Relationships Among Statements
Financial statements use the financial data that is reported in the accounting system... Read More
–LOS 15a: describe the roles of financial reporting and financial statement analysis
–LOS 15b: 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
–LOS 15c: describe the importance of financial statement notes and supplementary information — including disclosures of accounting policies, methods, and estimates — and management’s commentary
–LOS 15d: describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls
–LOS 15e: identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information
–LOS 15f: describe the steps in the financial statement analysis framework
– LOS 16a: describe the objective of financial statements and the importance of financial reporting standards in security analysis and valuation
– LOS 16b: describe roles and desirable attributes of financial reporting standard-setting bodies and regulatory authorities in establishing and enforcing reporting standards
– LOS 16c: 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
– LOS 16d: describe general requirements for financial statements under International Financial Reporting Standards (IFRS)
– LOS 16e: describe implications for financial analysis of differing financial reporting systems and the importance of monitoring developments in financial reporting standards
– LOS 17a: describe the components of the income statement and alternative presentation formats of that statement
– LOS 17b: 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
– LOS 17c: calculate revenue given information that might influence the choice of revenue recognition method
– LOS 17d: describe general principles of expense recognition, specific expense recognition applications, and implications of expense recognition choices for financial analysis
– LOS 17e: describe the financial reporting treatment and analysis of non-recurring items (including discontinued operations, unusual or infrequent items) and changes in accounting policies)
– LOS 17f: distinguish between the operating and non-operating components of the income statement
– LOS 17g: 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
– LOS 17h: distinguish between dilutive and antidilutive securities and describe the implications of each for the earnings per share calculation
– LOS 17i: convert income statements to common-size income statements
– LOS 17j: evaluate a company’s financial performance using common-size income statements and financial ratios based on the income statement
– LOS 17k: describe, calculate, and interpret comprehensive income
– LOS 17l: describe other comprehensive income and identify major types of items included in it
– LOS 18a: describe the elements of the balance sheet: assets, liabilities, and equity
– LOS 18b: describe uses and limitations of the balance sheet in financial analysis
– LOS 18c: describe alternative formats of balance sheet presentation
– LOS 18d: distinguish between current and non-current assets and current and noncurrent liabilities
– LOS 18e: describe different types of assets and liabilities and the measurement bases of each
– LOS 18f: describe the components of shareholders’ equity
– LOS 18g: demonstrate the conversion of balance sheets to common–size balance sheets and interpret common–size balance sheets
– LOS 18h: calculate and interpret liquidity and solvency ratios
– LOS 19a: 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
– LOS 19b: describe how non-cash investing and financing activities are reported
– LOS 19c: contrast cash flow statements prepared under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (US GAAP)
– LOS 19d: distinguish between the direct and indirect methods of presenting cash from operating activities and describe arguments in favor of each method
– LOS 19e: describe how the cash flow statement is linked to the income statement and the balance sheet
– LOS 19f: 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
– LOS 19g: demonstrate the conversion of cash flows from the indirect to direct method
– LOS 19h: analyze and interpret both reported and common-size cash flow statements
– LOS 19i: calculate and interpret free cash flow to the firm, free cash flow to equity, and performance and coverage cash flow ratios
– LOS 20a: describe tools and techniques used in financial analysis, including their uses and limitations
– LOS 20b: classify, calculate, and interpret activity, liquidity, solvency, profitability, and valuation ratios
– LOS 20c: describe relationships among ratios and evaluate a company using ratio analysis
– LOS 20d: demonstrate the application of DuPont analysis of return on equity and calculate and interpret effects of changes in its components
– LOS 20e: calculate and interpret ratios used in equity analysis and credit analysis
– LOS 20f: explain the requirements for segment reporting and calculate and interpret segment ratios
– LOS 20g: describe how ratio analysis and other techniques can be used to model and forecast earnings
– LOS 21a: distinguish between costs included in inventories and costs recognised as expenses in the period in which they are incurred
– LOS 21b: describe different inventory valuation methods (cost formulas)
– LOS 21c: calculate and compare cost of sales, gross profit, and ending inventory using different inventory valuation methods and using perpetual and periodic inventory systems
– LOS 21d: calculate and explain how inflation and deflation of inventory costs affect the financial statements and ratios of companies that use different inventory valuation methods
– LOS 21e: explain LIFO reserve and LIFO liquidation and their effects on financial statements and ratios
– LOS 21f: demonstrate the conversion of a company’s reported financial statements from LIFO to FIFO for purposes of comparison
– LOS 21g: describe the measurement of inventory at the lower of cost and net realisable value
– LOS 21h: describe implications of valuing inventory at net realisable value for financial statements and ratios
– LOS 21i: describe the financial statement presentation of and disclosures relating to inventories
– LOS 21j: explain issues that analysts should consider when examining a company’s inventory disclosures and other sources of information
– LOS 21k: calculate and compare ratios of companies, including companies that use different inventory methods
– LOS 21l: analyze and compare the financial statements of companies, including companies that use different inventory methods
– LOS 22a: identify and contrast costs that are capitalised and costs that are expensed in the period in which they are incurred
– LOS 22b: compare the financial reporting of the following types of intangible assets: purchased, internally developed, acquired in a business combination
– LOS 22c: explain and evaluate how capitalising versus expensing costs in the period in which they are incurred affects financial statements and ratios
– LOS 22d: describe the different depreciation methods for property, plant, and equipment and calculate depreciation expense
– LOS 22e: describe how the choice of depreciation method and assumptions concerning useful life and residual value affect depreciation expense, financial statements, and ratios
– LOS 22f: describe the different amortisation methods for intangible assets with finite lives and calculate amortisation expense
– LOS 22g: describe how the choice of amortisation method and assumptions concerning useful life and residual value affect amortisation expense, financial statements, and ratios
– LOS 22h: describe the revaluation model
– LOS 22i: explain the impairment of property, plant, and equipment and intangible assets
– LOS 22j: explain the derecognition of property, plant, and equipment and intangible assets
– LOS 22k: explain and evaluate how impairment, revaluation, and derecognition of property, plant, and equipment and intangible assets affect financial statements and ratios
– LOS 22l: describe the financial statement presentation of and disclosures relating to property, plant, and equipment and intangible assets
– LOS 22m: analyze and interpret financial statement disclosures regarding property, plant, and equipment and intangible assets
– LOS 22n: compare the financial reporting of investment property with that of property, plant, and equipment
– LOS 23a: describe the differences between accounting profit and taxable income and define key terms, including deferred tax assets, deferred tax liabilities, valuation allowance, taxes payable, and income tax expense
– LOS 23b: explain how deferred tax liabilities and assets are created and the factors that determine how a company’s deferred tax liabilities and assets should be treated for the purposes of financial analysis
– LOS 23c: calculate the tax base of a company’s assets and liabilities
– LOS 23d: calculate income tax expense, income taxes payable, deferred tax assets, and deferred tax liabilities, and calculate and interpret the adjustment to the financial statements related to a change in the income tax rate
– LOS 23e: evaluate the impact of tax rate changes on a company’s financial statements and ratios
– LOS 23f: identify and contrast temporary versus permanent differences in pre–tax accounting income and taxable income
– LOS 23g: describe the valuation allowance for deferred tax assets—when it is required and what impact it has on financial statements
– LOS 23h: explain recognition and measurement of current and deferred tax items
– LOS 23i: analyze disclosures relating to deferred tax items and the effective tax rate reconciliation and explain how information included in these disclosures affects a company’s financial statements and financial ratios
– LOS 23j: identify the key provisions of and differences between income tax accounting under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP)
– LOS 24a: determine the initial recognition, initial measurement and subsequent measurement of bonds
– LOS 24b: describe the effective interest method and calculate interest expense, amortisation of bond discounts/premiums, and interest payments
– LOS 24c: explain the derecognition of debt
– LOS 24d: describe the role of debt covenants in protecting creditors
– LOS 24e: describe the financial statement presentation of and disclosures relating to debt
– LOS 24f: explain motivations for leasing assets instead of purchasing them
– LOS 24g: explain the financial reporting of leases from a lessee’s perspective
– LOS 24h: explain the financial reporting of leases from a lessor’s perspective
– LOS 24i: compare the presentation and disclosure of defined contribution and defined benefit pension plans
– LOS 24j: calculate and interpret leverage and coverage ratios
– LOS 25a: distinguish between financial reporting quality and quality of reported results (including quality of earnings, cash flow, and balance sheet items)
– LOS 25b: describe a spectrum for assessing financial reporting quality
– LOS 25c: distinguish between conservative and aggressive accounting
– LOS 25d: describe motivations that might cause management to issue financial reports that are not high quality
– LOS 25e: describe conditions that are conducive to issuing low-quality, or even fraudulent, financial reports
– LOS 25f: describe mechanisms that discipline financial reporting quality and the potential limitations of those mechanisms
– LOS 25g: describe presentation choices, including non-GAAP measures, that could be used to influence an analyst’s opinion
– LOS 25h: describe accounting methods (choices and estimates) that could be used to manage earnings, cash flow, and balance sheet items
– LOS 25i: describe accounting warning signs and methods for detecting manipulation of information in financial reports
– LOS 26a: evaluate a company’s past financial performance and explain how a company’s strategy is reflected in past financial performance
– LOS 26b: demonstrate how to forecast a company’s future net income and cash flow
– LOS 26c: describe the role of financial statement analysis in assessing the credit quality of a potential debt investment
– LOS 26d: describe the use of financial statement analysis in screening for potential equity investments
– LOS 26e: explain appropriate analyst adjustments to a company’s financial statements to facilitate comparison with another company
– LOS 22a: describe how business activities are classified for financial reporting purposes
– LOS 22b: explain the relationship of financial statement elements and accounts, and classify accounts into the financial statement elements
– LOS 22c: explain the accounting equation in its basic and expanded forms
– LOS 22d: describe the process of recording business transactions using an accounting system based on the accounting equation
– LOS 22e: describe the need for accruals and valuation adjustments in preparing financial statements
– LOS 22f: describe the relationships among the income statement, balance sheet, statement of cash flows, and statement of owners’ equity
– LOS 22g: describe the flow of information in an accounting system
– LOS 22h: describe the use of the results of the accounting process in security analysis
LOS a: describe the steps in the financial statement analysis framework
LOS b: describe the roles of financial statement analysis
LOS a: explain the financial reporting and disclosures related to intangible assets
LOS b: explain the financial reporting and disclosures related to goodwill
LOS c: explain the financial reporting and disclosures related to financial instruments
LOS d: explain the financial reporting and disclosures related to non-current liabilities
LOS e: calculate and interpret common-size balance sheets and related financial ratios
LOS a: describe how the cash flow statement is linked to the income statement and the balance sheet
LOS c: demonstrate the conversion of cash flows from the indirect to direct method
LOS a: analyze and interpret both reported and common-size cash flow statements
LOS a: explain the financial reporting of leases from the perspectives of the lessors and lessees
LOS b: describe a spectrum for assessing financial reporting quality
LOS c: explain the difference between conservative and aggressive accounting
LOS b: calculate and interpret activity, liquidity, solvency, and profitability ratios
LOS c: describe relationships among ratios and evaluate a company using ratio analysis
LOS e: describe the uses of industry-specific ratios used in financial analysis
LOS f: describe how ratio analysis and other techniques can be used to model and forecast earnings
LOS a: demonstrate the development of a sales-based pro forma company model