Browse CFA Level 1

Financial Statement Analysis

Financial Statement Analysis (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.

In this section

  • Chapter 1: Introduction to Financial Statement Analysis
    Chapter 1: Introduction to Financial Statement Analysis (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • The Role of Financial Reporting and Analysis
      The Role of Financial Reporting and Analysis (CFA Level 1): Importance of Financial Reporting, Communicating Financial Health, and Enhancing Transparency. Key definitions, formulas, and exam tips.
    • The Financial Statement Analysis Framework
      The Financial Statement Analysis Framework (CFA Level 1): Purpose and Context, Collecting Data, and Processing the Data. Key definitions, formulas, and exam tips.
    • Regulatory Filings, Notes, and Auditor’s Reports
      Regulatory Filings, Notes, and Auditor’s Reports (CFA Level 1): Major Regulatory Filings, Importance in Financial Statement Analysis, and Notes to the Financial Statements. Key definitions, formulas, and exam tips.
    • IFRS vs. US GAAP and Monitoring Developments in Reporting Standards
      IFRS vs. US GAAP and Monitoring Developments in Reporting Standards (CFA Level 1): Principle-Based vs. Rules-Based Approach, Key Differences Affecting Financial Analysis, and Revenue Recognition. Key definitions, formulas, and exam tips.
    • Sources of Information for Analysis
      Sources of Information for Analysis (CFA Level 1): Key Public Filings: Annual and Interim Reports, Press Releases and Investor Presentations, and Industry Reports and Economic Data. Key definitions, formulas, and exam tips.
    • Qualitative Characteristics of Financial Statements
      Qualitative Characteristics of Financial Statements (CFA Level 1): Relevance, Faithful Representation, and Comparability. Key definitions, formulas, and exam tips.
    • Limitations and Challenges in Financial Statement Analysis
      Limitations and Challenges in Financial Statement Analysis (CFA Level 1): Historical Focus, Impact of Estimates and Judgment, and Omission of Non-Financial Factors. Key definitions, formulas, and exam tips.
    • Segment Reporting Requirements
      Segment Reporting Requirements (CFA Level 1): Segment Reporting: A Practical Exploration, Why Segment Reporting Matters, and Definition of an Operating Segment. Key definitions, formulas, and exam tips.
    • Subsequent Events and Their Implications
      Subsequent Events and Their Implications (CFA Level 1): Definition of Subsequent Events, Categories of Subsequent Events, and Adjusting Events. Key definitions, formulas, and exam tips.
    • XBRL and Digital Reporting Requirements
      XBRL and Digital Reporting Requirements (CFA Level 1): Defining XBRL and Its Growing Importance, Key Concepts and Terminology, and Regulatory Landscape and Global Adoption. Key definitions, formulas, and exam tips.
    • Critical Audit Matters and Auditor Communication
      Critical Audit Matters and Auditor Communication (CFA Level 1): Defining Critical Audit Matters, Broader Spectrum of Auditor Communication, and Why CAMs Matter for Analysts. Key definitions, formulas, and exam tips.
    • Interim Reporting (IAS 34, US GAAP) and First-Time Adoption (IFRS 1)
      Interim Reporting (IAS 34, US GAAP) and First-Time Adoption (IFRS 1) (CFA Level 1): Purpose of Interim Financial Statements and Interim Reporting Under IAS 34. Key definitions, formulas, and exam tips.
    • Data Analytics for Financial Disclosures
      Data Analytics for Financial Disclosures (CFA Level 1): Big Data and Textual Analysis, Structured vs. Unstructured Data, and Real-Time Surveillance. Key definitions, formulas, and exam tips.
    • Seasonality in Interim Disclosures
      Seasonality in Interim Disclosures (CFA Level 1): Key Concepts and Terminology, Practical Implications for Analysts, and 1) Comparability. Key definitions, formulas, and exam tips.
    • Illustrative Example of IFRS 1 Adjustments
      Illustrative Example of IFRS 1 Adjustments (CFA Level 1): Transition Reconciliation Under IFRS 1, Common IFRS 1 Adjustments, and Optional Exemptions. Key definitions, formulas, and exam tips.
  • Chapter 2: Analyzing Income Statements
    Chapter 2: Analyzing Income Statements (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
    • Principles of Revenue Recognition
      Principles of Revenue Recognition (CFA Level 1): Five-Step Model, Identify the Contract(s), and Identify the Performance Obligations. Key definitions, formulas, and exam tips.
    • Expense Recognition and Capitalization vs. Expensing
      Expense Recognition and Capitalization vs. Expensing (CFA Level 1): Background and Context, Expense Recognition and the Matching Principle, and Capitalization vs. Expensing At a Glance. Key definitions, formulas, and exam tips.
    • Nonrecurring Items and Accounting Policy Changes
      Nonrecurring Items and Accounting Policy Changes (CFA Level 1): Nonrecurring Items: Definition and Significance and Why You Should Care About Nonrecurring Items. Key definitions, formulas, and exam tips.
    • Basic and Diluted Earnings per Share
      Basic and Diluted Earnings per Share (CFA Level 1): Significance of EPS, Basic EPS, and Process Flow for Basic EPS. Key definitions, formulas, and exam tips.
    • Common-Size Income Statements and Profitability Ratios
      Common-Size Income Statements and Profitability Ratios (CFA Level 1): What Is Common-Size Income Statement Analysis?, Key Benefits, and Typical Flow. Key definitions, formulas, and exam tips.
    • Classification of Operating vs. Non-Operating Items
      Classification of Operating vs. Non-Operating Items (CFA Level 1): Why Classify Items as Operating vs. Non-Operating?, Core Distinctions, and Quick Personal Anecdote. Key definitions, formulas, and exam tips.
    • EBIT, EBITDA, and Non-GAAP Metrics
      EBIT, EBITDA, and Non-GAAP Metrics (CFA Level 1): Understanding EBIT, Calculating EBIT, and Enter EBITDA. Exam-focused explanations with key terms and takeaways.
    • Long-Term Contracts and Installment Sales
      Long-Term Contracts and Installment Sales (CFA Level 1): Key Concepts and Why They Matter, Long-Term Contracts at a Glance, and Installment Sales Basics. Key definitions, formulas, and exam tips.
    • Impact of Government Assistance on Income
      Impact of Government Assistance on Income (CFA Level 1): Government Assistance: IFRS vs. US GAAP, Types of Government Assistance and Income Statement Effects, and Grants Related to Income. Key definitions, formulas, and exam tips.
    • Classification Shifting and Earnings Management
      Classification Shifting and Earnings Management (CFA Level 1): How Classification Shifting Works and Why Classification Shifting Is Popular. Key definitions, formulas, and exam tips.
    • Key IFRS vs. US GAAP Differences in Revenue and Expense Recognition
      Key IFRS vs. US GAAP Differences in Revenue and Expense Recognition (CFA Level 1): Minor Gaps that Remain, Key Differences in Revenue Recognition, and Five-Step Model in IFRS 15 vs. ASC. Key definitions, formulas, and exam tips.
    • IFRS 15 vs. ASC 606: Comparative Overview
      IFRS 15 vs. ASC 606: Comparative Overview (CFA Level 1): Core Principles and the Five-Step Model, Subtle Differences in Collectibility, and Presentations of Contract Assets and Liabilities. Key definitions, formulas, and exam tips.
  • Chapter 3: Analyzing Balance Sheets
    Chapter 3: Analyzing Balance Sheets (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
    • Balance Sheet Presentation and Classification
      Balance Sheet Presentation and Classification (CFA Level 1): Structure of a Classified Balance Sheet, Current Assets, and Noncurrent Assets. Key definitions, formulas, and exam tips.
    • Intangible Assets and Goodwill
      Intangible Assets and Goodwill (CFA Level 1): Defining Intangible Assets, Internally Developed vs. Purchased Intangibles, and Internally Developed Intangibles. Key definitions, formulas, and exam tips.
    • Financial Instruments and Fair Value Disclosures
      Financial Instruments and Fair Value Disclosures (CFA Level 1): Understanding Financial Instruments, Classification and Measurement, and Amortized Cost. Key definitions, formulas, and exam tips.
    • Noncurrent Liabilities
      Noncurrent Liabilities (CFA Level 1): Key Components of Noncurrent Liabilities, Long-Term Debt, and Carrying Value and Amortization. Key definitions, formulas, and exam tips.
    • Common-Size Balance Sheets and Solvency Ratios
      Common-Size Balance Sheets and Solvency Ratios (CFA Level 1): Understanding the Power of Common-Size Balance Sheets and Why Common-Size Analysis Matters. Key definitions, formulas, and exam tips.
    • Other Comprehensive Income and Equity Section Implications
      Other Comprehensive Income and Equity Section Implications (CFA Level 1): Typical Items in OCI, Presentation and Format, and IFRS vs. US GAAP Treatment. Key definitions, formulas, and exam tips.
    • Assets Held for Sale and Discontinued Operations
      Assets Held for Sale and Discontinued Operations (CFA Level 1): IFRS 5 and ASC 205-20 Basics, Criteria for Classification as Held for Sale, and Measurement at the Lower of Carrying Amount or. Key definitions, formulas, and exam tips.
    • Biological Assets and Government Grants
      Biological Assets and Government Grants (CFA Level 1): IFRS Approach to Biological Assets, Defining Biological Assets, and Fair Value Measurement and Impact on Earnings. Key definitions, formulas, and exam tips.
    • Contingent Liabilities and Provisions
      Contingent Liabilities and Provisions (CFA Level 1): Key Definitions, Recognition Criteria, and Measurement Approaches. Key definitions, formulas, and exam tips.
    • Implications of High-Inflation Environments on Balance Sheet Items
      Implications of High-Inflation Environments on Balance Sheet Items (CFA Level 1): Understanding High-Inflation and Hyperinflation and IFRS Fundamentals: IAS 29 Restatement. Key definitions, formulas, and exam tips.
    • Fair Value Hierarchy under IFRS 13 and ASC 820
      Fair Value Hierarchy under IFRS 13 and ASC 820 (CFA Level 1): Why Fair Value Matters, Three-Level Fair Value Hierarchy, and Visualizing the Fair Value Hierarchy. Key definitions, formulas, and exam tips.
    • Examples of Fair Value Measurement (Levels 1, 2, 3)
      Examples of Fair Value Measurement (Levels 1, 2, 3) (CFA Level 1): Level 1: Fair Value from Quoted Market Prices and Level 2: Valuation Using Observable Inputs (Other Than. Key definitions, formulas, and exam tips.
  • Chapter 4: Analyzing Statements of Cash Flows
    Chapter 4: Analyzing Statements of Cash Flows (CFA Level 1): Practical explanations of core ideas, with key terms, formulas, and common exam pitfalls.
    • Linkages among the Cash Flow Statement, Income Statement, and Balance Sheet
      Linkages among the Cash Flow Statement, Income Statement, and Balance Sheet (CFA Level 1): Interconnected Nature of the Three Statements and Starting with Accruals vs. Cash. Key definitions, formulas, and exam tips.
    • Direct vs. Indirect Methods of Reporting
      Direct vs. Indirect Methods of Reporting (CFA Level 1): Direct Method, Advantages of the Direct Method, and Disadvantages of the Direct Method. Key definitions, formulas, and exam tips.
    • Free Cash Flow (FCFF and FCFE) and Coverage Ratios
      Free Cash Flow (FCFF and FCFE) and Coverage Ratios (CFA Level 1): Key Concepts in Free Cash Flow Analysis, Free Cash Flow to the Firm (FCFF), and Free Cash Flow to Equity (FCFE). Key definitions, formulas, and exam tips.
    • Interpreting and Evaluating Operating, Investing, and Financing Cash Flows
      Interpreting and Evaluating Operating, Investing, and Financing Cash Flows (CFA Level 1): Operating Activities, Defining Operating Cash Flow, and Evaluating the Quality of Operating Cash Flows. Key definitions, formulas, and exam tips.
    • Disclosures of Noncash Transactions
      Disclosures of Noncash Transactions (CFA Level 1): Understanding the Purpose of Noncash Transaction Disclosures, Why Noncash Items Aren’t on the Main Statement, and Common Types of Noncash Transactions. Key definitions, formulas, and exam tips.
    • Adjustments for Non-Recurring Cash Flows
      Adjustments for Non-Recurring Cash Flows (CFA Level 1): Why Adjustment Is Important, Common Types of Non-Recurring Cash Flows, and Analytical Approach to Adjusting Non-Recurring Items. Key definitions, formulas, and exam tips.
    • Classification of Operating vs. Investing Cash Flows under IFRS vs. US GAAP
      Classification of Operating vs. Investing Cash Flows under IFRS vs. US GAAP (CFA Level 1): Core Principles of the Statement of Cash Flows and IFRS Classification Flexibility. Key definitions, formulas, and exam tips.
    • Evaluating the Quality of Cash Flow from Operations
      Evaluating the Quality of Cash Flow from Operations (CFA Level 1): Importance of CFO Quality, Relevance to Analysts and Investors, and When CFO Diverges from Net Income. Key definitions, formulas, and exam tips.
    • Interim Cash Flow Reporting Considerations
      Interim Cash Flow Reporting Considerations (CFA Level 1): Significance of Interim Reporting, IFRS (IAS 34) vs. US GAAP (ASC 270), and Potential Seasonality and Cyclicality. Key definitions, formulas, and exam tips.
    • Seasonality Impact on Cash Flows
      Seasonality Impact on Cash Flows (CFA Level 1): Nature of Seasonality in Cash Flows, Practical Case: A Personal Anecdote, and Identifying Seasonal Patterns. Key definitions, formulas, and exam tips.
    • Cross-Reference to Stress Testing (see 14, 16)
      Cross-Reference to Stress Testing (see 14, 16) (CFA Level 1): Linking Historical Cash Flows to Stress Tests, Stress Testing for Financial Institutions (Preview of Chapter, and Capital Adequacy and Cash Flows. Key definitions, formulas, and exam tips.
  • Chapter 5: Analysis of Inventories
    Chapter 5: Analysis of Inventories (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
    • Inventory Measurement and Valuation (Cost vs. Net Realizable Value)
      Inventory Measurement and Valuation (Cost vs. Net Realizable Value) (CFA Level 1): Core Principles of Inventory Valuation, Lower of Cost or Net Realizable Value (NRV), and What Constitutes “Cost”?. Key definitions, formulas, and exam tips.
    • Inventory Method Choices under IFRS vs. US GAAP
      Inventory Method Choices under IFRS vs. US GAAP (CFA Level 1): Permissible Methods under IFRS, FIFO (First-In, First-Out), and Weighted Average Cost (WAC). Key definitions, formulas, and exam tips.
    • Effects of Inflation and Deflation on Inventory Methods
      Effects of Inflation and Deflation on Inventory Methods (CFA Level 1): Basic Dynamics of Price Movements, How Cost Flow Assumptions Operate, and FIFO (First-In, First-Out). Key definitions, formulas, and exam tips.
    • Periodic vs. Perpetual Inventory Systems
      Periodic vs. Perpetual Inventory Systems (CFA Level 1): Periodic Inventory System, Advantages of the Periodic System, and Disadvantages of the Periodic System. Key definitions, formulas, and exam tips.
    • Inventory Write-Downs, Write-Offs, and Reversals
      Inventory Write-Downs, Write-Offs, and Reversals (CFA Level 1): Defining the Terms, Basics of Inventory Valuation, and Write-Downs. Key definitions, formulas, and exam tips.
    • Inventory Disclosures and Key Analytical Considerations
      Inventory Disclosures and Key Analytical Considerations (CFA Level 1): Common Disclosures in the Footnotes, Valuation Method, and Write-Downs and Potential Reversals. Key definitions, formulas, and exam tips.
    • Impact of Inventory Management on Profitability and Liquidity
      Impact of Inventory Management on Profitability and Liquidity (CFA Level 1): Linking Inventory to Profitability, Lowering Holding Costs and Enhancing Margins, and Write-Downs and Impact on Net Income. Key definitions, formulas, and exam tips.
    • Inventory Turnover Analysis Across Industries
      Inventory Turnover Analysis Across Industries (CFA Level 1): Why Inventory Turnover Ratios Matter and Days Inventory on Hand (DIOH) and Core Calculations. Key definitions, formulas, and exam tips.
    • Industry-Specific Inventory KPIs (Retail, Manufacturing)
      Industry-Specific Inventory KPIs (Retail, Manufacturing) (CFA Level 1): Retail Industry KPIs, Gross Margin Return on Investment (GMROI), and Practical Observations. Key definitions, formulas, and exam tips.
  • Chapter 6: Analysis of Long-Term Assets
    Chapter 6: Analysis of Long-Term Assets (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
    • Capitalization of Costs vs. Immediate Expensing
      Capitalization of Costs vs. Immediate Expensing (CFA Level 1): Understanding the Fundamental Trade-Off, Key Criteria for Capitalizing Costs, and Immediate Expensing: The Short-Term Hit. Key definitions, formulas, and exam tips.
    • Depreciation, Amortization, and Asset Impairment
      Depreciation, Amortization, and Asset Impairment (CFA Level 1): Depreciation of Tangible Assets, Rationale Behind Depreciation, and Common Depreciation Methods. Key definitions, formulas, and exam tips.
    • Derecognition and Disposal of Long-Term Assets
      Derecognition and Disposal of Long-Term Assets (CFA Level 1): Fundamental Concepts, Key Terminology, and Derecognition Triggers. Key definitions, formulas, and exam tips.
    • Intangible Assets: Internally Developed vs. Acquired
      Intangible Assets: Internally Developed vs. Acquired (CFA Level 1): Recognition of Internally Developed Intangibles, IFRS Approach (IAS 38), and Criteria for Capitalization under IAS 38. Key definitions, formulas, and exam tips.
    • Revaluation vs. Cost Model
      Revaluation vs. Cost Model (CFA Level 1): Cost Model, Analytical Observations with the Cost Model, and Revaluation Model. Key definitions, formulas, and exam tips.
    • Component Depreciation and Partial Asset Retirements
      Component Depreciation and Partial Asset Retirements (CFA Level 1): IFRS Emphasis on Component Depreciation, Benefits of Component Depreciation, and US GAAP Perspective. Key definitions, formulas, and exam tips.
    • Exploration and Evaluation Assets in the Extractive Industry
      Exploration and Evaluation Assets in the Extractive Industry (CFA Level 1): IFRS 6 and the Extractive Industry, Full Cost Method, and Key Characteristics of the Full Cost Method. Key definitions, formulas, and exam tips.
    • Reclassification of Assets under Construction
      Reclassification of Assets under Construction (CFA Level 1): Test Your Knowledge: Reclassification of Assets under Construction and Which of the following best describes why reclassification. Key definitions, formulas, and exam tips.
    • Real Estate (REIT) Treatment of Long-Term Assets
      Real Estate (REIT) Treatment of Long-Term Assets (CFA Level 1): Nature of REIT Assets, Key Characteristics of REIT Structures, and Regulatory Considerations. Key definitions, formulas, and exam tips.
  • Chapter 7: Long-Term Liabilities and Equity
    Chapter 7: Long-Term Liabilities and Equity (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
    • Lease Accounting (Lessee vs. Lessor)
      Lease Accounting (Lessee vs. Lessor) (CFA Level 1): Key Principles, Lessee Accounting Under IFRS 16, and Impact on Financial Statements (Lessee under IFRS 16). Key definitions, formulas, and exam tips.
    • Pension and Other Post-Employment Benefits
      Pension and Other Post-Employment Benefits (CFA Level 1): Defined Contribution Plans, Key Characteristics, and Presentation and Analysis. Key definitions, formulas, and exam tips.
    • Stock-Based Compensation
      Stock-Based Compensation (CFA Level 1): Why Does Stock-Based Compensation Matter?, Common Types of Stock-Based Awards, and Measurement of Fair Value. Key definitions, formulas, and exam tips.
    • Equity Transactions and Disclosures
      Equity Transactions and Disclosures (CFA Level 1): Components of Equity, Common Equity Transactions, and Share Issuances. Key definitions, formulas, and exam tips.
    • Hybrid Instruments and Presentation
      Hybrid Instruments and Presentation (CFA Level 1): Defining Hybrid Instruments, Embedded Derivatives, and Bifurcation Requirements. Key definitions, formulas, and exam tips.
    • Convertible Debt and Detachable Warrants
      Convertible Debt and Detachable Warrants (CFA Level 1): Key Concepts and Terminology, Economic Rationale and Investor Perspective, and Accounting Treatment under IFRS and US GAAP. Key definitions, formulas, and exam tips.
    • Recording and Analyzing Treasury Stock Transactions
      Recording and Analyzing Treasury Stock Transactions (CFA Level 1): Key Characteristics of Treasury Stock, Motivations for Share Repurchases, and Cost Method and Par Value (Stated Value) Method. Key definitions, formulas, and exam tips.
    • Economic Value Added (EVA) Considerations for Equity
      Economic Value Added (EVA) Considerations for Equity (CFA Level 1): Key Concepts of EVA, How EVA Relates to Equity, and Diagram: EVA Calculation Flow. Key definitions, formulas, and exam tips.
    • IFRS vs. US GAAP Pension Accounting Differences
      IFRS vs. US GAAP Pension Accounting Differences (CFA Level 1): Comparison in a Nutshell and Discount Rate Differences. Key definitions, formulas, and exam tips.
    • IFRS 16 vs. ASC 842 Lease Approaches
      IFRS 16 vs. ASC 842 Lease Approaches (CFA Level 1): Lessee Perspective and IFRS 16: One Model for Lessees. Exam-focused explanations with key terms and takeaways.
  • Chapter 8: Analysis of Income Taxes
    Chapter 8: Analysis of Income Taxes (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
    • Accounting Profit vs. Taxable Income
      Accounting Profit vs. Taxable Income (CFA Level 1): Distinguishing Accounting Profit from Taxable Income, Accounting Profit (Pretax Financial Income), and Taxable Income. Key definitions, formulas, and exam tips.
    • Temporary vs. Permanent Differences
      Temporary vs. Permanent Differences (CFA Level 1): Test Your Knowledge: Temporary vs. Permanent Differences and and Which statement best describes how temporary differences affect. Key definitions, formulas, and exam tips.
    • Deferred Tax Assets and Liabilities
      Deferred Tax Assets and Liabilities (CFA Level 1): Setting the Stage: The Difference Between Accounting and, Key Terms and Concepts, and Mechanics of DTAs and DTLs. Key definitions, formulas, and exam tips.
    • Effective Tax Rate vs. Statutory Tax Rate vs. Cash Tax Rate
      Effective Tax Rate vs. Statutory Tax Rate vs. Cash Tax Rate (CFA Level 1): Differentiating the Three Tax Rates, Statutory Tax Rate, and Effective Tax Rate. Key definitions, formulas, and exam tips.
    • Valuation Allowances for Deferred Tax Assets
      Valuation Allowances for Deferred Tax Assets (CFA Level 1): Understanding Deferred Tax Assets and the Concept of, Quick Analogy, and Key Drivers for Recording and Adjusting Valuation Allowances. Key definitions, formulas, and exam tips.
    • Uncertain Tax Positions and Interpretations
      Uncertain Tax Positions and Interpretations (CFA Level 1): Recognition and Measurement and Impact on Financial Statements. Key definitions, formulas, and exam tips.
    • Impact of Tax Holidays on Deferred Taxes
      Impact of Tax Holidays on Deferred Taxes (CFA Level 1): Definition and Purpose of Tax Holidays, Types of Tax Holidays, and Deferred Tax Implications. Key definitions, formulas, and exam tips.
    • Capital Gains vs. Ordinary Income Taxation
      Capital Gains vs. Ordinary Income Taxation (CFA Level 1): Ordinary Income vs. Capital Gains, Short-Term vs. Long-Term Capital Gains, and Corporate Entities and Capital Gains Taxation. Key definitions, formulas, and exam tips.
    • Corridor Approaches and Recognition of Actuarial Gains/Losses
      Corridor Approaches and Recognition of Actuarial Gains/Losses (CFA Level 1): Why These Gains and Losses Happen, Corridor Approach Under Older US GAAP, and Illustrative Diagram. Key definitions, formulas, and exam tips.
    • IFRS vs. US GAAP Differences in Income Tax Accounting
      IFRS vs. US GAAP Differences in Income Tax Accounting (CFA Level 1): Foundational Similarities Under IFRS and US GAAP, Recognition of Deferred Tax Assets, and Uncertain Tax Positions. Key definitions, formulas, and exam tips.
  • Chapter 9: Off-Balance-Sheet Items and Special Purpose Entities
    Chapter 9: Off-Balance-Sheet Items and Special Purpose Entities (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Understanding Off-Balance-Sheet Arrangements
      Understanding Off-Balance-Sheet Arrangements (CFA Level 1): Defining Off-Balance-Sheet Arrangements, Common OBS Arrangements, and Operating Leases (Legacy Approach). Key definitions, formulas, and exam tips.
    • Special Purpose Entities and Variable Interest Entities
      Special Purpose Entities and Variable Interest Entities (CFA Level 1): Key Concepts and Definitions, Special Purpose Entities (SPEs) and SPVs, and Variable Interest Entities (VIEs) Under US GAAP. Key definitions, formulas, and exam tips.
    • Impact on Leverage and Coverage Ratios
      Impact on Leverage and Coverage Ratios (CFA Level 1): Why It Matters for Leverage Metrics and “Look-Through” Approach. Key definitions, formulas, and exam tips.
    • Disclosure Requirements and Red Flags
      Disclosure Requirements and Red Flags (CFA Level 1): Core Disclosure Requirements Under IFRS and US GAAP, Nature and Purpose of the Arrangements, and Maximum Exposure to Losses. Key definitions, formulas, and exam tips.
    • Sale-Leaseback Transactions and Their Impact
      Sale-Leaseback Transactions and Their Impact (CFA Level 1): Why Companies Engage in Sale-Leaseback Transactions, Economic Substance vs. Legal Form, and Accounting Treatment Under IFRS 16 and ASC 842. Key definitions, formulas, and exam tips.
    • Factoring of Receivables and Securitizations
      Factoring of Receivables and Securitizations (CFA Level 1): Big Picture and Key Principles, Factoring of Receivables, and With Recourse vs. Without Recourse. Key definitions, formulas, and exam tips.
    • Structured Financing Arrangements
      Structured Financing Arrangements (CFA Level 1): Key Concepts in Structured Financing, Common Types of Structured Financing Arrangements, and Where to Look for Disclosure. Key definitions, formulas, and exam tips.
    • Repo Transactions and Off-Balance-Sheet Implications
      Repo Transactions and Off-Balance-Sheet Implications (CFA Level 1): Key Concepts in Repurchase Agreements, When Is It On-Balance-Sheet?, and Allure (and Risk) of Off-Balance-Sheet Classification. Key definitions, formulas, and exam tips.
    • Industry Examples of Off-Balance-Sheet Structures
      Industry Examples of Off-Balance-Sheet Structures (CFA Level 1): Airlines and Shipping: Leveraging Operating Leases, Quick Anecdote, and Technology and Pharmaceutical: R&D Partnerships and SPEs. Key definitions, formulas, and exam tips.
  • Chapter 10: Intercorporate Investments and Business Combinations
    Chapter 10: Intercorporate Investments and Business Combinations (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Accounting Treatments: Cost, Equity, and Acquisition Methods
      Accounting Treatments: Cost, Equity, and Acquisition Methods (CFA Level 1): Cost Method, Key Concepts, and Common Pitfalls. Key definitions, formulas, and exam tips.
    • Consolidation, Noncontrolling Interests, and Goodwill Implications
      Consolidation, Noncontrolling Interests, and Goodwill Implications (CFA Level 1): Consolidation Concept Under the Acquisition Method, Key Steps in Consolidation, and Noncontrolling Interests (NCI). Key definitions, formulas, and exam tips.
    • Joint Ventures and Proportionate Consolidation
      Joint Ventures and Proportionate Consolidation (CFA Level 1): Key Concepts and Definitions and Why the Methods Matter. Key definitions, formulas, and exam tips.
    • Effects on Financial Statements and Ratios
      Effects on Financial Statements and Ratios (CFA Level 1): Cost Method: Minimal Influence, Minimal Transparency, Potential Distortions, and Equity Method: Reflecting a Share of Actual Performance. Key definitions, formulas, and exam tips.
    • Step Acquisitions and Partial Disposals
      Step Acquisitions and Partial Disposals (CFA Level 1): Key Concepts of Step Acquisitions, Remeasurement to Fair Value, and Goodwill Calculation and Noncontrolling Interests. Key definitions, formulas, and exam tips.
    • Pushdown Accounting and Reverse Acquisitions
      Pushdown Accounting and Reverse Acquisitions (CFA Level 1): Informal Look at Pushdown Accounting, Key Points to Remember, and Reverse Acquisitions: Flipping the Script. Key definitions, formulas, and exam tips.
    • Contingent Consideration in Business Combinations
      Contingent Consideration in Business Combinations (CFA Level 1): Why Contingent Consideration Exists, Initial Recognition: The Fair Value Approach, and Fair Value Measurement Techniques. Key definitions, formulas, and exam tips.
    • Accounting for Bargain Purchases
      Accounting for Bargain Purchases (CFA Level 1): Distinguishing Features of Bargain Purchases, Step-by-Step Accounting Treatment, and Reassess the Fair Value of Assets and Liabilities. Key definitions, formulas, and exam tips.
    • IFRS 10, IFRS 11, IFRS 12 Alignment with US GAAP
      IFRS 10, IFRS 11, IFRS 12 Alignment with US GAAP (CFA Level 1): IFRS 10: Consolidated Financial Statements vs. US GAAP, Single Consolidation Model in IFRS 10, and Multiple Approaches in US GAAP. Key definitions, formulas, and exam tips.
    • Illustrative Goodwill Calculation and Full vs. Partial Goodwill Methods
      Illustrative Goodwill Calculation and Full vs. Partial Goodwill Methods (CFA Level 1): parent acquires 75% of a subsidiary for and Under IFRS, if a parent chooses the partial. Key definitions, formulas, and exam tips.
  • Chapter 11: Analysis of Global Operations
    Chapter 11: Analysis of Global Operations (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
    • Foreign Currency Transactions
      Foreign Currency Transactions (CFA Level 1): Spot Rates, Functional Currency, and Initial Recognition, Monetary vs. Non-Monetary Items, and Realized vs. Unrealized Gains or Losses. Key definitions, formulas, and exam tips.
    • Translation of Foreign Currency Financial Statements
      Translation of Foreign Currency Financial Statements (CFA Level 1): Current Rate Method, When to Use It, and How It Works. Key definitions, formulas, and exam tips.
    • Exchange Rate Effects on Reported Performance
      Exchange Rate Effects on Reported Performance (CFA Level 1): Core Concepts of Exchange-Rate Impacts on Financial Statements and Transaction vs. Translation Exposure in a Nutshell. Key definitions, formulas, and exam tips.
    • Multinational Disclosures and Considerations
      Multinational Disclosures and Considerations (CFA Level 1): Key Multinational Disclosures, Geographic Revenue Analysis, and Assets and Liabilities by Region. Key definitions, formulas, and exam tips.
    • Functional vs. Presentation Currency
      Functional vs. Presentation Currency (CFA Level 1): Understanding the Concept, Functional Currency vs Presentation Currency, and Determining the Appropriate Functional Currency. Key definitions, formulas, and exam tips.
    • Hedge Accounting for Foreign Currency Transactions
      Hedge Accounting for Foreign Currency Transactions (CFA Level 1): Objectives of Hedge Accounting, Key Accounting Standards: IFRS 9 vs. ASC 815, and Types of Hedges. Key definitions, formulas, and exam tips.
    • Hyperinflationary Accounting and Effects on Consolidations
      Hyperinflationary Accounting and Effects on Consolidations (CFA Level 1): Understanding Hyperinflationary Environments, Accounting in Hyperinflationary Economies, and Why Behind Restatement. Key definitions, formulas, and exam tips.
    • Transfer Pricing in Global Operations
      Transfer Pricing in Global Operations (CFA Level 1): Arm’s Length Principle and Regulatory Considerations, Common Transfer Pricing Methods, and How Transfer Pricing Affects Financial Statements. Key definitions, formulas, and exam tips.
    • Interim Foreign Currency Translation Issues
      Interim Foreign Currency Translation Issues (CFA Level 1): Key Concepts in Interim Foreign Currency Translation, Applying Average and Period-End Rates, and Seasonality and Exchange Rate Volatility. Key definitions, formulas, and exam tips.
  • Chapter 12: Financial Reporting Quality
    Chapter 12: Financial Reporting Quality (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
    • Quality of Financial Reports vs. Quality of Earnings/Cash Flows
      Quality of Financial Reports vs. Quality of Earnings/Cash Flows (CFA Level 1): Financial Reporting Quality: Key Elements, Characteristics of High-Quality Reporting, and Quality of Earnings: Why It Matters. Key definitions, formulas, and exam tips.
    • Conservative vs. Aggressive Accounting Choices
      Conservative vs. Aggressive Accounting Choices (CFA Level 1): Defining Conservative and Aggressive Approaches, Typical Areas of Judgment, and Financial Statement Implications. Key definitions, formulas, and exam tips.
    • Motivations and Conditions for Earnings Manipulation
      Motivations and Conditions for Earnings Manipulation (CFA Level 1): Key Motivations Behind Earnings Manipulation, Meeting or Beating Analyst Forecasts, and Achieving Management Bonus Thresholds. Key definitions, formulas, and exam tips.
    • Identifying Warning Signs in Financial Statements
      Identifying Warning Signs in Financial Statements (CFA Level 1): Common Red Flags and Why They Matter, Receivables Growth vs. Sales Growth, and Inventory Surges and Potential Write-Downs. Key definitions, formulas, and exam tips.
    • Earnings Persistence and Sustainable Earnings Measures
      Earnings Persistence and Sustainable Earnings Measures (CFA Level 1): Concept of Earnings Persistence, Sustainable Earnings vs. Transitory Items, and Identifying Highly Persistent Earnings. Key definitions, formulas, and exam tips.
    • Fraud Triangle and Corporate Governance
      Fraud Triangle and Corporate Governance (CFA Level 1): Test Your Knowledge: Fraud Triangle and Corporate Governance and Which of the following examples best illustrates “Pressure”. Key definitions, formulas, and exam tips.
    • Audit Committee Responsibilities in Enhancing Reporting Quality
      Audit Committee Responsibilities in Enhancing Reporting Quality (CFA Level 1): Understanding the Role of the Audit Committee, Independence and Expertise, and Key Responsibilities. Key definitions, formulas, and exam tips.
    • External Auditor Independence and Rotation Requirements
      External Auditor Independence and Rotation Requirements (CFA Level 1): Why Independence Matters, Mandatory Rotation Requirements, and Global Landscape and Variations. Key definitions, formulas, and exam tips.
    • Handling Complex Transactions with Limited Transparency
      Handling Complex Transactions with Limited Transparency (CFA Level 1): Why Transactions Become Complex and Common Structures That Limit Transparency. Key definitions, formulas, and exam tips.
  • Chapter 13: Financial Analysis Techniques
    Chapter 13: Financial Analysis Techniques (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
  • Chapter 14: Financial Analysis of Banks and Insurance Companies
    Chapter 14: Financial Analysis of Banks and Insurance Companies (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Unique Financial Statement Structures of Financial Institutions
      Unique Financial Statement Structures of Financial Institutions (CFA Level 1): Why Statements Differ for Financial Institutions, Balance Sheet of a Bank, and Loans as the Primary Asset. Key definitions, formulas, and exam tips.
    • Regulatory Capital and Reserve Requirements
      Regulatory Capital and Reserve Requirements (CFA Level 1): Importance of Regulatory Capital, Understanding Capital Tiers for Banks, and Reserve Requirements for Banks. Key definitions, formulas, and exam tips.
    • Evaluating Liquidity, Asset Quality, and Solvency
      Evaluating Liquidity, Asset Quality, and Solvency (CFA Level 1): Liquidity Analysis, Liquidity in the Insurance Sector, and Visualizing Short-Term vs. Long-Term Mismatches. Key definitions, formulas, and exam tips.
    • Risks Specific to Banking and Insurance Operations
      Risks Specific to Banking and Insurance Operations (CFA Level 1): Nature of Risk in Banking and Insurance, Credit Risk, and Identifying Credit Risk. Key definitions, formulas, and exam tips.
    • Off-Balance-Sheet Exposures in Financial Institutions
      Off-Balance-Sheet Exposures in Financial Institutions (CFA Level 1): Common Off-Balance-Sheet Items in Banking, Letters of Credit (LoCs), and Loan Commitments. Key definitions, formulas, and exam tips.
    • Stress Testing and Scenario Analysis for Financial Institutions
      Stress Testing and Scenario Analysis for Financial Institutions (CFA Level 1): Why We Need Stress Testing, Regulatory Requirements and Approaches, and Single-Factor vs. Multi-Factor Stress Tests. Key definitions, formulas, and exam tips.
    • Basel Accords and Implications for Bank Capital
      Basel Accords and Implications for Bank Capital (CFA Level 1): Understanding the Basel Accords, Evolution of the Basel Accords, and Basel I. Key definitions, formulas, and exam tips.
    • Insurance Contract Liabilities and Discount Rate Assumptions
      Insurance Contract Liabilities and Discount Rate Assumptions (CFA Level 1): Key Concepts of Insurance Contract Liabilities, Why Discount Rate Assumptions Matter, and Methodologies for Measuring Liabilities. Key definitions, formulas, and exam tips.
    • Underwriting Margins and Embedded Value Analysis
      Underwriting Margins and Embedded Value Analysis (CFA Level 1): Underwriting Margin: The Core of Insurance Profitability, Definition and Calculation, and Interpreting the Margin: Why It Matters. Key definitions, formulas, and exam tips.
    • IFRS 17 and Its Impact on Insurance Contract Accounting
      IFRS 17 and Its Impact on Insurance Contract Accounting (CFA Level 1): Evolution from IFRS 4 to IFRS 17, Core Concepts in IFRS 17, and IFRS 17: The General Model. Key definitions, formulas, and exam tips.
  • Chapter 15: ESG Considerations in Financial Statement Analysis
    Chapter 15: ESG Considerations in Financial Statement Analysis (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Incorporating Environmental, Social, and Governance Data
      Incorporating Environmental, Social, and Governance Data (CFA Level 1): Defining ESG and Its Relevance, Sources of ESG Data, and Reliability Checks and Comparing Data. Key definitions, formulas, and exam tips.
    • Materiality of ESG Issues in Financial Reporting
      Materiality of ESG Issues in Financial Reporting (CFA Level 1): Double Materiality and Broader Stakeholder Impact, Key Regulatory Definitions and Standards, and Collaborating to Identify ESG Materiality. Key definitions, formulas, and exam tips.
    • ESG Disclosure Frameworks and Standards
      ESG Disclosure Frameworks and Standards (CFA Level 1): Understanding the Core Frameworks, Global Reporting Initiative (GRI), and Sustainability Accounting Standards Board (SASB). Key definitions, formulas, and exam tips.
    • Integrating ESG into Ratio and Trend Analysis
      Integrating ESG into Ratio and Trend Analysis (CFA Level 1): Linking ESG Factors to Traditional Financial Ratios, Common ESG Metrics for Ratio Analysis, and Integrating ESG Metrics with Traditional Ratios. Key definitions, formulas, and exam tips.
    • Corporate Reporting Practices and ESG Metrics
      Corporate Reporting Practices and ESG Metrics (CFA Level 1): Common ESG Reporting Structures, Environmental (E) Metrics, and Social (S) Metrics. Key definitions, formulas, and exam tips.
    • Carbon Emissions Reporting and Assurance
      Carbon Emissions Reporting and Assurance (CFA Level 1): Key Concepts in Carbon Emissions Reporting, Scope 1, Scope 2, and Scope 3: Defining, and Calculating Emissions: The GHG Protocol and Emission Factors. Key definitions, formulas, and exam tips.
    • Green Bond Reporting and Sustainability-Linked Finance
      Green Bond Reporting and Sustainability-Linked Finance (CFA Level 1): Key Features of Green Bonds, Use of Proceeds and Project Criteria, and Segregation of Funds. Key definitions, formulas, and exam tips.
    • Social Impact Metrics in ESG Disclosure
      Social Impact Metrics in ESG Disclosure (CFA Level 1): Common Social Indicators, Social Controversies and Reputational Damage, and Supply Chain Transparency. Key definitions, formulas, and exam tips.
    • Climate-Related Contingencies and Provisions
      Climate-Related Contingencies and Provisions (CFA Level 1): Distinguishing Climate-Related Contingencies from Traditional Contingencies and Legal Disclosure of Climate-Related Contingencies. Key definitions, formulas, and exam tips.
    • Potential ESG Liabilities and Intangible Assets (e.g., Carbon Credits)
      Potential ESG Liabilities and Intangible Assets (e.g., Carbon Credits) (CFA Level 1): Understanding Potential ESG Liabilities and Intangible Assets and Key ESG Intangibles: Carbon Credits and Beyond. Key definitions, formulas, and exam tips.
  • Chapter 16: Building a Company Financial Model
    Chapter 16: Building a Company Financial Model (CFA Level 1): Practical explanations of core ideas, with key terms, formulas, and common exam pitfalls.

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Volume 3: Corporate Issuers
Volume 5: Equity Investments