CFA Level 1 Prep- Financial Reporting and Analysis

Exam Weight 20% | Taught by Ankur Kulshrestha, CFA

This section contains four sub-sections.

First Sub-Section

The readings in the first section describe the general principles of financial reporting, underscoring the critical role of the analysis of financial reports in investment decision making. The first reading introduces the range of information that is available to analyze the financial performance of a company, including the principal financial statements (the income statement, balance sheet, cash flow statement, and statement of changes in owners’ equity), notes to those statements, and management discussion and analysis of results. A general framework for addressing most financial statement analysis tasks is also presented. A company’s financial statements are the end-products of a process for recording the business transactions of the company. The second reading illustrates this process, introducing such basic concepts as the accounting equation and accounting accruals. The presentation of financial information to the public by a company must conform to applicable financial reporting standards based on factors such as the jurisdiction in which the information is released. The final reading in this study session explores the roles of financial reporting standard-setting bodies and regulatory authorities. The International Accounting Standards Board’s conceptual framework and the movement towards global convergence of financial reporting standards are also described.

Second Sub-Section

The first three readings in the second section focus on the three major financial statements: the income statement, the balance sheet, and the cash flow statement. For each financial statement, the reading describes its purpose, construction, pertinent ratios, and common-size analysis. These readings provide a background for evaluating trends in a company’s performance over several measurement periods and for comparing the performance of different companies over a given period. The final reading covers in greater depth financial analysis techniques based on the financial reports. 

Third Sub-Section

The readings in this section examine financial reporting for specific categories of assets and liabilities. Analysts must understand the effects of alternative financial reporting policies on financial statements and ratios and be able to execute appropriate adjustments to enhance comparability between companies. In addition, analysts must be alert to differences between a company’s reported financial statements and economic reality. The description and measurement of inventories require careful attention because inventories are frequently the largest current asset for merchandising and manufacturing companies. For these companies, the measurement of inventory cost (i.e., cost of sales) is a critical factor in determining gross profit and other measures of profitability. Long-lived operating assets are often the largest category of assets on a company’s balance sheet. The analyst needs to scrutinize management’s choices with respect to recognizing expenses associated with these operating assets because of the potentially large effect such choices can have on reported earnings and the opportunities for financial statement manipulation. A company’s accounting policies (such as depreciation choices) can cause differences in taxes reported in financial statements and taxes reported on tax returns. Issues relating to deferred taxes are discussed. Non-current liabilities affect a company’s liquidity and solvency and have consequences for its long-term growth and viability. The notes to the financial statements must be carefully reviewed to ensure that all potential liabilities (e.g., leasing arrangements and other contractual commitments) are appropriately evaluated for their conformity to economic reality. Adjustments to the financial statements may be required to achieve comparability when evaluating several companies. 

Fourth Sub-Section

This section discusses financial reporting quality and shows the application of financial statement analysis to debt and equity investments. Frequently used tools and techniques for evaluating companies include common-size analysis, cross-sectional analysis, trend analysis, and ratio analysis. Beyond mere knowledge of these tools and techniques, however, the analyst must recognize the implications of accounting choices on the quality of a company’s reported financial results. Then the analyst can apply financial analysis techniques to tasks such as the evaluation of past and future financial performance, credit risk and analysis, the screening of potential equity investments, and other job needs. The readings also explain adjustments to reported financials that analysts often make. Such adjustments are often needed to put companies’ reported results on a comparable basis.

  • radio_button_checked
    Self paced
  • check
    enrollments9
  • font_download
    LanguagesEnglish
  • event
    Published DateJul 20, 2018
  • radio_button_checked
    Documents: 1
  • play_circle_filled
    Video: 88
  • content_paste
    Test: 25

Course Highlights

  • check_circle
    Understanding the general principles of financial reporting
  • check_circle
    Focus on Income statement, Balance sheet & Cash flow statement
  • check_circle
    Examine financial reports for specific category of asset & liabilities

Schedule

Section 1 - PPT slides for FRA
  • subject
    CFA_FRA_LI_2017
Section 2 - Reading 21: Financial Statement Analysis
  • class
    Basics on FRA- 1
  • class
    Basics on FRA- 2
  • class
    Audit & Audit Reports
  • class
    Structure of Financial Analysis
  • content_paste
    Reading 21 Quiz 1
Section 3 - Reading 22: Financial Reporting Mechanics
  • class
    Basics on FRA- 3
  • class
    Basics on FRA- 4
  • content_paste
    Reading 22 Quiz 1
Section 4 - Reading 23: Financial Reporting Standards
  • content_paste
    Reading 23 Quiz 1
Section 5 - Reading 24: Understanding Income Statements
  • class
    Basics on Income Statement
  • class
    Revenue Recognition Rules
  • class
    Expense Measurement Rules
  • content_paste
    Reading 24 Quiz 1
  • class
    Accrual and Cash Mismatch: Four New Terms
  • class
    Gross and Net Reporting of Revenue
  • content_paste
    Reading 24 Quiz 2
  • class
    Exception to Accrual_Long Term Contracts-1
  • class
    Exception to Accrual_Long Term Contracts-2
  • class
    Exception to Accrual_Long Term Contracts-3
  • class
    Exception to Accrual_Long Term Contracts-4
  • class
    Installment sales- Revenue Recognition
  • content_paste
    Reading 24 Quiz 3
  • class
    Barter Transaction Revenue Recognition
  • class
    Other Comprehensive Income (OCI)
  • class
    Non Sustainable Items
  • class
    Change in Principles and Estimates
  • class
    Basics EPS Overview
  • class
    Basic EPS Calculation
  • class
    Diluted EPS_1
  • class
    Diluted EPS_2
  • class
    Diluted EPS_3
  • class
    Treatment of options under diluted EPS
  • content_paste
    Reading 24 Quiz 4
Section 6 - Reading 25: Understanding Balance Sheets
  • class
    Basics on Balance Sheet
  • content_paste
    Reading 25 Quiz 1
  • class
    Operating Cycle
  • class
    Different valuation Bases
  • content_paste
    Reading 25 Quiz 2
  • class
    Other Assets and Liabilities
  • class
    Treasury Stock
  • class
    St. of change in Owners Equity
  • content_paste
    Reading 25 Quiz 3
  • class
    Overview of Passive Investments
  • class
    Fair Value Model: Passive Investments
  • class
    HTM, AFS and Trading Securities
  • class
    More examples on Passive Investments
  • content_paste
    Reading 25 Quiz 4
Section 7 - Reading 26: Understanding Cash Flow Statements
  • class
    Overview on Cash Flow Statements
  • class
    Clarification on Interest/Dividends_USGAAP Vs IFRS
  • class
    Tax Flows_US GAAP Vs IFRS
  • class
    Direct Method of CFO -Basics and Example
  • class
    Indirect Method of CFO -Basics and Example
  • class
    Indirect to Direct Method conversion: Part 1
  • class
    Indirect to Direct Method conversion Part 2
  • class
    Indirect to Direct Method conversion Part 3
  • class
    Indirect to Direct Method conversion Part 4
  • content_paste
    Reading 26 Quiz 1
  • class
    Free Cash Flow Calculation
Section 8 - Reading 27: Financial Analysis Techniques
  • class
    Basics on Ratios
  • class
    Activity Ratios
  • class
    Liquidity Ratios
  • class
    Solvency Ratios
  • class
    Profitability Ratios
  • class
    Du-Pont Analysis
  • class
    Valuation Ratios and Business Risk
  • class
    Limitations of Financial Ratios
  • class
    Common Sizing and Financial Statements
  • content_paste
    Reading 27 Quiz 1
Section 9 - Reading 28: Inventories
  • class
    Basics on Inventories
  • content_paste
    Reading 28 Quiz 1
  • class
    LiFO Liquidation
  • class
    Change of method from LIFO to FIFO
  • content_paste
    Reading 28 Quiz 2
  • class
    Write up and Write Down
  • content_paste
    Reading 28 Quiz 3
  • class
    Issues for the analyst
Section 10 - Reading 29: Long-lived Assets
  • content_paste
    Reading 29 Quiz 1
  • class
    What is Impairment
  • class
    Analysis of Impairment of Assets
  • class
    Examples of Impairment of Assets
  • content_paste
    Reading 29 Quiz 2
  • content_paste
    Reading 29 Quiz 3
  • class
    Investment Property (Fair Value Model)
  • class
    Revaluation Model
  • class
    Revaluation vs Fair Value Model
  • content_paste
    Reading 29 Quiz 4
Section 11 - Reading 30: Income Taxes
  • class
    Overview of Income Tax
  • class
    Calculation of Deferred Taxes
  • class
    Deferred Taxes: Full Practice Example
  • class
    Valuation of Deferred taxes- Important Points
  • class
    Reversal of Deferred Taxes
  • class
    Tax Base of Asset and Liability
  • class
    Relationship- Deferred taxes and CFO (Indirect Method)
  • content_paste
    Reading 30 Quiz 1
Section 12 - Reading 31: Non Current (Long Term) Liabilities
  • class
    Basics on Lease and Different Types
  • class
    How to differentiate between Operating Lease from Financial Lease
  • class
    Accounting for Lessee
  • class
    Accounting for Lessor
  • class
    Sales Type Lease (Type of Fin Lease)
  • class
    Other Misc points in Leases
  • content_paste
    Reading 31 Quiz 1
  • class
    Basics on Bonds/Financial Liabilities
  • class
    Accounting for financial bonds
  • content_paste
    Reading 31 Quiz 2
Section 13 - Reading 32: Financial Reporting Quality
  • class
    Earning and Reporting Quality
  • class
    Aggressive and Conservative Accounting
  • class
    Manipulation Sign and Motives
  • content_paste
    Reading 32 Quiz 1
Section 14 - Reading 33: Financial Statement Analysis
  • class
    Forecasting of Income Statement & CFS
  • class
    Credit Appraisal using FRA
  • class
    Equity Screening using FRA
  • class
    Analyst Adjustments
  • content_paste
    Reading 33 Quiz 1

Instructor

Amit ParakhIndiaContact Instructor

Amit Parakh is one of the most qualified global trainers in the CFA Program and FRM space. He has a B-Com from Calcutta University and an MBA from IIMA. Having aced Chartered Accountancy (a national rank), FRM, CS, CFA exams all in first attempt, he knows what it takes. Amit has been with ICICI Bank in the structured finance division. He has also been a sell side equity analyst with JP Morgan. He carries an extensive experience of teaching specialized courses in derivative and fixed income.