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2016-cfa-curriculum-updates/
CFA Level 1 Changes to Curriculum
The 11th edition of the Standards of Practice Handbook, effective July 2014, is still
relatively new so its no surprise that the Institute has not changed much from last
year’s level 1 exam. There are no changes to the Ethical and Professional
Standards study session on the exam.

The changes to the CFA level 1 2016 curriculum do not affect study session two or
three of Quantitative Methods.

The changes to the CFA level 1 2016 curriculum do not affect study session four
through six of Economics.

Study session seven, the introduction to Financial Reporting and Analysis, is the
first part of the CFA level 1 2016 curriculum where we see any changes.

 LOS 7.2.1b and 7.2.2e have added or removed words but there is no change to the
intent or the material you’ll need to study.
 LOS 7.2.2a is new: Describe how business activities are classified for financial
reporting purposes

Study session eight includes a new LOS (8.2.1d): Describe key aspects of the
converged accounting standards issued by the International Accounting Standards
Board and Financial Accounting Standards Board in May 2014.

Study session nine is where we see the most CFA level 1 changes to the LOS

 9.2.1c now asks you to “compare” the different inventory methods across perpetual
and periodic inventory systems.
 9.2.1d through 9.2.1h have been removed and replaced
 9.2.1d through 9.2.1l are six new LOS

Make sure you spend some time on inventories section (Reading 29). There is a new
focus on the material and it accounts for a big portion of the changes.

Reading 30 of study session nine on Long-Lived Assets has also been changed
significantly

 9.2.2c and 9.2.2d have been removed

 9.2.2f now only asks you to describe the different amortization methods and
calculate amortization expense
 9.2.2 (b,c,d,e,g,k,o,p) are all new LOS on the 2016 CFA level 1 exam. That’s a
quarter of the new LOS in just one reading so you can bet the Institute will be looking
at the section for the exam.
Reading 31 (Income Taxes) has one change, LOS 9.2.3h has been changed to be
more specific. You now need to, “Explain recognition and measurement of current
and deferred tax items.”

The changes to the CFA level 1 2016 curriculum do not affect study session ten
of Financial Reporting and Analysis.

The changes to the CFA level 1 2016 curriculum do not affect study session eleven
of Corporate Finance.

Reading 42 (Risk Management: An Introduction) in study session 12 is new.

The seven LOS for 12.2.1 are new so make sure you master the reading. You will
revisit risk management in more depth during the CFA level 2 and level 3 exams so
make sure you get a really good base of understanding in the first exam.

Study session 13 (Equity) includes one LOS change. LOS 13.2.1g has been
replaced. You no longer have to compare behavioral finance with traditional finance
but must instead describe behavioral finance and its relevance to market anomalies.

LOS 14.2.1 of study session 14 (equity) includes some wording change to d, g, h

and j. Most of the changes do not affect what you need to learn. Make sure you
understand how barriers to entry affect price competition and how the
macroeconomic picture influences industry growth and risk.

LOS 14.2.2 f and g include some wording changes. Neither of the changes is really
material but more to better define what you need to understand.

LOS 15.2.1 of study session 15 (Fixed Income) changes the word ‘functions’ for
‘content’ in the 2016 curriculum. It seems this a more general approach to the
section.

LOS 15.2.2e is new and places a little more emphasis on sovereign bonds.

LOS 15.2.2f and 15.2.2i include wording changes to take the emphasis off
sovereign bonds and highlight risks of repurchase agreements.

LOS 15.2.3 of Reading 55 (Intro to ABS) includes a lot of changes so make sure
your pay attention to the section. LOS 15.2.3 (b, e, g, h, i) include wording changes
but do not change the intent very much.

LOS 15.2.3 (c and f) are new while 15.2.3e has been replaced.

LOS 16.2.1 (d and e) include wording changes but do not materially affect your
studying. You no longer have to explain how embedded options affect interest rate
risk.
LOS 16.2.2b is new, you must now describe default probability and loss severity as
components of credit risk.

LOS 16.2.2f includes a wording change but only to better define that you need to
know the four Cs of credit analysis.

LOS 16.2.2i has been removed.

The changes to the CFA level 1 2016 curriculum do not affect study session 17
of Derivatives.

LOS 18.2.1 of Reading 61 (Intro to Alternative Investments) include wording

changes but do not affect the material or what you need to learn.

The majority of the CFA level 1 changes to the 2016 curriculum occur in study
sessions 7 and 9 (Financial Reporting), study session 12 (Portfolio Management),
and study sessions 15 and 16 (Fixed Income). Most of the wording changes do not
amount to much but pay attention to the new reading (SS 12) as well as the new
LOS. The easiest way to do this is just to highlight the sections that include the new
LOS and make sure you understand the material when you get there.