CFA® Program Curriculum Changes for 2022

The cohort sitting for their examinations in November 2021 is the last lot of candidates to be examined using the CFA Program 2020 curriculum, the curriculum that has been in force for the last two years. Normally, CFA Institute reviews its curriculum yearly. However, due to the disruption caused by the coronavirus pandemic, the Institute did not update its curriculum in 2021. This notwithstanding, we are delighted to inform you that major changes have been announced in regard to the 2022 curriculum. Stay tuned and you shall find out more shortly.

Who Needs to Know about these Changes?

Deferring Candidates

Deferring candidates will be tested on the new curriculum. In this respect, there is a caveat that calls for your attention: CFA institute no longer accepts deferral applications submitted via email. Deferral requests have to be made on CFA Institute’s website. For any such request to pass the validity threshold, it has to be occasioned by any of these reasons: pregnancy, mandatory military service during a candidate’s test window, rescheduling of the examinations by Prometric, death of a member of a candidate’s family, a life-threatening illness has affected a candidate or a member of their family, and if a candidate has been exposed to or contracted COVID 14 days before their examinations.

Since they will be tested on the new curriculum, deferring candidates should make a point of going through the entire 2022 curriculum. Alternatively, they can use the old curriculum for the readings that are still intact and incorporate the added learning objectives in their studies.

New Candidates

Are you a candidate aspiring to start the CFA Program? Here is news for you: Early registration is now open for candidates wishing to write their level I exams in May 2022. New candidates will be examined using the 2022 curriculum. In their preparation for the examinations, a new candidate should ensure that they use the revised notes. At AnalystPrep, we provide you with top-notch updated study materials, video lessons, and access to over 4,000 practice questions. Aside from all these, we offer mock examinations and an interactive student forum to make your learning experience easy and memorable.

Returning candidates

The new curriculum will be used to examine candidates who failed their examinations. While preparing to retake their examinations, such candidates can go through the whole curriculum. Also at their disposal is the option of using their old study notes. They must, however, ensure they pay utmost attention to the newly introduced learning objectives and completely ignore those that have since been expunged.

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Topic Weightings

There are no changes in the topic weights. CFA Institute made major changes to the topic weightings in the 2020 curriculum by converting the topic weightings into a range rather than a number. This is a complete departure from what has been the case over the years. The Institute’s decision to revise the topic weightings was premised upon the need to dissuade candidates from ignoring topics with smaller percentages (for example, Alternative Investments and Derivatives) and focusing more, instead, on others with higher percentages (for example, Quantitative Methods and Financial Reporting Analysis).

Topic weightings are important. They give candidates a clue of the section that carries the highest percentage. As such, candidates can increase their chances of passing their examinations by putting in a little more effort on topics that carry a lot of weight. Take, for example, a candidate who has gone through the whole curriculum and has less than a month to examination day. Such a  candidate can choose to go over topics such as FRA one more time instead of a topic that carries a lower weight.

The 2022 topic weightings, which are similar to the 2020/2021 curriculum, are shown in the table below.

$$\small{\begin{array}{l|c} \textbf{Level I Topic} & \textbf{Level I Weight} \\ \hline \text{Quantitative Methods} & 8-12\% \\ \hline \text{Economics} & 8-12\% \\ \hline \text{Financial Reporting and Analysis} & 13-17\% \\ \hline \text{Corporate Issuers} & 8-12\% \\ \hline \text{Equity} & 10-12\% \\ \hline \text{Fixed Income} & 10-12\% \\ \hline\text{Derivatives} & 5-8\% \\ \hline \text{Alternative Investments} & 5-8\% \\ \hline\text{Portfolio Management} & 5-8\% \\ \hline \text{Ethics} & 15-20\%\end{array}}$$

Spoiler alert!

Have you already noticed from the table above that corporate finance is no longer corporate finance but corporate issuers?

Have you also noticed that ethics is no longer the first topic?

Let us now look at the changes, topic-by-topic.

I. Quantitative Methods

The only constant reading in the 2022 edition is Reading 1 – The Time Value of Money reading. As will be discussed below, other readings have been deleted, added, and others updated.

Added Readings

Reading 2 – Organizing, Visualizing, and Describing data

Reading 7 – Introduction to Linear Regression (which used to be in the level II curriculum)

Deleted Readings

Reading 7 (of the 2020 curriculum) – Statistical Concepts and Market Returns.

Updated Readings

Four Quantitative Methods readings have been updated;

1. Reading 3: Probability Concepts – the LOS “Calculate and interpret the 1) 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” has been scraped off the 2020 curriculum.  The changes in other probability concept learning objectives are minor changes in wordings.
2. Reading 4: Common probability distributions – Minor changes have been made to this reading. The LOS “describe properties of student’s t distribution and calculate and interpret its degrees of freedom” has been moved from reading 5, Sampling and estimation, to this reading. There has also been a change in the wordings of four learning objective statements.
3. Reading 5: Sampling and estimation – The LOS “describe properties of student’s t distribution and calculate and interpret its degrees of freedom” has been moved to the  “Common probability distributions” Reading. The LOS “describe the use of resampling (bootstrap, jackknife) to estimate the sampling distribution of a statistic” has been added.
4. Reading 6: Hypothesis testing –- The LOS “explain tests of independence based on contingency table data” has been added. Several other learning objective statements have been updated. For instance, the LOS “explain a test statistic, type I and type II errors, a significance level, and how significance levels are used in hypothesis testing” has been updated to include the power of a test. It now reads, “explain a test statistic, type I and type II errors, a significance level, and how significance levels are used in hypothesis testing, and the power of a test.” 

II. Economics

There has been no major content revision on this topic. Minor changes have been made to two readings.

Updated Readings

• The LOS “explain the IS and LM curves and how they combine to generate the aggregate demand curve” in reading 10: Aggregate output, prices, and economic growth has been updated. It now only talks about how the aggregate demand curve is generated.
• The LOS “describe credit cycles” has been introduced to reading 11: Understanding business cycles.

III. Financial Statement Analysis

Just like economics, no major changes have been made in this reading. Only one LOS in reading 24: Non-current (long-term) liabilities, has been revised.

IV. Corporate Issuers

Formerly known as corporate finance, the corporate issuer is now the fourth topic. Several changes have been made to this topic. Only one reading, reading 32:– Measures of leverage, has remained constant. A lot of readings have been introduced and a number removed.

Added Readings

• Reading 28 – Uses of Capital
• Reading 29 – Sources of Capital
• Reading 30 – Cost of Capital – Foundational Topics
• Reading 31 – Capital Structure

Deleted Readings

• Reading 32 (in the 2020 curriculum) – Capital budgeting
• Reading 33 (in the 2020 curriculum) – Cost of capital
• Reading 35 (in the 2020 curriculum) – Working capital management

Updated Readings

Only one reading, reading 27 – Introduction to corporate governance and other ESG considerations, has been updated to include ESG content.

V. Equities

Like economics and financial statements and analysis, no major content modification has been made in this topic. The only notable change is the split of the LOS “compare methods by which companies can be grouped, current industry classification systems, and classify a company, given a description of its activities and the classification system”, in the introduction to industry and company analysis, into two. The two LOSs are; compare methods by which companies can be grouped, describe current industry classification systems, and identify how a company should be classified, given a description of its activities and the classification system.

VI. Fixed Income

There are no new readings on this topic. It is noteworthy that no readings have been removed. However, several readings have been updated.

Updated Readings

• Reading 42 – Introduction to asset-backed securities: An LOS “describe characteristics and risks of covered bonds and how they differ from other asset-backed securities” has been added.
• Reading 43 – Understanding fixed income risk and return: An LOS “describe the difference between empirical duration and analytical duration” has been added.
• Reading 44 – Fundamentals of credit analysis: No major content-related change has been made in this reading. The only change that has been made in this reading is that two learning objective statements have been worded differently.

VII. Derivatives

No change has been made on this topic.

VIII. Alternative Investments

Alternative investments had only one reading in the previous curriculum. The current curriculum still has only one reading, reading 47: Introduction to Alternative Investments. However, major content revision has been done in the reading.

IX. Portfolio Management

One reading has been added, and two readings updated. No reading has been deleted.

Added Readings

• Reading 52 – The behavioral biases of individuals.

Updated Readings

• Reading 51: Basics of portfolio planning and construction – The content has been revised to include ESG consideration.
• Reading 54: Technical analysis – More examples have been added.

X. Ethics

Formerly the first topic in previous editions, Ethical and Professional Standards is now the last.

Added Reading

• Reading 60 – Ethics Applications

Deleted Reading

• Reading 5 – Global Investment and Performance Standards (GIPS).

Updated Reading

Reading 59 – Introduction to GIPS.

• Describe the key concepts of GIPS Standards for firms.
• Describe the fundamentals of compliance, including the recommendations of the GIPS standards concerning the definition of the firm and the firm’s definition of discretion.
• Describe the concept of independent verification.