CFA Level I - LOS Changes 2017-2018 Topic LOS Level I - 2017 (534 LOS) LOS Level I - 2018 (529 LOS) Compared Ethics 1.1.a explain ethics 1.1.a explain ethics Ethics 1.1.b describe the role of a code of ethics in describe the role of a code of 1.1.b defining a profession ethics in defining a profession Ethics 1.1.c identify challenges to ethical 1.1.c identify challenges to ethical behavior behavior describe the need for high ethical Ethics 1.1.d describe the need for high ethical standards in the investment industry 1.1.d standards in the investment industry Ethics 1.1.e distinguish between ethical and legal distinguish between ethical and 1.1.e standards legal standards Ethics 1.1.f describe and apply a framework for describe and apply a framework 1.1.f ethical decision making 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 Ethics Ethics Ethics 1.2.b 1.2.c 1.3.a 1.3.b state the six components of the Code of Ethics and the seven Standards of Professional Conduct explain the ethical responsibilities required by the Code and Standards, including the subsections of each Standard demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards 1.2.b 1.2.c 1.3.a 1.3.b state the six components of the Code of Ethics and the seven Standards of Professional Conduct explain the ethical responsibilities required by the Code and Standards, including the subsections of each Standard demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards or Accounting Questions? Go to passingscoreforum.com 1
Ethics Ethics Ethics Ethics Ethics Ethics Ethics Ethics Topic LOS Level I - 2017 (534 LOS) LOS Level I - 2018 (529 LOS) Compared 1.3.c 1.4.a 1.4.b 1.4.c 1.5.a 1.5.b 1.5.c 1.5.d 2.6.a 2.6.b recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards explain the construction and purpose of composites in performance reporting explain the requirements for verification describe the key features of the GIPS standards and the fundamentals of compliance describe the scope of the GIPS standards with respect to an investment firm s definition and historical performance record 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 describe the nine major sections of the GIPS standards interpret interest rates as required rates of return, discount rates, or opportunity costs explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk 1.3.c 1.4.a 1.4.b 1.4.c 1.5.a 1.5.b 1.5.c 1.5.d 2.6.a 2.6.b recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards explain the construction and purpose of composites in performance reporting explain the requirements for verification describe the key features of the GIPS standards and the fundamentals of compliance describe the scope of the GIPS standards with respect to an investment firm s definition and historical performance record 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 describe the nine major sections of the GIPS standards interpret interest rates as required rates of return, discount rates, or opportunity costs explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk or Accounting Questions? Go to passingscoreforum.com 2
2.6.c 2.6.d 2.6.e 2.6.f 2.7.a 2.7.b 2.7.c 2.7.d 2.7.e 2.7.f effective annual rate, given the stated annual interest rate and the frequency of compounding solve time value of money problems for different frequencies of compounding 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 demonstrate the use of a time line in modeling and solving time value of money problems net present value (NPV) and the internal rate of return (IRR) of an investment contrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule calculate and interpret a holding period return (total return) calculate and compare the moneyweighted and time-weighted rates of return of a portfolio and evaluate the performance of portfolios based on these measures bank discount yield, holding period yield, effective annual yield, and money market yield for US Treasury bills and other money market instruments convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields 2.6.c 2.6.d 2.6.e 2.6.f 2.7.a 2.7.b 2.7.c 2.7.d 2.7.e 2.7.f effective annual rate, given the stated annual interest rate and the frequency of compounding solve time value of money problems for different frequencies of compounding 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 demonstrate the use of a time line in modeling and solving time value of money problems net present value (NPV) and the internal rate of return (IRR) of an investment contrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule calculate and interpret a holding period return (total return) calculate and compare the moneyweighted and time-weighted rates of return of a portfolio and evaluate the performance of portfolios based on these measures bank discount yield, holding period yield, effective annual yield, and money market yield for US Treasury bills and other money market instruments convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields or Accounting Questions? Go to passingscoreforum.com 3
2.8.a 2.8.b 2.8.c 2.8.d 2.8.e 2.8.f 2.8.g 2.8.h 2.8.i 2.8.j distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the types of measurement scales define a parameter, a sample statistic, and a frequency distribution calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution describe the properties of a data set presented as a histogram or a frequency polygon 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 calculate and interpret quartiles, quintiles, deciles, and percentiles 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 proportion of observations falling within a specified number of standard deviations of the mean using Chebyshev s inequality coefficient of variation and the Sharpe ratio explain skewness and the meaning of a positively or negatively skewed return distribution 2.8.a 2.8.b 2.8.c 2.8.d 2.8.e 2.8.f 2.8.g 2.8.h 2.8.i 2.8.j distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the types of measurement scales define a parameter, a sample statistic, and a frequency distribution calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution describe the properties of a data set presented as a histogram or a frequency polygon 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 calculate and interpret quartiles, quintiles, deciles, and percentiles 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 proportion of observations falling within a specified number of standard deviations of the mean using Chebyshev s inequality coefficient of variation and the Sharpe ratio explain skewness and the meaning of a positively or negatively skewed return distribution or Accounting Questions? Go to passingscoreforum.com 4
2.8.k 2.8.l 2.8.m 2.9.a 2.9.b 2.9.c 2.9.d 2.9.e describe the relative locations of the mean, median, and mode for a unimodal, nonsymmetrical distribution explain measures of sample skewness and kurtosis compare the use of arithmetic and geometric means when analyzing investment returns define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events state the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities state the probability of an event in terms of odds for and against the event distinguish between unconditional and conditional probabilities explain the multiplication, addition, and total probability rules 2.8.k 2.8.l 2.8.m 2.9.a 2.9.b 2.9.c 2.9.d 2.9.e describe the relative locations of the mean, median, and mode for a unimodal, nonsymmetrical distribution explain measures of sample skewness and kurtosis compare the use of arithmetic and geometric means when analyzing investment returns define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events state the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities state the probability of an event in terms of odds for and against the event distinguish between unconditional and conditional probabilities explain the multiplication, addition, and total probability rules 2.9.f 2.9.g 2.9.h 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 distinguish between dependent and independent events calculate and interpret an unconditional probability using the total probability rule 2.9.f 2.9.g 2.9.h 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 distinguish between dependent and independent events calculate and interpret an unconditional probability using the total probability rule or Accounting Questions? Go to passingscoreforum.com 5
2.9.i 2.9.j 2.9.k 2.9.l 2.9.m explain the use of conditional expectation in investment applications explain the use of a tree diagram to represent an investment problem calculate and interpret covariance and correlation expected value, variance, and standard deviation of a random variable and of returns on a portfolio calculate and interpret covariance given a joint probability function 2.9.n calculate and interpret an updated probability using Bayes formula identify the most appropriate method to solve a particular 2.9.o counting problem and solve counting problems using factorial, combination, and permutation concepts define a probability distribution 3.10.a and distinguish between discrete and continuous random variables and their probability functions describe the set of possible 3.10.b outcomes of a specified discrete random variable 3.10.c interpret a cumulative distribution function calculate and interpret 3.10.d probabilities for a random variable, given its cumulative distribution function define a discrete uniform random 3.10.e variable, a Bernoulli random variable, and a binomial random variable 2.9.i 2.9.j 2.9.k 2.9.l 2.9.m 2.9.n 2.9.o 3.10.a 3.10.b 3.10.c 3.10.d 3.10.e explain the use of conditional expectation in investment applications explain the use of a tree diagram to represent an investment problem calculate and interpret covariance and correlation expected value, variance, and standard deviation of a random variable and of returns on a portfolio calculate and interpret covariance given a joint probability function calculate and interpret an updated probability using Bayes formula identify the most appropriate method to solve a particular counting problem and solve counting problems using factorial, combination, and permutation concepts define a probability distribution and distinguish between discrete and continuous random variables and their probability functions describe the set of possible outcomes of a specified discrete random variable interpret a cumulative distribution function calculate and interpret probabilities for a random variable, given its cumulative distribution function define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable or Accounting Questions? Go to passingscoreforum.com 6
3.10.f 3.10.g 3.10.h 3.10.i 3.10.j 3.10.k 3.10.l 3.10.m 3.10.n 3.10.o calculate and interpret probabilities given the discrete uniform and the binomial distribution functions construct a binomial tree to describe stock price movement calculate and interpret tracking error define the continuous uniform distribution and calculate and interpret probabilities, given a continuous uniform distribution explain the key properties of the normal distribution distinguish between a univariate and a multivariate distribution and explain the role of correlation in the multivariate normal distribution determine the probability that a normally distributed random variable lies inside a given interval define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret probabilities using the standard normal distribution define shortfall risk, calculate the safety-first ratio, and select an optimal portfolio using Roy s safety-first criterion explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices 3.10.f 3.10.g 3.10.h 3.10.i 3.10.j 3.10.k 3.10.l 3.10.m 3.10.n calculate and interpret probabilities given the discrete uniform and the binomial distribution functions construct a binomial tree to describe stock price movement define the continuous uniform distribution and calculate and interpret probabilities, given a continuous uniform distribution explain the key properties of the normal distribution distinguish between a univariate and a multivariate distribution and explain the role of correlation in the multivariate normal distribution determine the probability that a normally distributed random variable lies inside a given interval define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret probabilities using the standard normal distribution define shortfall risk, calculate the safety-first ratio, and select an optimal portfolio using Roy s safety-first criterion explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices Removed or Accounting Questions? Go to passingscoreforum.com 7
3.10.p 3.10.q 3.10.r 3.11.a 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 explain Monte Carlo simulation and describe its applications and limitations compare Monte Carlo simulation and historical simulation define simple random sampling and a sampling distribution 3.10.o 3.10.p 3.10.q 3.11.a 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 explain Monte Carlo simulation and describe its applications and limitations compare Monte Carlo simulation and historical simulation define simple random sampling and a sampling distribution 3.11.b explain sampling error 3.11.b explain sampling error 3.11.c distinguish between simple random and stratified random sampling 3.11.c distinguish between simple random and stratified random sampling 3.11.d distinguish between time-series distinguish between time-series 3.11.d and cross-sectional data and cross-sectional data 3.11.e explain the central limit theorem explain the central limit theorem 3.11.e and its importance and its importance 3.11.f 3.11.g 3.11.h 3.11.i 3.11.j standard error of the sample mean identify and describe desirable properties of an estimator distinguish between a point estimate and a confidence interval estimate of a population parameter describe properties of Student s t- distribution and calculate and interpret its degrees of freedom 3.11.f 3.11.g 3.11.h 3.11.i standard error of the sample mean identify and describe desirable properties of an estimator distinguish between a point estimate and a confidence interval estimate of a population parameter describe properties of Student s t- distribution and calculate and interpret its degrees of freedom calculate and interpret a calculate and interpret a confidence interval for a confidence interval for a population mean, given a normal population mean, given a normal distribution with 1) a known 3.11.j distribution with 1) a known Wording population variance, 2) an population variance, 2) an Change unknown population variance, or unknown population variance, or 3) an unknown variance and a 3) an unknown population large sample size variance and a large sample size or Accounting Questions? Go to passingscoreforum.com 8
3.11.k 3.12.a 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 define a hypothesis, describe the steps of hypothesis testing, and describe and interpret the choice of the null and alternative hypotheses 3.11.k 3.12.a 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 define a hypothesis, describe the steps of hypothesis testing, and describe and interpret the choice of the null and alternative hypotheses 3.12.b distinguish between one-tailed and two-tailed tests of hypotheses explain a test statistic, Type I and 3.12.c Type II errors, a significance level, and how significance levels are used in hypothesis testing explain a decision rule, the power 3.12.d of a test, and the relation between confidence intervals and hypothesis tests distinguish between a statistical 3.12.e result and an economically meaningful result 3.12.f explain and interpret the p-value as it relates to hypothesis testing identify the appropriate test statistic and interpret the results for a hypothesis test concerning the population mean of both large 3.12.g and small samples when the population is normally or approximately normally distributed and the variance is 1) known or 2) unknown 3.12.b 3.12.c 3.12.d 3.12.e 3.12.f 3.12.g distinguish between one-tailed and two-tailed tests of hypotheses explain a test statistic, Type I and Type II errors, a significance level, and how significance levels are used in hypothesis testing explain a decision rule, the power of a test, and the relation between confidence intervals and hypothesis tests distinguish between a statistical result and an economically meaningful result explain and interpret the p-value as it relates to hypothesis testing 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 or Accounting Questions? Go to passingscoreforum.com 9
3.12.h 3.12.i 3.12.j 3.12.k 3.13.a 3.13.b 3.13.c 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 identify the appropriate test statistic and interpret the results for a hypothesis test concerning the mean difference of two normally distributed populations 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 distinguish between parametric and nonparametric tests and describe situations in which the use of nonparametric tests may be appropriate explain principles of technical analysis, its applications, and its underlying assumptions describe the construction of different types of technical analysis charts and interpret them explain uses of trend, support, resistance lines, and change in polarity 3.12.h 3.12.i 3.12.j 3.12.k 3.13.a 3.13.b 3.13.c 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 identify the appropriate test statistic and interpret the results for a hypothesis test concerning the mean difference of two normally distributed populations 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 distinguish between parametric and nonparametric tests and describe situations in which the use of nonparametric tests may be appropriate explain principles of technical analysis, its applications, and its underlying assumptions describe the construction of different types of technical analysis charts and interpret them explain uses of trend, support, resistance lines, and change in polarity 3.13.d describe common chart patterns 3.13.d describe common chart patterns or Accounting Questions? Go to passingscoreforum.com 10
3.13.e 3.13.f 3.13.g 3.13.h 4.14.a 4.14.b 4.14.c 4.14.d 4.14.e 4.14.f 4.15.a 4.15.b 4.15.c describe common technical analysis indicators (price-based, momentum oscillators, sentiment, and flow of funds) explain how technical analysts use cycles describe the key tenets of Elliott Wave Theory and the importance of Fibonacci numbers describe intermarket analysis as it relates to technical analysis and asset allocation calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure compare substitution and income effects distinguish between normal goods and inferior goods describe the phenomenon of diminishing marginal returns determine and describe breakeven and shutdown points of production describe how economies of scale and diseconomies of scale affect costs describe characteristics of perfect competition, monopolistic competition, oligopoly, and pure monopoly explain relationships between price, marginal revenue, marginal cost, economic profit, and the elasticity of demand under each market structure describe a firm s supply function under each market structure 3.13.e 3.13.f 3.13.g 3.13.h 4.14.a 4.14.b 4.14.c 4.14.d 4.14.e 4.14.f 4.15.a 4.15.b 4.15.c describe common technical analysis indicators (price-based, momentum oscillators, sentiment, and flow of funds) explain how technical analysts use cycles describe the key tenets of Elliott Wave Theory and the importance of Fibonacci numbers describe intermarket analysis as it relates to technical analysis and asset allocation calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure compare substitution and income effects distinguish between normal goods and inferior goods describe the phenomenon of diminishing marginal returns determine and interpret breakeven and shutdown points of production describe how economies of scale and diseconomies of scale affect costs describe characteristics of perfect competition, monopolistic competition, oligopoly, and pure monopoly explain relationships between price, marginal revenue, marginal cost, economic profit, and the elasticity of demand under each market structure describe a firm s supply function under each market structure Wording Change or Accounting Questions? Go to passingscoreforum.com 11
4.15.d 4.15.e 4.15.f 4.15.g 4.15.h 4.16.a 4.16.b 4.16.c 4.16.d 4.16.e 4.16.f 4.16.g 4.16.h describe and determine the optimal price and output for firms under each market structure explain factors affecting long-run equilibrium under each market structure describe pricing strategy under each market structure describe the use and limitations of concentration measures in identifying market structure identify the type of market structure within which a firm operates calculate and explain gross domestic product (GDP) using expenditure and income approaches compare the sum-of-value-added and value-of-final-output methods of calculating GDP compare nominal and real GDP and GDP deflator compare GDP, national income, personal income, and personal disposable income explain the fundamental relationship among saving, investment, the fiscal balance, and the trade balance explain the IS and LM curves and how they combine to generate the aggregate demand curve explain the aggregate supply curve in the short run and long run explain causes of movements along and shifts in aggregate demand and supply curves 4.15.d 4.15.e 4.15.f 4.15.g 4.15.h 4.16.a 4.16.b 4.16.c 4.16.d 4.16.e 4.16.f 4.16.g 4.16.h describe and determine the optimal price and output for firms under each market structure explain factors affecting long-run equilibrium under each market structure describe pricing strategy under each market structure describe the use and limitations of concentration measures in identifying market structure identify the type of market structure within which a firm operates calculate and explain gross domestic product (GDP) using expenditure and income approaches compare the sum-of-value-added and value-of-final-output methods of calculating GDP compare nominal and real GDP and GDP deflator compare GDP, national income, personal income, and personal disposable income explain the fundamental relationship among saving, investment, the fiscal balance, and the trade balance explain the IS and LM curves and how they combine to generate the aggregate demand curve explain the aggregate supply curve in the short run and long run explain causes of movements along and shifts in aggregate demand and supply curves or Accounting Questions? Go to passingscoreforum.com 12
4.16.i 4.16.j 4.16.k 4.16.l 4.16.m 4.16.n 4.16.o 4.17.a 4.17.b 4.17.c 4.17.d describe how fluctuations in aggregate demand and aggregate supply cause short-run changes in the economy and the business cycle distinguish between the following types of macroeconomic equilibria: long-run full employment, short-run recessionary gap, short-run inflationary gap, and short-run stagflation explain how a short-run macroeconomic equilibrium may occur at a level above or below full employment analyze the effect of combined changes in aggregate supply and demand on the economy describe sources, measurement, and sustainability of economic growth describe the production function approach to analyzing the sources of economic growth distinguish between input growth and growth of total factor productivity as components of economic growth describe the business cycle and its phases describe how resource use, housing sector activity, and external trade sector activity vary as an economy moves through the business cycle describe theories of the business cycle describe types of unemployment and compare measures of unemployment 4.16.i 4.16.j 4.16.k 4.16.l 4.16.m 4.16.n 4.16.o 4.17.a 4.17.b 4.17.c 4.17.d describe how fluctuations in aggregate demand and aggregate supply cause short-run changes in the economy and the business cycle distinguish between the following types of macroeconomic equilibria: long-run full employment, short-run recessionary gap, short-run inflationary gap, and short-run stagflation explain how a short-run macroeconomic equilibrium may occur at a level above or below full employment analyze the effect of combined changes in aggregate supply and demand on the economy describe sources, measurement, and sustainability of economic growth describe the production function approach to analyzing the sources of economic growth distinguish between input growth and growth of total factor productivity as components of economic growth describe the business cycle and its phases describe how resource use, housing sector activity, and external trade sector activity vary as an economy moves through the business cycle describe theories of the business cycle describe types of unemployment and compare measures of unemployment or Accounting Questions? Go to passingscoreforum.com 13
4.17.e explain inflation, hyperinflation, explain inflation, hyperinflation, 4.17.e disinflation, and deflation disinflation, and deflation 4.17.f explain the construction of indices explain the construction of 4.17.f used to measure inflation indexes used to measure inflation compare inflation measures, compare inflation measures, 4.17.g including their uses and 4.17.g including their uses and limitations limitations 4.17.h distinguish between cost-push distinguish between cost-push 4.17.h and demand-pull inflation and demand-pull inflation interpret a set of economic interpret a set of economic 4.17.i indicators and describe their uses 4.17.i indicators and describe their uses and limitations and limitations 5.18.a compare monetary and fiscal compare monetary and fiscal 5.18.a policy policy 5.18.b describe functions and definitions describe functions and definitions 5.18.b of money of money 5.18.c explain the money creation explain the money creation 5.18.c process process 5.18.d describe theories of the demand describe theories of the demand 5.18.d for and supply of money for and supply of money 5.18.e describe the Fisher effect 5.18.e describe the Fisher effect 5.18.f describe roles and objectives of describe roles and objectives of 5.18.f central banks central banks 5.18.g contrast the costs of expected and contrast the costs of expected and 5.18.g unexpected inflation unexpected inflation 5.18.h describe tools used to implement describe tools used to implement 5.18.h monetary policy monetary policy 5.18.i describe the monetary describe the monetary 5.18.i transmission mechanism transmission mechanism 5.18.j describe qualities of effective describe qualities of effective 5.18.j central banks central banks explain the relationships between explain the relationships between 5.18.k monetary policy and economic monetary policy and economic 5.18.k growth, inflation, interest, and growth, inflation, interest, and exchange rates exchange rates 5.18.l 5.18.m contrast the use of inflation, interest rate, and exchange rate targeting by central banks determine whether a monetary policy is expansionary or contractionary 5.18.l 5.18.m contrast the use of inflation, interest rate, and exchange rate targeting by central banks determine whether a monetary policy is expansionary or contractionary Wording Change or Accounting Questions? Go to passingscoreforum.com 14
5.18.n 5.18.o 5.18.p 5.18.q 5.18.r 5.18.s 5.18.t 5.19.a 5.19.b 5.19.c 5.19.d 5.19.e 5.19.f 5.19.g 5.19.h describe limitations of monetary policy describe roles and objectives of fiscal policy describe tools of fiscal policy, including their advantages and disadvantages describe the arguments about whether the size of a national debt relative to GDP matters explain the implementation of fiscal policy and difficulties of implementation determine whether a fiscal policy is expansionary or contractionary explain the interaction of monetary and fiscal policy compare gross domestic product and gross national product describe benefits and costs of international trade distinguish between comparative advantage and absolute advantage explain the Ricardian and Heckscher Ohlin models of trade and the source(s) of comparative advantage in each model compare types of trade and capital restrictions and their economic implications explain motivations for and advantages of trading blocs, common markets, and economic unions describe common objectives of capital restrictions imposed by governments describe the balance of payments accounts including their components 5.18.n 5.18.o 5.18.p 5.18.q 5.18.r 5.18.s 5.18.t 5.19.a 5.19.b 5.19.c 5.19.d 5.19.e 5.19.f 5.19.g 5.19.h describe limitations of monetary policy describe roles and objectives of fiscal policy describe tools of fiscal policy, including their advantages and disadvantages describe the arguments about whether the size of a national debt relative to GDP matters explain the implementation of fiscal policy and difficulties of implementation determine whether a fiscal policy is expansionary or contractionary explain the interaction of monetary and fiscal policy compare gross domestic product and gross national product describe benefits and costs of international trade distinguish between comparative advantage and absolute advantage compare the Ricardian and Heckscher Ohlin models of trade and the source(s) of comparative advantage in each model compare types of trade and capital restrictions and their economic implications explain motivations for and advantages of trading blocs, common markets, and economic unions describe common objectives of capital restrictions imposed by governments describe the balance of payments accounts including their components Wording Change or Accounting Questions? Go to passingscoreforum.com 15
5.19.i 5.19.j 5.20.a 5.20.b 5.20.c 5.20.d 5.20.e 5.20.f 5.20.g 5.20.h explain how decisions by consumers, firms, and governments affect the balance of payments describe functions and objectives of the international organizations that facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization define an exchange rate and distinguish between nominal and real exchange rates and spot and forward exchange rates describe functions of and participants in the foreign exchange market percentage change in a currency relative to another currency calculate and interpret currency cross-rates convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation explain the arbitrage relationship between spot rates, forward rates, and interest rates calculate and interpret a forward discount or premium forward rate consistent with the spot rate and the interest rate in each currency 5.19.i 5.19.j 5.20.a 5.20.b 5.20.c 5.20.d 5.20.e 5.20.f 5.20.g 5.20.h explain how decisions by consumers, firms, and governments affect the balance of payments describe functions and objectives of the international organizations that facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization define an exchange rate and distinguish between nominal and real exchange rates and spot and forward exchange rates describe functions of and participants in the foreign exchange market percentage change in a currency relative to another currency calculate and interpret currency cross-rates convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation explain the arbitrage relationship between spot rates, forward rates, and interest rates calculate and interpret a forward discount or premium forward rate consistent with the spot rate and the interest rate in each currency 5.20.i describe exchange rate regimes 5.20.i describe exchange rate regimes 5.20.j explain the effects of exchange rates on countries international trade and capital flows 5.20.j explain the effects of exchange rates on countries international trade and capital flows or Accounting Questions? Go to passingscoreforum.com 16
6.21.a describe the roles of financial reporting and financial statement analysis 6.21.a describe the roles of financial reporting and financial statement analysis 6.21.b 6.21.c 6.21.d 6.21.e 6.21.f 6.22.a 6.22.b 6.22.c 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 describe the importance of financial statement notes and supplementary information including disclosures of accounting policies, methods, and estimates and management s commentary describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information describe the steps in the financial statement analysis framework describe how business activities are classified for financial reporting purposes explain the relationship of financial statement elements and accounts, and classify accounts into the financial statement elements explain the accounting equation in its basic and expanded forms 6.21.b 6.21.c 6.21.d 6.21.e 6.21.f 6.22.a 6.22.b 6.22.c 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 describe the importance of financial statement notes and supplementary information including disclosures of accounting policies, methods, and estimates and management s commentary describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information describe the steps in the financial statement analysis framework describe how business activities are classified for financial reporting purposes explain the relationship of financial statement elements and accounts, and classify accounts into the financial statement elements explain the accounting equation in its basic and expanded forms or Accounting Questions? Go to passingscoreforum.com 17
6.22.d 6.22.e 6.22.f 6.22.g 6.22.h 6.23.a 6.23.b 6.23.c describe the process of recording business transactions using an accounting system based on the accounting equation describe the need for accruals and valuation adjustments in preparing financial statements describe the relationships among the income statement, balance sheet, statement of cash flows, and statement of owners equity describe the flow of information in an accounting system describe the use of the results of the accounting process in security analysis 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 describe the status of global convergence of accounting standards and ongoing barriers to developing one universally accepted set of financial reporting standards 6.22.d 6.22.e 6.22.f 6.22.g 6.22.h 6.23.a 6.23.b 6.23.c describe the process of recording business transactions using an accounting system based on the accounting equation describe the need for accruals and valuation adjustments in preparing financial statements describe the relationships among the income statement, balance sheet, statement of cash flows, and statement of owners equity describe the flow of information in an accounting system describe the use of the results of the accounting process in security analysis 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 describe the status of global convergence of accounting standards and ongoing barriers to developing one universally accepted set of financial reporting standards or Accounting Questions? Go to passingscoreforum.com 18
6.23.d 6.23.e 6.23.f 6.23.g 6.23.h 6.23.i 7.24.a 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 describe general requirements for financial statements under International Standards (IFRS) compare key concepts of financial reporting standards under IFRS and US generally accepted accounting principles (US GAAP) reporting systems identify characteristics of a coherent financial reporting framework and the barriers to creating such a framework describe implications for financial analysis of differing financial reporting systems and the importance of monitoring developments in financial reporting standards analyze company disclosures of significant accounting policies describe the components of the income statement and alternative presentation formats of that statement 6.23.d 6.23.e 6.23.f 6.23.g 6.23.h 6.23.i 7.24.a 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 describe general requirements for financial statements under International Standards (IFRS) compare key concepts of financial reporting standards under IFRS and US generally accepted accounting principles (US GAAP) reporting systems identify characteristics of a coherent financial reporting framework and the barriers to creating such a framework describe implications for financial analysis of differing financial reporting systems and the importance of monitoring developments in financial reporting standards analyze company disclosures of significant accounting policies describe the components of the income statement and alternative presentation formats of that statement or Accounting Questions? Go to passingscoreforum.com 19
7.24.b 7.24.c 7.24.d 7.24.e 7.24.f 7.24.g 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 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 Accounting Standards Board in May 2014 describe general principles of expense recognition, specific expense recognition applications, and implications of expense recognition choices for financial analysis describe the financial reporting treatment and analysis of nonrecurring items (including discontinued operations, unusual or infrequent items) and changes in accounting policies distinguish between the operating and non-operating components of the income statement 7.24.b 7.24.c 7.24.d 7.24.e 7.24.f 7.24.g 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 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 Accounting Standards Board in May 2014 describe general principles of expense recognition, specific expense recognition applications, and implications of expense recognition choices for financial analysis describe the financial reporting treatment and analysis of nonrecurring items (including discontinued operations, unusual or infrequent items) and changes in accounting policies distinguish between the operating and non-operating components of the income statement or Accounting Questions? Go to passingscoreforum.com 20
7.24.h 7.24.i 7.24.j 7.24.k 7.24.l 7.24.m 7.25.a 7.25.b 7.25.c 7.25.d 7.25.e 7.25.f 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 distinguish between dilutive and antidilutive securities and describe the implications of each for the earnings per share calculation convert income statements to common-size income statements evaluate a company s financial performance using common-size income statements and financial ratios based on the income statement describe, calculate, and interpret comprehensive income describe other comprehensive income and identify major types of items included in it describe the elements of the balance sheet: assets, liabilities, and equity describe uses and limitations of the balance sheet in financial analysis describe alternative formats of balance sheet presentation distinguish 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 describe the components of shareholders equity 7.24.h 7.24.i 7.24.j 7.24.k 7.24.l 7.24.m 7.25.a 7.25.b 7.25.c 7.25.d 7.25.e 7.25.f 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 distinguish between dilutive and antidilutive securities and describe the implications of each for the earnings per share calculation convert income statements to common-size income statements evaluate a company s financial performance using common-size income statements and financial ratios based on the income statement describe, calculate, and interpret comprehensive income describe other comprehensive income and identify major types of items included in it describe the elements of the balance sheet: assets, liabilities, and equity describe uses and limitations of the balance sheet in financial analysis describe alternative formats of balance sheet presentation distinguish 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 describe the components of shareholders equity or Accounting Questions? Go to passingscoreforum.com 21
7.25.g 7.25.h 7.26.a 7.26.b 7.26.c 7.26.d 7.26.e 7.26.f 7.26.g 7.26.h convert balance sheets to common-size balance sheets and interpret common-size balance sheets calculate and interpret liquidity and solvency ratios 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 contrast cash flow statements prepared under International 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 describe how the cash flow statement is linked to the income statement and the balance sheet 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 convert cash flows from the indirect to direct method analyze and interpret both reported and common-size cash flow statements 7.25.g 7.25.h 7.26.a 7.26.b 7.26.c 7.26.d 7.26.e 7.26.f 7.26.g 7.26.h convert balance sheets to common-size balance sheets and interpret common-size balance sheets calculate and interpret liquidity and solvency ratios 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 contrast cash flow statements prepared under International 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 describe how the cash flow statement is linked to the income statement and the balance sheet 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 convert cash flows from the indirect to direct method analyze and interpret both reported and common-size cash flow statements or Accounting Questions? Go to passingscoreforum.com 22