R21 | Financial Statement Analysis: An Introduction

This free ecourse is the first of ten ecourses on the Financial Analysis and Reporting topics of the 2019 CFA Level I Exams. While this targets the CFA Program, this ecourse is a foundation course for non-finance/non-accountants (including the investing general public), startup and small business entrepreneurs and financial analysts. 

Not only you will learn the core knowledge of Reading 21 useful for your exam preparation but also you will acquire value-added knowledge useful in real-life application. We call this lesson design our 2-in-1 course delivery as you train for both exam and practice.

The candidate should be able to: 

a. describe the roles of financial reporting and financial statement analysis;

b. 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;

c. describe the importance of financial statement notes and supplementary information—including disclosures of accounting policies, methods, and estimates—and management’s commentary;

d. describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls;

e. identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information;

f. describe the steps in the financial statement analysis framework.

You can learn this ecourse in under two hours on average for combined Lesson, Practice and Knowledge Summary sections. Each lesson slide has only few bullet points, avoiding unnecessary wordiness. Practice questions are random 1/4 of a comprehensive questions pool.

You will learn the relevant current standards from International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Standards (US GAAP) as we update this ecourse when the standards change.

You will learn the lessons of Reading 21 enriched with extra learning points that reinforce your knowledge of the reading material.

You will know which learning objective (both under Bloom and CFA Program) is achieved by each learning point and practice question. Plus you will get summary answers to CFA Program's Learning Outcome Statements or LOS (i.e. learning objectives) and compact definitions of key concepts covered in the ecourse.

You will read excerpts of relevant accounting standards so you can have exprience of interacting with the language of the IASB and FASB.

You will also understand the structure and general contents of financial statements of Microsoft under US GAAP and Rolls-Royce under IFRS and even discover key facts about thier businesses. For example, you will discover yourself how:

▸ Microsoft overcame declining product sales with services.

▸ Rolls-Royce dramatically increased its net profit 30x for the same amount of gross margin.

The content text readability is in plain English, easily understood by even age 13-15 learners.

Rather than stating the learning points for you to remember or understand, we frame them as questions for you to analyze and evaluate so you derive the learning points yourself using your innate intelligence, prior knowledge and even common sense. You are to make your best guess that even if you get the answer wrong you have made conceptual connections that help you retain your learning for longer.

You will also sharpen your learning achievement with flashcards, identifying the answer in either name or definition and stating the answer in either say-it-to-yourself-then-read  or say-it-out-loud spoken answers.  

You will enjoy studying more and reinforce your  learning when you play our gamified summary of learning points satisfying the learning objectives as well as the glossary for this ecourse. Games include space combat, crossword/cryptex puzzles, snakes and ladders, who wants to be a millionaire?, sudoku, and memory game. 

You can make your study notes within the ecourse. Plus you can engage with your fellow learners and the ecourse instructor with sharing notes and questions.  You can also view the lessons on non-interactive mode for offline studying.

When you pass the ecourse, you receive a Certificate of Self-Directed Learning Achievement, which includes a verifiable security code and also indicates any honor you received (e.g. Distinction or Merit).

eCPD Instructor Espinosa (CPA CFA MBA MA Law) is a consultant who has worked in New York, London and other major cities in Europe for Fortune 500 companies including as a VP for a major Swiss bank. He also taught in both undergraduate and graduate courses in accountancy, finance and MBA programs. He obtained 93.75% overall grade in US CPA Exams including 97% in Financial Accounting. He graduated with Merit in his law degree and a Distinction in his legal dissertation. He was a judge in 2015 CFA Institute Research Challenge of CFA New York. He has a knack for simplifying concepts and making learning points in theory and practice easily comprehensible.

USD 1.00 as standalone

USD 0.50 when bundled in 10-ecourse Financial Reporting and Analysis

R21-30 | Financial Statement Analysis

This ecourse bundle consists of ten ecourses on the Financial Analysis and Reporting topics of the 2019 CFA Exams Level I . While this targets the CFA Program, this ecourse is a foundation course for non-finance/non-accountants, startup and small business entrepreneurs and financial analysts.

The candidate should be able to: 

a. describe the roles of financial reporting and financial statement analysis; 

b. 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; 

c. describe the importance of financial statement notes and supplementary information—including disclosures of accounting policies, methods, and estimates—and management’s commentary; 

d. describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls; 

e. identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information; 

f. describe the steps in the financial statement analysis framework.

a. describe the objective of financial statements and the importance of financial reporting standards in security analysis and valuation;

b. describe roles and desirable attributes of financial reporting standard-setting bodies and regulatory authorities in establishing and enforcing reporting standards, and describe the role of the International Organization of Securities Commissions;

c. describe the status of global convergence of accounting standards and ongoing barriers to developing one universally accepted set of financial reporting standards;

d. 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;

e. describe general requirements for financial statements under International Financial Reporting Standards (IFRS);

f. compare key concepts of financial reporting standards under IFRS and US generally accepted accounting principles (US GAAP) reporting systems;

g. identify characteristics of a coherent financial reporting framework and the barriers to creating such a framework;

h. describe implications for financial analysis of differing financial reporting systems and the importance of monitoring developments in financial reporting standards;

i. analyze company disclosures of significant accounting policies.

a. describe the components of the income statement and alternative presentation formats of that statement;

b. 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;

c. calculate revenue given information that might influence the choice of revenue recognition method;

d. describe key aspects of the converged accounting standards for revenue recognition issued by the International Accounting Standards Board and Financial Accounting Standards Board in May 2014;

e. describe general principles of expense recognition, specific expense recognition applications, and implications of expense recognition choices for financial analysis;

f. describe the financial reporting treatment and analysis of non-recurring items (including discontinued operations, unusual or infrequent items) and changes in accounting policies;

g. distinguish between the operating and non-operating components of the income statement;

h. 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;

i. distinguish between dilutive and antidilutive securities and describe the implications of each for the earnings per share calculation;

j. convert income statements to common-size income statements;

k. evaluate a company’s financial performance using common-size income statements and financial ratios based on the income statement;

l. describe, calculate, and interpret comprehensive income;

m. describe other comprehensive income and identify major types of items included in it.

a. describe the elements of the balance sheet: assets, liabilities, and equity;

b. describe uses and limitations of the balance sheet in financial analysis;

c. describe alternative formats of balance sheet presentation;

d. distinguish between current and non-current assets and current and non-current liabilities;

e. describe different types of assets and liabilities and the measurement bases of each;

f. describe the components of shareholders’ equity;

g. convert balance sheets to common-size balance sheets and interpret common-size balance sheets;

h. calculate and interpret liquidity and solvency ratios.

a. 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;

b. describe how non-cash investing and financing activities are reported;

c. contrast cash flow statements prepared under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (US GAAP);

d. distinguish between the direct and indirect methods of presenting cash from operating activities and describe arguments in favor of each method;

e. describe how the cash flow statement is linked to the income statement and the balance sheet;

f. 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;

g. convert cash flows from the indirect to direct method;

h. analyze and interpret both reported and common-size cash flow statements;

i. calculate and interpret free cash flow to the firm, free cash flow to equity, and performance and coverage cash flow ratios.

a. describe tools and techniques used in financial analysis, including their uses and limitations;

b. classify, calculate, and interpret activity, liquidity, solvency, profitability, and valuation ratios;

c. describe relationships among ratios and evaluate a company using ratio analysis;

d. demonstrate the application of DuPont analysis of return on equity and calculate and interpret effects of changes in its components;

e. calculate and interpret ratios used in equity analysis and credit analysis;

f. explain the requirements for segment reporting and calculate and interpret segment ratios;

g. describe how ratio analysis and other techniques can be used to model and forecast earnings.

a. distinguish between costs included in inventories and costs recognised as expenses in the period in which they are incurred;

b. describe different inventory valuation methods (cost formulas);

c. calculate and compare cost of sales, gross profit, and ending inventory using different inventory valuation methods and using perpetual and periodic inventory systems;

d. calculate and explain how inflation and deflation of inventory costs affect the financial statements and ratios of companies that use different inventory valuation methods;

e. explain LIFO reserve and LIFO liquidation and their effects on financial statements and ratios;

f. convert a company’s reported financial statements from LIFO to FIFO for purposes of comparison;

g. describe the measurement of inventory at the lower of cost and net realisable value;

h. describe implications of valuing inventory at net realisable value for financial statements and ratios;

i. describe the financial statement presentation of and disclosures relating to inventories;

j. explain issues that analysts should consider when examining a company’s inventory disclosures and other sources of information;

k. calculate and compare ratios of companies, including companies that use different inventory methods;

l. analyze and compare the financial statements of companies, including companies that use different inventory methods.

a. distinguish between costs that are capitalised and costs that are expensed in the period in which they are incurred;

b. compare the financial reporting of the following types of intangible assets: purchased, internally developed, acquired in a business combination;

c. explain and evaluate how capitalising versus expensing costs in the period in which they are incurred affects financial statements and ratios;

d. describe the different depreciation methods for property, plant, and equipment and calculate depreciation expense;

e. describe how the choice of depreciation method and assumptions concerning useful life and residual value affect depreciation expense, financial statements, and ratios;

f. describe the different amortisation methods for intangible assets with finite lives and calculate amortisation expense;

g. describe how the choice of amortisation method and assumptions concerning useful life and residual value affect amortisation expense, financial statements, and ratios;

h. describe the revaluation model;

i. explain the impairment of property, plant, and equipment and intangible assets;

j. explain the derecognition of property, plant, and equipment and intangible assets;

k. explain and evaluate how impairment, revaluation, and derecognition of property, plant, and equipment and intangible assets affect financial statements and ratios;

l. describe the financial statement presentation of and disclosures relating to property, plant, and equipment and intangible assets;

m. analyze and interpret financial statement disclosures regarding property, plant, and equipment and intangible assets;

n. compare the financial reporting of investment property with that of property, plant, and equipment;

o. explain and evaluate how leasing rather than purchasing assets affects financial statements and ratios;

p. explain and evaluate how finance leases and operating leases affect financial statements and ratios from the perspective of both the lessor and the lessee.

a. 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;

b. 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;

c. calculate the tax base of a company’s assets and liabilities;

d. 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;

e. evaluate the effect of tax rate changes on a company’s financial statements and ratios;

f. distinguish between temporary and permanent differences in pre-tax accounting income and taxable income;

g. describe the valuation allowance for deferred tax assets—when it is required and what effect it has on financial statements;

h. explain recognition and measurement of current and deferred tax items;

i. 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;

j. identify the key provisions of and differences between income tax accounting under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP).

a. determine the initial recognition, initial measurement and subsequent measurement of bonds;

b. describe the effective interest method and calculate interest expense, amortisation of bond discounts/premiums, and interest payments;

c. explain the derecognition of debt;

d. describe the role of debt covenants in protecting creditors;

e. describe the financial statement presentation of and disclosures relating to debt;

f. explain motivations for leasing assets instead of purchasing them;

g. distinguish between a finance lease and an operating lease from the perspectives of the lessor and the lessee;

h. determine the initial recognition, initial measurement, and subsequent measurement of finance leases;

i. compare the disclosures relating to finance and operating leases;

j. compare the presentation and disclosure of defined contribution and defined benefit pension plans;

k. calculate and interpret leverage and coverage ratios.

eCPD Instructor Espinosa (CPA CFA MBA MA Law) is a consultant who has worked in New York, London and other major cities in Europe for Fortune 500 companies including as a VP for a major Swiss bank. He also taught in both undergraduate and graduate courses in accountancy, finance and MBA programs. He obtained 93.75% overall grade in US CPA Exams including 97% in Financial Accounting. He graduated with Merit in his law degree and a Distinction in his legal dissertation. He was a judge in 2015 CFA Institute Research Challenge of CFA New York. He has a knack for simplifying concepts and making learning points in theory and practice easily comprehensible.

USD 10.00 as standalone

USD 5.00 when bundled in 10-ecourse Financial Reporting and Analysis

R22 | Financial Reporting Standards

This ecourse is the second of ten ecourses on the Financial Analysis and Reporting topics of the 2019 CFA Level I Exams. While this targets the CFA Program, this ecourse is a foundation course for non-finance/non-accountants (including the investing general public), startup and small business entrepreneurs and financial analysts.

The candidate should be able to: 

a. describe the objective of financial statements and the importance of financial reporting standards in security analysis and valuation;

b. describe roles and desirable attributes of financial reporting standard-setting bodies and regulatory authorities in establishing and enforcing reporting standards, and describe the role of the International Organization of Securities Commissions;

c. describe the status of global convergence of accounting standards and ongoing barriers to developing one universally accepted set of financial reporting standards;

d. 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;

e. describe general requirements for financial statements under International Financial Reporting Standards (IFRS);

f. compare key concepts of financial reporting standards under IFRS and US generally accepted accounting principles (US GAAP) reporting systems;

g. identify characteristics of a coherent financial reporting framework and the barriers to creating such a framework;

h. describe implications for financial analysis of differing financial reporting systems and the importance of monitoring developments in financial reporting standards;

i. analyze company disclosures of significant accounting policies.

You will understand the structure and general contents of financial statements of Microsoft under US GAAP and Rolls-Royce under IFRS and even discover key facts about thier businesses. For example, you will discover yourself how:

▸ Microsoft overcame declining product sales with services.

▸ Rolls-Royce dramatically increased its net profit 30x for the same amount of gross margin.

The content text readability is in plain English, easily understood by even age 13-15 learners.

Rather than stating the learning points for you to remember or understand, we frame them as questions for you to analyze and evaluate so you derive the learning points yourself using your innate intelligence, prior knowledge and even common sense. You are to make your best guess that even if you get the answer wrong you have made conceptual connections that help you retain your learning for longer.

eCPD Instructor Espinosa (CPA CFA MBA MA Law) is a consultant who has worked in New York, London and other major cities in Europe for Fortune 500 companies including as a VP for a major Swiss bank. He also taught in both undergraduate and graduate courses in accountancy, finance and MBA programs. He obtained 93.75% overall grade in US CPA Exams including 97% in Financial Accounting. He graduated with Merit in his law degree and a Distinction in his legal dissertation. He was a judge in 2015 CFA Institute Research Challenge of CFA New York. He has a knack for simplifying concepts and making learning points in theory and practice easily comprehensible.

USD 1.00 as standalone

USD 0.50 when bundled in 10-ecourse Financial Reporting and Analysis