Apptuto CFA L1 LOS Changes 2016

CFA Course of Study Changes
2016
Level I
July 2015
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CFA Level I Curriculum Changes 2016

The CFA Institute has now released the Level I Course of Study for 2016, and there are a number of
changes from 2015. We have reviewed and compared the new Learning Objective Statements (LOS) to
help Candidates who are either repeating or using prior year materials.
While it is important to know the whole curriculum thoroughly, always make sure you have a particularly
good understanding of any new Readings or LOS as there is always a high chance that new material may
be tested.
If you have any comments please contact us at learn@apptuto.com
Summary of Changes
1 new Reading has been added to Study Session 12; Portfolio Management.
9 out of the 18 Study Sessions have been affected by changing LOS.
In total 29 new LOS have been added, while 23 have been amended, and 8 have been removed.
There has been no change in the exam weighting of subjects in 2016.
Exam Weighting Summary

2016
In 2016 the CFA Institute has indicated that there has been no change in exam weightings.
2015
In the previous year, 2015 there was minimal movement in the weightings, resulting with a greater emphasis
on Portfolio Management, which increased from 5% up to 7% and Alternative Investments (up to 4%).
3 | www.apptuto.com Apptuto 2015
Study Session 1: Ethical and Professional Standards
1.1 Reading Text Changes

There are no changes in the 2016 curriculum from 2015. Note that last year (2015) was the first year
Readings 1 & 2 referred to the 11th Edition of the Standards of Practice Handbook, rather than the 10th
Edition (used for the 2014 curriculum).
Comment: The Eleventh edition, effective July 1 2014, updates to the Code and Standards and Handbook
include the following1:
The Code of Ethics now includes language that aligns with the mission of CFA Institute and reflects
an investment professional's responsibility to protect the integrity of capital markets for the
betterment of society.
Standard IV(C): Responsibilities of Supervisors now focuses on the need for supervisors to take
positive steps to promote compliance rather than just preventing violations.
Standard V(B): Communication with Clients and Prospective Clients now includes a requirement to
address risks and limitations as part of the investment process.
Standard VII(A) now reflects the growth in educational programs of CFA Institute by encompassing
additional programs beyond the CFA examination.
The Handbook chapter Ethics and the Investment Industry expands the discussion on the
importance of ethical conduct within the industry. The integrity of capital markets and its participants
is vital to maintaining levels of efficiencies and trust that ultimately benefit society.
Throughout the Handbook, guidance enhancements and new examples were added to cover a
variety of current practices occurring within the investment industry such as social media usage and
reliance upon quantitative models and processes.
1.2 LOS Changes

NO CHANGE FROM 2015
1.3 Exam Weighting Change

NO CHANGE FROM 2015
http://www.cfainstitute.org/ethics/codes/ethics/pages/periodic_review.aspx
Study Session 2: Quantitative Methods - Basic Concepts

NO CHANGE FROM 2015
2.2 LOS Changes

NO CHANGE FROM 2015

NO CHANGE FROM 2015
Study Session 3: Quantitative Methods Application

NO CHANGE FROM 2015
3.2 LOS Changes

NO CHANGE FROM 2015

NO CHANGE FROM 2015
Study Session 4: Economics

NO CHANGE FROM 2015
4.2 LOS Changes

NO CHANGE FROM 2015

NO CHANGE FROM 2015
Study Session 5: Economics Macroeconomic Analysis

NO CHANGE FROM 2015
5.2 LOS Changes

NO CHANGE FROM 2015

NO CHANGE FROM 2015
Study Session 6: Economics Economics in a Global Context

NO CHANGE FROM 2015
6.2 LOS Changes

NO CHANGE FROM 2015

NO CHANGE FROM 2015
Study Session 7: Financial Reporting and Analysis An

Introduction

NO CHANGE FROM 2015
7.2 LOS Changes

7.2.1
LOS
b.
7.2.2
Reading 22: Financial Statement Analysis: An Introduction

Change type
Partial
Change:
Remove
Word
2015 Syllabus
Describe the roles of the key financial
statements (statement of financial
position, statement of comprehensive
income, statement of changes in equity,
and statement of cash flows) in
evaluating a companys performance and
financial position;
2016 Syllabus
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 companys
performance and financial position;
Reading 23: Financial Reporting Mechanics
LOS
Change type
2015 Syllabus
a.
New
Partial
Change:
Word
Addition
Describe the need for accruals and other

adjustments in preparing financial
statements
2016 Syllabus
Describe how business activities are
classified for financial reporting
purposes;
Describe the need for accruals and
valuation adjustments in preparing
financial statements
The new LOS above has impacted the lettering for the remaining LOS in Reading 23. For example LOS a.
in 2015 is now LOS b. in 2016.

NO CHANGE FROM 2015
Study Session 8: Financial Reporting and Analysis Income

Statements, Balance Sheets, and Cash Flow Statements

NO CHANGE FROM 2015
8.2 LOS Changes

8.2.1
Reading 25: Understanding Income Sheets
LOS
Change type
2015 Syllabus
d.
New
2016 Syllabus
Describe key aspects of the converged accounting standards
issued by the International Accounting Standards Board and
Financial Accounting Standards Board in May 2014;

NO CHANGE FROM 2015
Study Session 9: Financial Reporting and Analysis Inventories,

Long-lived Assets, Income Taxes, and Non-current Liabilities

NO CHANGE FROM 2015
9.2 LOS Changes

9.2.1
Reading 29: Inventories
LOS
Change type
c.
Partial
Change:
Removal &
Addition
2015 Syllabus
Calculate cost of sales and
ending inventory using different
inventory valuation methods
and explain the effect of the
inventory valuation method
choice on gross profit;
2016 Syllabus
Calculate and compare cost of sales, gross
profit and ending inventory using different
inventory methods and using perpetual and
periodic inventory systems.
d.
Removed
e.
Removed
h.
Removed
Calculate and compare cost of

sales, gross profit, and ending
inventory using perpetual and
periodic inventory systems
Compare cost of sales, ending
inventory, and gross profit using
different inventory valuation
methods;
Calculate and interpret ratios
used to evaluate inventory
management
d.
New
e.
New
f.
New
j.
New
k.
New
l.
New
9.2.2
Calculate and explain how inflation and

deflation of inventory costs affect the financial
statements and ratios of companies that use
different inventory valuation methods;
Explain LIFO reserve and LIFO liquidation and
their effects on financial statements and ratios;
Convert a companys reported financial
statements from LIFO to FIFO for purposes of
comparison;
Explain issues that analysts should consider
when examining a companys inventory
disclosures and other sources of information
Calculate and compare rations of companies,
including companies that use different
inventory methods;
Analyse and compare the financial statements
of companies, including companies that use
different inventory methods
Reading 30: Long-Lived Assets
LOS
Change type
c.
Removed
d.
Removed
f.
Partial
Change:
Removal &
2015 Syllabus
Describe the different
depreciation methods for
property, plant, and
equipment, the effect of the
choice of depreciation
method on the financial
statements, and the effects
of assumptions concerning
useful life and residual value
on depreciation expense;
Calculate depreciation
expense;
Describe the different
amortization methods for
intangible assets with finite
2016 Syllabus
Describe the different amortization methods for

intangible assets with finite lives and calculate
amortisation expense;
Addition
lives, the effect of the

choice of amortization
method on the financial
statements, and the effects
of assumptions concerning
useful life and residual
value on amortization
expense
b.
New
c.
New
d.
New
e.
New
g.
New
k.
New
o.
New
p.
New
9.2.3
Compare the financial reporting of the following

types of intangible assets: purchased, internally
developed, acquired in a business combination
Explain and evaluate how capitalising versus
expensing costs in the period in which they are
incurred affects financial statements and ratios;
Describe how different depreciation methods for
property, plant, and equipment and calculate
depreciation expense;
Describe how the choice of depreciation method
and assumptions concerning useful life and
residual value affect depreciation expense,
financial statements, and rations;
Describe how the choice of amortisation method
and assumptions concerning useful life and
residual value affect amortisation expense,
financial statements, and ratios;
Explain and evaluate how impairment,
revaluation, and derecognition of property, plant,
and equipment and intangible assets affect
financial statements and ratios;
Explain and evaluate how leasing rather than
purchasing assets affects financial statements
and ratios;
Explain and evaluate how finance leases and
operating leases affect financial statements and
ratios from the perspective of both the lessor and
lessee.
Reading 31: Income Taxes
LOS
Change type
h.
Removed
h.
New
2015 Syllabus
Compare a companys
deferred tax items;
-

NO CHANGE FROM 2015
2016 Syllabus
Explain recognition and measurement of current
and deferred tax items;
10 Study Session 10: Financial Reporting and Analysis Financial

Reporting Quality and Financial Statement Analysis
NO CHANGE FROM 2015
10.2 LOS Change

NO CHANGE FROM 2015

NO CHANGE FROM 2015
11 Study Session 11: Corporate Finance

NO CHANGE FROM 2015
11.2 LOS Changes

NO CHANGE FROM 2015

NO CHANGE FROM 2015
12 Study Session 12: Portfolio Management

In 2016 there is one new Reading:
Reading 42: Risk Management: An Introduction
12.2 LOS Change

12.2.1
Reading 42: Risk Management: An Introduction
LOS
Change
Type
2014
Syllabus
a.
New
b.
New
c.
New
d.
New
e.
New
f.
New
g.
New
2015 Syllabus
Define risk management;
Describe features of a risk management framework;
Define risk governance and describe elements of effective risk
governance;
Explain how risk tolerance affects risk management;
Describe risk budgeting and its role in risk governance;
Identify financial and non-financial sources of risk and describe
how they may interact;
Describe methods for measuring and modifying risk exposures and
factors to consider in choosing among the methods.

NO CHANGE FROM 2015
13 Study Session 13: Equity Market Organization, Market Indices,

and Market Efficiency
NO CHANGE FROM 2015
13.2 LOS Changes

13.2.1
Reading 47: Market Efficiency
LOS
Change type
g.
Removed
g.
2015 Syllabus
Contrast the behavioural finance view
of investor behaviour to that of
traditional finance.
New
2016 Syllabus
Describe behavioural finance and its
potential relevance to understanding
market anomalies.

NO CHANGE FROM 2014
14 Study Session 14: Equity Equity Analysis and Valuation

NO CHANGE FROM 2015
14.2 LOS Changes

14.2.1
Reading 50: Introduction to Industry and Company Analysis
LOS
Change type
2015 Syllabus
d.
Partial
Change:
Reword
Explain how peer group as used in

equity
valuation
relates
to
a
companys industry classification;
g.
Partial
Change:
Removal &
Addition
h.
Partial
Change:
Removal
j.
Partial
Change:
Addition
14.2.2
Explain the effects of barriers to entry,

industry
concentration,
industry
capacity, and market share stability
on pricing power and return on
capital;
Describe product and industry life
cycle models, classify an industry as
to life cycle phase (embryonic,
growth, shakeout, maturity, and
decline), and describe limitations of
the life-cycle concept in forecasting
industry performance;
Describe demographic, governmental,
social, and technological influences
on industry growth, profitability, and
risk;
2016 Syllabus
Explain how a companys industry
classification can be used to identify
a potential peer group for equity
valuation
Explain the effects of barriers to entry,
industry concentration, industry capacity,
and market share stability on pricing
power and price competition;
Describe industry life cycle models,
classify an industry as to life cycle stage,
and describe limitations of the life-cycle
concept
in
forecasting
industry
performance;
Describe macroeconomic,
technological, demographic,
governmental, and social influences on
industry growth, profitability, and risk;
Reading 51: Equity Valuation: Concepts and Basic Tools
LOS
Change type
f.
Partial
Change:
Addition
2015 Syllabus
Identify companies for which the
constant growth or a multistage
dividend
discount
model
is
appropriate:
2016 Syllabus
Identify characteristics of companies for
which the constant growth or a multi-stage
dividend discount model is appropriate;
Partial
Change:
Removal &
Addition
g.
Explain the rationale for using price

multiples to value equity and
distinguish between multiples
based on comparables versus
multiples
based
on
fundamentals;
Explain the rationale for using price

multiples to value equity, how the price to
earnings
multiple
relates
to
fundamentals, and the use of multiples
based on comparables;

NO CHANGE FROM 2015
15 Study Session 15: Fixed Income: Basic Concepts

NO CHANGE FROM 2015
15.2 LOS Changes

15.2.1
LOS
Reading 52: Fixed-Income Securities: Defining Elements

Change type
Partial
Change:
Removal &
Addition
b.
15.2.2
2015 Syllabus
Describe functions of a bond
indenture;
2016 Syllabus
Describe content of a bond indenture;
Reading 53: Fixed-Income Markets: Issuance, Trading, and Funding
LOS
Change type
2015 Syllabus
e.
New
f.
Partial
Change:
Removal
Describe securities issued by

sovereign governments, nonsovereign governments, government
agencies, and supranational entities;
2016 Syllabus
Describe securities issued by sovereign
governments
Describe securities issued by nonsovereign governments, quasigovernment entities, and supranational
entities
i.
Partial
Change:
Removal &
Addition
Describe repurchase agreements

(repos) and their importance to
investors who borrow short term
Describe repurchase agreements

(repos) and the risks associated with
them.
15.2.3
LOS
b.
e.
g.
h.
i.
Reading 55: Introduction to asset-backed securities

Change type
Partial
Change:
Removal &
Addition
2015 Syllabus
Describe the securitization process,
including the parties to the process, the
roles they play, and the legal
structures involved;
Partial
Change:
Removal &
Addition
Describe types and characteristics of

residential mortgage-backed securities,
and explain the cash flows and
credit risk for each type;
Partial
Change:
Removal
Partial
Change:
Removal &
Addition
Partial
Change:
Removal &
Addition
Describe the characteristics and risks

of commercial mortgage-backed
securities;
non-mortgage asset-backed securities,
including the cash flows and credit risk
of each type;

residential mortgage-backed securities,
including mortgage pass-through
securities
and
collateralized
mortgage obligations, and explain
the cash flows and risks for each type;
Describe characteristics and risks of
commercial mortgage-backed
securities;
non-mortgage asset-backed securities,
including the cash flows and risks of
each type.
Describe collateralized debt obligations,

including their cash flows and credit
risk.
Describe
collateralized
debt
obligations, including their cash flows
and risks.
LOS
Change type
2015 Syllabus
c.
New
f.
New
LOS
Change type
e.
Removed
2015 Syllabus
Explain the motivation for creating
securitized structures with multiple
tranches (e.g. collateralized mortgage
obligations), and the characteristics
and risks of securitized structure;

NO CHANGE FROM 2015
2016 Syllabus
Describe securitization, including the
parties involved in the process and
the roles they play;
2016 Syllabus
Describe typical structures of
securitizations, including credit tranching
and time tranching
Define prepayment risk and describe the
prepayment risk of mortgage-backed
securities
2016 Syllabus
16 Study Session 16: Fixed Income Analysis of Risk

NO CHANGE FROM 2015
16.2 LOS Change

16.2.1
Reading 56: Understanding Fixed-Income Risk and Return
LOS
Change type
d.
Partial
Change:
Removal
e.
Partial
Change:
Removal
16.2.2
2015 Syllabus
Define key rate duration and describe
the key use of key rate durations in
measuring the sensitivity of bonds to
changes in the shape of the benchmark
yield curve
Explain how a bonds maturity, coupon,
embedded options, and yield level
affect its interest rate risk;
2016 Syllabus
Define key rate duration and describe
the use of key rate durations in
measuring the sensitivity of bonds to
changes in the shape of the
benchmark yield curve
Explain how a bonds maturity, coupon,
and yield level effect its interest rate
risk;
Reading 57: Fundamentals of Credit Analysis
LOS
Change type
2015 Syllabus
b.
New
f.
Partial
Change:
Addition
Explain the components of traditional

credit analysis;
i.
Removed
Calculate the return impact of spread

changes

NO CHANGE FROM 2015
2016 Syllabus
Describe default probability and loss
severity as components of credit risk;
Explain the four Cs (Capacity,
Collateral, Covenants, and Character)
of traditional credit analysis;
-
17 Study Session 17: Derivatives

NO CHANGE FROM 2015
17.2 LOS Change

NO CHANGE FROM 2015

NO CHANGE FROM 2015
18 Study Session 18: Alternative Investments

NO CHANGE FROM 2015
18.2 LOS Change

18.2.1
LOS
Reading 61: Introduction to Alternative Investments
Change type
2015 Syllabus
d.
Partial
Change:
Addition
Describe hedge funds, private equity,

real estate, commodities, and other
alternative investments, including, as
applicable, strategies, sub-categories,
potential benefits and risks, fee
structures, and due diligence;
f.
Partial
Change:
Addition
Describe issues in valuing, and

calculating returns on, hedge funds,
private equity, real estate, and
commodities
2016 Syllabus
Describe hedge funds, private equity,
real
estate,
commodities,
infrastructure, and other alternative
investments, including, as applicable,
strategies, sub-categories, potential
benefits and risks, fee structures, and
due diligence;
Describe issues in valuing, and
calculating returns on, hedge funds,
private equity, real estate, and
commodities, and infrastructure
NO CHANGE FROM 2015

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CFA Course of Study Changes

Apptuto is a gamified CFA exam prep platform built by CFA

Because the secret to passing is practice, Apptuto gives you a

Start studying today with for your free trial

CFA Level I Curriculum Changes 2016

Exam Weighting Summary

3 | www.apptuto.com Apptuto 2015

Study Session 1: Ethical and Professional Standards

1.1 Reading Text Changes

1.2 LOS Changes

1.3 Exam Weighting Change

4 | www.apptuto.com Apptuto 2015

Study Session 2: Quantitative Methods - Basic Concepts

2.1 Reading Text Changes

2.2 LOS Changes

2.3 Exam Weighting Change

Study Session 3: Quantitative Methods Application

3.1 Reading Text Changes

3.2 LOS Changes

3.3 Exam Weighting Change

Study Session 4: Economics

4.1 Reading Text Changes

4.2 LOS Changes

4.3 Exam Weighting Change

5 | www.apptuto.com Apptuto 2015

Study Session 5: Economics Macroeconomic Analysis

5.1 Reading Text Changes

5.2 LOS Changes

5.3 Exam Weighting Change

Study Session 6: Economics Economics in a Global Context

6.1 Reading Text Changes

6.2 LOS Changes

6.3 Exam Weighting Change

6 | www.apptuto.com Apptuto 2015

Study Session 7: Financial Reporting and Analysis An

7.1 Reading Text Changes

7.2 LOS Changes

Reading 22: Financial Statement Analysis: An Introduction

Reading 23: Financial Reporting Mechanics

Describe the need for accruals and other

7.3 Exam Weighting Change

7 | www.apptuto.com Apptuto 2015

Study Session 8: Financial Reporting and Analysis Income

8.1 Reading Text Changes

8.2 LOS Changes

Reading 25: Understanding Income Sheets

8.1 Exam Weighting Change

Study Session 9: Financial Reporting and Analysis Inventories,

9.1 Reading Text Changes

9.2 LOS Changes

Reading 29: Inventories

8 | www.apptuto.com Apptuto 2015

Calculate and compare cost of

Calculate and explain how inflation and

Reading 30: Long-Lived Assets

9 | www.apptuto.com Apptuto 2015

Describe the different amortization methods for

lives, the effect of the

Compare the financial reporting of the following

Reading 31: Income Taxes

9.3 Exam Weighting Change

10 | www.apptuto.com Apptuto 2015

10 Study Session 10: Financial Reporting and Analysis Financial