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CFA Course of Study Changes

2015
Level 1
August 2014

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CFA Level 1 Curriculum Changes 2015


The CFA Institute has now released the Level 1 Course of Study for 2015, and there are a number of
changes from 2014. 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

The Readings for Ethical and Professional Standards has been updated to the new 11th Edition
of the Standards of Practice Handbook
In addition, 3 new Readings have been added; 1 each in Financial Reporting & Analysis, Fixed
Income and Derivatives
6 Readings have been removed; 2 in Financial Reporting & Analysis and 4 in Derivatives
In total 38 new LOS have been added, while 6 have been amended, and 39 have been removed
10 out of the 18 Study Sessions have been effected by changing LOS
There is also a small adjustment in exam weighting guidelines affecting 4 subjects

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Exam Weighting Summary


There has been minimal movement in the exam weightings, resulting with a greater emphasis on
Portfolio Management, which has increased from 5% up to 7% and Alternative Investments (up to 4%)

Subject

Study
Sessions

Exam Weighting
2014

Exam Weighting
2015

Net Change

Ethical and Professional


Standards

15%

15%

2,3

12%

12%

4,5,6

10%

10%

7,8,9,10

20%

20%

Corporate Finance

11

8%

7%

-1%

Portfolio Management

12

5%

7%

+2%

Equity

13,14

10%

10%

Fixed Income

15,16

12%

10%

-2%

Derivatives

17

5%

5%

Alternative Investments

18

3%

4%

+1%

Quantitative Methods
Economics
Financial Reporting and
Analysis

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Study Session 1: Ethical and Professional Standards

1.1 Reading Text Changes


In 2015, Readings 1 and 2 refer 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 2014

1.3 Exam Weighting Change


NO CHANGE FROM 2014

http://www.cfainstitute.org/ethics/codes/ethics/pages/periodic_review.aspx


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Study Session 2: Quantitative Methods - Basic Concepts

2.1 Reading Text Changes


NO CHANGE FROM 2014

2.2 LOS Changes


NO CHANGE FROM 2014

2.3 Exam Weighting Change


NO CHANGE FROM 2014

Study Session 3: Quantitative Methods Application

3.1 Reading Text Changes


NO CHANGE FROM 2014

3.2 LOS Changes


3.2.1
LOS
q.

Reading 9: Common Probability Distributions


Change type
Partial
Change:
Remove
Word

2014 Syllabus
Explain Monte Carlo simulation and
describe its major applications and
limitations

2015 Syllabus
Explain Monte Carlo simulation and
describe its applications and
limitations

Comment: By removing the word major could imply the Candidate needs to have a deeper knowledge of
Monte Carlo simulations applications.

3.3 Exam Weighting Change


NO CHANGE FROM 2014

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Study Session 4: Economics

4.1 Reading Text Changes


NO CHANGE FROM 2014

4.2 LOS Changes


NO CHANGE FROM 2014

4.3 Exam Weighting Change


NO CHANGE FROM 2014

Study Session 5: Economics Macroeconomic Analysis

5.1 Reading Text Changes


NO CHANGE FROM 2014

5.2 LOS Changes


5.2.1

Reading 17: Aggregate Output, Prices, and Economic Growth

LOS

Change type

2014 Syllabus

j.

New

5.2.2

2015 Syllabus
distinguish between the following
types of macroeconomic equilibria:
long-run full employment, short-run
recessionary gap, short-run
inflationary gap, and short-run
stagflation;

Reading 19: Monetary and Fiscal Policy

LOS

Change type

2014 Syllabus

i.

New

5.3 Exam Weighting Change


NO CHANGE FROM 2014

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2015 Syllabus
describe the monetary transmission
mechanism

Study Session 6: Economics Economics in a Global Context

6.1 Reading Text Changes


NO CHANGE FROM 2014

6.2 LOS Changes


6.2.1

Reading 20: International Trade and Capital Flows

LOS

Change type

2014 Syllabus

g.

New

2015 Syllabus
describe common objectives of
capital restrictions imposed by
governments

6.3 Exam Weighting Change


NO CHANGE FROM 2014

Study Session 7: Financial Reporting and Analysis An


Introduction

7.1 Reading Text Changes


NO CHANGE FROM 2014

7.2 LOS Changes


NO CHANGE FROM 2014

7.3 Exam Weighting Change


NO CHANGE FROM 2014

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Study Session 8: Financial Reporting and Analysis Income


Statements, Balance Sheets, and Cash Flow Statements

8.1 Reading Text Changes


NO CHANGE FROM 2014

8.2 LOS Changes


8.2.1

Reading 26: Understanding Balance Sheets

LOS

Change type

g.

Removed

2014 Syllabus
Analyze balance sheets and statements
of changes in equity

2015 Syllabus
-

Study Session 9: Financial Reporting and Analysis


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

9.1 Reading Text Changes


NO CHANGE FROM 2014

9.2 LOS Changes


9.2.1
LOS
f.

Reading 32: Non-Current (Long Term) Liabilities


Change type
Partial
Change:
Remove
Word

2014 Syllabus

2015 Syllabus

Explain the motivations for leasing


assets instead of purchasing them

Explain motivations for leasing assets


instead of purchasing them

9.3 Exam Weighting Change


NO CHANGE FROM 2014

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10 Study Session 10 Financial Reporting and Analysis Financial


Reporting Quality and Financial Statement Analysis
10.1 Reading Text Changes
In 2015 there is one new Reading:

Reading 33 Financial Reporting Quality

2 Readings from 2014 have been removed:

2014 Reading 33 Financial Reporting Quality: Red Flags and Accounting Warning Signs
2014 Reading 34 Accounting Shenanigans on the Cash Flow Statement

10.2 LOS Change


10.2.1

LOS

Reading 33: Financial Reporting Quality

Change
Type

2014
Syllabus

2015 Syllabus

a.

New

distinguish between financial reporting quality and quality of


reported results (including quality of earnings, cash flow, and
balance sheet items);

b.

New

describe a spectrum for assessing financial reporting quality;

c.

New

distinguish between conservative and aggressive accounting;

d.

New

e.

New

f.

New

g.

New

h.

New

i.

New

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describe motivations that might cause management to issue


financial reports that are not high quality;
describe conditions that are conducive to issuing low-quality, or
even fraudulent, financial reports;
describe mechanisms that discipline financial reporting quality and
the potential limitations of those mechanisms
describe presentation choices, including non-GAAP measures,
that could be used to influence an analysts opinion
describe accounting methods (choices and estimates) that could
be used to manage earnings, cash flow, and balance sheet items;
describe accounting warning signs and methods for detecting
manipulation of information in financial reports.

10.2.2

2014 Reading 33: Financial Reporting Quality: Red Flags and Accounting Warning Signs

LOS

Change
Type

2014 Syllabus

2015
Syllabus

a.

Removed

describe incentives that might induce a companys executives to


manage reported earnings, financial positions, and cash flows;

b.

Removed

describe activities that will result in a low quality of earnings

c.

Removed

d.

Removed

10.2.3

describe the three conditions that are generally present when


fraud occurs, including the risk factors related to these
conditions
describe common accounting warning signs and methods for
detecting each

2014 Reading 34 Accounting Shenanigans on the Cash Flow Statement

LOS

Change type

a.

Removed

b.

Removed

2014 Syllabus
describe reasons for investors to assess the quality of cash flow
statements
analyze and describe the following ways to manage or
manipulate the cash flow statement: stretching out payables,
financing of payables, securitization of receivables, issuing stock
options, and using stock buybacks.

10.3 Exam Weighting Change


NO CHANGE FROM 2014

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2015
Syllabus
-

11 Study Session 11: Corporate Finance


11.1 Reading Text Changes
NO CHANGE FROM 2014

11.2 LOS Changes


11.2.1
LOS

Reading 35: Capital Budgeting (Reading 36 in 2014)


Change type

a.

Partial
Change:
Removal

b.

Partial
Change:
Removal

d.

Partial
Change:
Removal

11.2.2

2015 Syllabus
describe the capital budgeting
process and distinguish among the
various categories of capital projects;
describe the basic principles of
capital budgeting
calculate and interpret net present
value (NPV), internal rate of return
(IRR), payback period, discounted
payback period, and profitability index
(PI) of a single capital project;

Reading 36: Capital Budgeting (Reading 36 in 2014)

LOS

Change type

c.

Removed

c.

2014 Syllabus
describe the capital budgeting process,
including the typical steps of the process, and distinguish among the various
categories of capital projects;
describe the basic principles of capital
budgeting, including cash flow
estimation;
calculate and interpret the results using
each of the following methods to
evaluate a single capital project: net
present value (NPV), internal rate of
return (IRR), payback period, discounted
payback period, and profitability index
(PI);

2014 Syllabus
Explain alternative methods of
calculating the weights used in the
WACC, including the use of the
companys target capital structure

New

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2015 Syllabus
Describe the use of target capital
structure in estimating WACC and
how target capital structure weights
may be determined

11.2.3

Reading 37: Measures of Leverage

LOS

Change type

a.

Partial
Change:
Removal

11.2.4
LOS

a.

2014 Syllabus
define and explain leverage, business
risk, sales risk, operating risk, and financial risk, and classify a risk, given a
description;

2015 Syllabus
define and explain leverage, business
risk, sales risk, operating risk, and
financial risk, and classify a risk;

Reading 38: Dividends and Share Repurchases: Basics


Change type

Partial
Change: New

2014 Syllabus

2015 Syllabus
Describe regular cash dividends,
extra dividends, liquidating
dividends, stock dividends, stock
splits, and reverse stock splits,
including their expected effect on
shareholders wealth and a
companys financial ratios;

Describe regular cash dividends, extra


dividends, stock dividends, stock splits,
and reverse stock splits, including their
expected effect on shareholders wealth
and a companys financial ratios;

11.3 Exam Weighting Change


Subject
Corporate Finance

Study
Sessions

Exam Weighting
2014

Exam
Weighting
2015

Net Change

11

8%

7%

-1%

12 Study Session 12: Portfolio Management


12.1 Reading Text Changes
NO CHANGE FROM 2014

12.2 LOS Change


NO CHANGE FROM 2014

12.3 Exam Weighting Change


Subject

Study
Sessions

Exam Weighting
2014

Exam Weighting
2015

Net Change

12

5%

7%

+2%

Portfolio Management

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13 Study Session 13: Equity Market Organization, Market


Indices, and Market Efficiency
13.1 Reading Text Changes
NO CHANGE FROM 2014

13.2 LOS Changes


NO CHANGE FROM 2014

13.3 Exam Weighting Change


NO CHANGE FROM 2014

14 Study Session 14: Equity Equity Analysis and Valuation


14.1 Reading Text Changes
NO CHANGE FROM 2014

14.2 LOS Changes


NO CHANGE FROM 2014

14.3 Exam Weighting Change


NO CHANGE FROM 2014

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15 Study Session 15: Fixed Income: Basic Concepts


15.1 Reading Text Changes
In 2015 there is one new Reading:

Reading 54 - Introduction to Asset Backed Securities

15.2 LOS Changes


15.2.1

Reading 54: Introduction to Asset Backed Securities

LOS

Change
Type

2014
Syllabus

a.

New

b.

New

c.

New

d.

New

e.

New

f.

New

g.

New

h.

New

2015 Syllabus
explain benefits of securitization for economies and financial
markets;
describe the securitization process, including the parties to the
process, the roles they play, and the legal structures involved;
describe types and characteristics of residential mortgage loans
that are typically securitized;
describe types and characteristics of residential mortgage-backed
securities, and explain the cash flows and credit risk for each type;
explain the motivation for creating securitized structures with
multiple tranches (e.g., collateralized mortgage obligations), and
the characteristics and risks of securitized structures;
describe the characteristics and risks of commercial mortgagebacked securities;
describe types and characteristics of non-mortgage asset-backed
securities, including the cash flows and credit risk of each type;
describe collateralized debt obligations, including their cash flows
and credit risk.;

15.3 Exam Weighting Change


Subject

Study
Sessions

Exam Weighting
2014

Exam Weighting
2015

Net Change

15,16

12%

10%

-2%

Fixed Income

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16 Study Session 16: Fixed Income Analysis of Risk


16.1 Reading Text Changes
NO CHANGE FROM 2014

16.2 LOS Change


16.2.1

Reading 55: Understanding Fixed-Income Risk and Return

LOS

Change type

2014
Syllabus

2015 Syllabus

d.

New

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

16.3 Exam Weighting Change

Subject

Study
Sessions

Exam Weighting
2014

Exam Weighting
2015

Net Change

15,16

12%

10%

-2%

Fixed Income

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17 Study Session 17: Derivatives


17.1 Reading Text Changes
In 2015 there is one new Reading:
Reading 58: Basics of Derivative Pricing and Valuation
4 Readings from 2014 have been removed:
2014 Reading 58: Forward Markets and Contracts
2014 Reading 59: Futures Markets and Contracts
2014 Reading 60: Option Markets and Contracts
2014 Reading 61: Swap Markets and Contracts

17.2 LOS Change


17.2.1

Reading 58: Basics of Derivative Pricing and Valuation

LOS

Change
Type

2014
Syllabus

a.

New

explain how the concepts of arbitrage, replication, and risk neutrality are
used in pricing derivatives;

b.

New

distinguish between value and price of forward and futures contracts;

c.

New

d.

New

e.

New

define a forward rate agreement and describe its uses;

f.

New

explain why forward and futures prices differ

g.

New

explain how swap contracts are similar to but different from a series of
forward contracts;

h.

New

distinguish between the value and price of swaps

i.

New

explain how the value of a European option is determined at expiration

j.

New

explain the exercise value, time value, and moneyness of an option

k.

New

identify the factors that determine the value of an option, and explain how
each factor affects the value of an option

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2015 Syllabus

explain how the value and price of a forward contract are determined at
expiration, during the life of the contract, and at initiation
describe monetary and nonmonetary benefits and costs associated with
holding the underlying asset, and explain how they affect the value and
price of a forward contract

l.

New

Explain put-call parity for European options

m.

New

Explain put-call-forward parity for European options

n.

New

explain how the value of an option is determined using a one-period


binomial model;

o.

New

explain under which circumstances the values of European and American


options differ.

17.2.2

2014 Reading 58: Forward Markets and Contracts

LOS

Change
Type

a.

Removed

explain delivery/settlement and default risk for both long and short
positions in a forward contract

b.

Removed

describe the procedures for settling a forward contract at expiration,


and how termination prior to expiration can affect credit risk

c.

Removed

distinguish between a dealer and an end user of a forward contract

d.

Removed

describe characteristics of equity forward contracts and forward


contracts on zero-coupon and coupon bonds

e.

Removed

describe characteristics of the Eurodollar time deposit market, and


define LIBOR and Euribor

f.

Removed

describe forward rate agreements (FRAs) and calculate the gain/loss


on a FRA

g.

Removed

calculate and interpret the payoff of a FRA and explain each of the
component terms of the payoff formula;

h.

Removed

describe characteristics of currency forward contracts

17.2.3

2014 Syllabus

2015
Syllabus

2014 Reading 59: Futures Markets and Contracts

LOS

Change
Type

a.

Removed

describe the characteristics of futures contracts;

b.

Removed

compare futures contracts and forward contracts;

c.

Removed

d.

Removed

e.

Removed

f.

Removed

2014 Syllabus

distinguish between margin in the securities markets and margin in the


futures markets, and explain the role of initial margin, maintenance
margin, variation margin, and settlement in futures trading
describe price limits and the process of marking to market, and
calculate and interpret the margin balance, given the previous days
balance and the change in the futures price
describe how a futures contract can be terminated at or prior to
expiration
describe characteristics of the following types of futures contracts:
Treasury bill, Eurodollar, Treasury bond, stock index, and currency

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2015
Syllabus

17.2.4

2014 Reading 60: Option Markets and Contracts

LOS

Change
Type

a.

Removed

describe call and put options

b.

Removed

distinguish between European and American options

c.

Removed

define the concept of moneyness of an option;

d.

Removed

compare exchange-traded options and over-the-counter options;

e.

Removed

identify the types of options in terms of the underlying instruments

f.

Removed

compare interest rate options with forward rate agreements (FRAs)

g.

Removed

define interest rate caps, floors, and collars

h.

Removed

calculate and interpret option payoffs and explain how interest rate
options differ from other types of options;

i.

Removed

define intrinsic value and time value, and explain their relationship;

j.

Removed

k.

Removed

l.

Removed

m.

Removed

explain putcall parity for European options, and explain how putcall
parity is related to arbitrage and the construction of synthetic options;

n.

Removed

explain how cash flows on the underlying asset affect putcall parity
and the lower bounds of option prices;

o.

Removed

Determine the directional effect of an interest rate change or


volatility change

17.2.5

2014 Syllabus

determine the minimum and maximum values of European options and


American options;
calculate and interpret the lowest prices of European and American
calls and puts based on the rules for minimum values and lower
bounds;
explain how option prices are affected by the exercise price and the
time to expiration;

2015
Syllabus

2014 Reading 61: Swap Markets and Contracts

LOS

Change
Type

2014 Syllabus

2015
Syllabus

a.

Removed

describe characteristics of swap contracts and explain how swaps are


terminated

b.

Removed

describe, calculate, and interpret the payments of currency swaps,


plain vanilla interest rate swaps, and equity swaps.

17.3 Exam Weighting Change


NO CHANGE FROM 2014

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18 Study Session 18: Alternative Investments


18.1 Reading Text Changes
NO CHANGE FROM 2014

18.2 LOS Change


NO CHANGE FROM 2014

18.3 Exam Weighting Change


Subject
Alternative Investments

Study
Sessions

Exam Weighting
2014

Exam Weighting
2015

Net Change

18

3%

4%

+1%

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