuation method choice on gross profit;
Calculate and compare cost of sales, gross profit and ending inventory using different inventory methods and using perpetual and periodic inventory systems.
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d. Removed
Calculate and compare cost of sales, gross profit, and ending inventory using perpetual and periodic inventory systems
-
e. Removed
Compare cost of sales, ending inventory, and gross profit using different inventory valuation methods;
-
h. Removed Calculate and interpret ratios used to evaluate inventory management
-
d. New -
Calculate and explain how inflation and deflation of inventory costs affect the financial statements and ratios of companies that use different inventory valuation methods;
e. New - Explain LIFO reserve and LIFO liquidation and their effects on financial statements and ratios;
f. New - Convert a company’s reported financial statements from LIFO to FIFO for purposes of comparison;
j. New - Explain issues that analysts should consider when examining a company’s inventory disclosures and other sources of information
k. New - Calculate and compare rations of companies, including companies that use different inventory methods;
l. New - Analyse and compare the financial statements of companies, including companies that use different inventory methods
9.2.2 Reading 30: Long-Lived Assets
LOS Change type 2015 Syllabus 2016 Syllabus
c. Removed
Describe the different depreciation methods for property, plant, and equipment, the effect of the choice of depreciation method on the financial statements, and the effects of assumptions concerning useful life and residual value on depreciation expense;
-
d. Removed Calculate depreciation expense; -
f. Partial
Change: Removal &
Describe the different amortization methods for intangible assets with finite
Describe the different amortization methods for intangible assets with finite lives and calculate amortisation expense;
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Addition lives, the effect of the choice of amortization method on the financial statements, and the effects of assumptions concerning useful life and residual value on amortization expense
b. New - Compare the financial reporting of the following types of intangible assets: purchased, internally developed, acquired in a business combination
c. New - Explain and evaluate how capitalising versus expensing costs in the period in which they are incurred affects financial statements and ratios;
d. New - Describe how different depreciation methods for property, plant, and equipment and calculate depreciation expense;
e. New -
Describe how the choice of depreciation method and assumptions concerning useful life and residual value affect depreciation expense, financial statements, and rations;
g. New -
Describe how the choice of amortisation method and assumptions concerning useful life and residual value affect amortisation expense, financial statements, and ratios;
k. New -
Explain and evaluate how impairment, revaluation, and derecognition of property, plant, and equipment and intangible assets affect financial statements and ratios;
o. New - Explain and evaluate how leasing rather than purchasing assets affects financial statements and ratios;
p. New -
Explain and evaluate how finance leases and operating leases affect financial statements and ratios from the perspective of both the lessor and lessee.
9.2.3 Reading 31: Income Taxes LOS Change type 2015 Syllabus 2016 Syllabus
h. Removed Compare a company’s deferred tax items; -
h. New - Explain recognition and measurement of current and deferred tax items;
9.3 Exam Weighting Change NO CHANGE FROM 2015
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10 Study Session 10: Financial Reporting and Analysis – Financial Reporting Quality and Financial Statement Analysis
10.1 Reading Text Changes NO CHANGE FROM 2015
10.2 LOS Change NO CHANGE FROM 2015
10.3 Exam Weighting Change NO CHANGE FROM 2015
11 Study Session 11: Corporate Finance
11.1 Reading Text Changes NO CHANGE FROM 2015
11.2 LOS Changes NO CHANGE FROM 2015
11.3 Exam Weighting Change NO CHANGE FROM 2015
12 Study Session 12: Portfolio Management
12.1 Reading Text Changes In 2016 there is one new Reading:
• Reading 42: Risk Management: An Introduction
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12.2 LOS Change 12.2.1 Reading 42: Risk Management: An Introduction
LOS Change Type
2014 Syllabus 2015 Syllabus
a. New - Define risk management;
b. New - Describe features of a risk management framework;
c. New - Define risk governance and describe elements of effective risk governance;
d. New - Explain how risk tolerance affects risk management;
e. New - Describe risk budgeting and its role in risk governance;
f. New - Identify financial and non-financial sources of risk and describe how they may interact;
g. New - Describe methods for measuring and modifying risk exposures and factors to consider in choosing among the methods.
12.3 Exam Weighting Change NO CHANGE FROM 2015
13 Study Session 13: Equity – Market Organization, Market Indices, and Market Efficiency
13.1 Reading Text Changes NO CHANGE FROM 2015
13.2 LOS Changes 13.2.1 Reading 47: Market Efficiency
LOS Change type 2015 Syllabus 2016 Syllabus
g. Removed Contrast the behavioural finance view
of investor behaviour to that of traditional finance.
-
g. New - Describe behavioural finance and its potential relevance to understanding market anomalies.
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13.3 Exam Weighting Change NO CHANGE FROM 2014
14 Study Session 14: Equity – Equity Analysis and Valuation
14.1 Reading Text Changes NO CHANGE FROM 2015
14.2 LOS Changes 14.2.1 Reading 50: Introduction to Industry and Company Analysis LOS Change type 2015 Syllabus 2016 Syllabus
d. Partial
Change: Reword
Explain how “peer group” as used in equity valuation relates to a company’s industry classification;
Explain how a company’s industry classification can be used to identify a potential “peer group” for equity valuation
g.
Partial Change:
Removal & Addition
Explain the effects of barriers to entry, industry concentration, industry capacity, and market share stability on pricing power and return on capital;
Explain the effects of barriers to entry, industry concentration, industry capacity, and market share stability on pricing power and price competition;
h. Partial
Change: Removal
Describe product and industry life cycle models, classify an industry as to life cycle phase (embryonic, growth, shakeout, maturity, and decline), and describe limitations of the life-cycle concept in forecasting industry performance;
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;
j. Partial
Change: Addition
Describe demographic, governmental, social, and technological influences on industry growth, profitability, and risk;
Describe macroeconomic, technological, demographic, governmental, and social influences on industry growth, profitability, and risk;
14.2.2 Reading 51: Equity Valuation: Concepts and Basic Tools
LOS Change type 2015 Syllabus 2016 Syllabus
f. Partial
Change: Addition
Identify companies for which the constant growth or a multistage dividend discount model is appropriate:
Identify characteristics of companies for which the constant growth or a multi-stage dividend discount model is appropriate;
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g.
Partial Change:
Removal & Addition
Explain the rationale for using price multiples to value equity and distinguish between multiples based on comparables versus multiples based on fundamentals;
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;
14.3 Exam Weighting Change NO CHANGE FROM 2015
15 Study Session 15: Fixed Income: Basic Concepts
15.1 Reading Text Changes NO CHANGE FROM 2015
15.2 LOS Changes 15.2.1 Reading 52: Fixed-Income Securities: Defining Elements LOS Change type 2015 Syllabus 2016 Syllabus
b.
Partial Change:
Removal & Addition
Describe functions of a bond indenture; Describe content of a bond indenture;
15.2.2 Reading 53: Fixed-Income Markets: Issuance, Trading, and Funding LOS Change type 2015 Syllabus 2016 Syllabus
e. New - Describe securities issued by sovereign governments
f. Partial
Change: Removal
Describe securities issued by sovereign governments, non-sovereign governments, government agencies, and supranational entities;
Describe securities issued by non-sovereign governments, quasi-government entities, and supranational entities
i.
Partial Change:
Removal & Addition
Describe repurchase agreements (repos) and their importance to investors who borrow short term
Describe repurchase agreements (repos) and the risks associated with them.
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15.2.3 Reading 55: Introduction to asset-backed securities
LOS Change type 2015 Syllabus 2016 Syllabus
b.
Partial Change:
Removal & Addition
Describe the securitization process, including the parties to the process, the roles they play, and the legal structures involved;
Describe securitization, including the parties involved in the process and the roles they play;
e.
Partial Change:
Removal & Addition
Describe types and characteristics of residential mortgage-backed securities, and explain the cash flows and credit risk for each type;
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;
g. Partial
Change: Removal
Describe the characteristics and risks of commercial mortgage-backed securities;
Describe characteristics and risks of commercial mortgage-backed securities;
h.
Partial Change:
Removal & Addition
Describe types and characteristics of non-mortgage asset-backed securities, including the cash flows and credit risk of each type;
Describe types and characteristics of non-mortgage asset-backed securities, including the cash flows and risks of each type.
i.
Partial Change:
Removal & Addition
Describe collateralized debt obligations, including their cash flows and credit risk.
Describe collateralized debt obligations, including their cash flows and risks.
LOS Change type 2015 Syllabus 2016 Syllabus
c. New - Describe typical structures of securitizations, including credit tranching and time tranching
f. New - Define prepayment risk and describe the prepayment risk of mortgage-backed securities
LOS Change type 2015 Syllabus 2016 Syllabus
e. Removed
Explain the motivation for creating securitized structures with multiple
tranches (e.g. collateralized mortgage obligations), and the characteristics and risks of securitized structure;
-
15.3 Exam Weighting Change NO CHANGE FROM 2015
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16 Study Session 16: Fixed Income Analysis of Risk
16.1 Reading Text Changes NO CHANGE FROM 2015
16.2 LOS Change 16.2.1 Reading 56: Understanding Fixed-Income Risk and Return LOS Change type 2015 Syllabus 2016 Syllabus
d. Partial
Change: Removal
Define key rate duration and describe the key use of key rate durations in measuring the sensitivity of bonds to changes in the shape of the benchmark yield curve
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
e. Partial
Change: Removal
Explain how a bonds maturity, coupon, embedded options, and yield level affect its interest rate risk;
Explain how a bonds maturity, coupon, and yield level effect its interest rate risk;
16.2.2 Reading 57: Fundamentals of Credit Analysis
LOS Change type 2015 Syllabus 2016 Syllabus
b. New - Describe default probability and loss severity as components of credit risk;
f. Partial
Change: Addition
Explain the components of traditional credit analysis;
Explain the four Cs (Capacity, Collateral, Covenants, and Character) of traditional credit analysis;
i. Removed Calculate the return impact of spread changes -
16.3 Exam Weighting Change NO CHANGE FROM 2015
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17 Study Session 17: Derivatives
17.1 Reading Text Changes NO CHANGE FROM 2015
17.2 LOS Change NO CHANGE FROM 2015
17.3 Exam Weighting Change NO CHANGE FROM 2015
18 Study Session 18: Alternative Investments
18.1 Reading Text Changes NO CHANGE FROM 2015
18.2 LOS Change 18.2.1 Reading 61: Introduction to Alternative Investments LOS Change type 2015 Syllabus 2016 Syllabus
d. Partial
Change: Addition
Describe hedge funds, private equity, real estate, commodities, and other alternative investments, including, as applicable, strategies, sub-categories, potential benefits and risks, fee structures, and due diligence;
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;
f. Partial
Change: Addition
Describe issues in valuing, and calculating returns on, hedge funds, private equity, real estate, and commodities
Describe issues in valuing, and calculating returns on, hedge funds, private equity, real estate, and commodities, and infrastructure
18.3 Exam Weighting Change
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NO CHANGE FROM 2015
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