fbpixel 101 concepts level II | IFT World - Part 3
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LM01 Alternative Investment Features, Methods, and Structures
LM01 Categories, Characteristics, and Compensation Structures of Alternative Investments
LM01 Corporate Structures and Ownership
LM01 Derivative Instrument and Derivative Market Features
LM01 Derivative Instrument and Derivative Market Features
LM01 Ethics and Trust in the Investment Profession
LM01 Ethics and Trust in the Investment Profession
LM01 Fixed-Income Instrument Features
LM01 Fixed-Income Securities: Defining Elements
LM01 Introduction to Financial Statement Analysis
LM01 Introduction to Financial Statement Analysis
LM01 Market Organization & Structure
LM01 Market Organization and Structure
LM01 Organizational Forms, Corporate Issuer Features, and Ownership
LM01 Portfolio Management Overview
LM01 Portfolio Management: An Overview
LM01 Rates and Returns
LM01 The Firm & Market Structures
LM01 Time Value of Money
LM01 Topics in Demand and Supply Analysis
LM02 Alternative Investment Performance and Returns
LM02 Analyzing Income Statements
LM02 Code of Ethics and Standards of Professional Conduct
LM02 Code of Ethics and Standards of Professional Conduct Profession
LM02 Financial Reporting Standards
LM02 Fixed Income Markets - Issuance Trading and Funding
LM02 Fixed-Income Cash Flows and Types
LM02 Forward Commitment and Contingent Claim Features and Instruments
LM02 Forward Commitment and Contingent Claim Features and Instruments
LM02 Introduction to Corporate Governance and Other ESG Considerations
LM02 Investors and Other Stakeholders
LM02 Organizing, Visualizing, and Describing Data
LM02 Performance Calculation and Appraisal of Alternative Investments
LM02 Portfolio Risk & Return: Part I
LM02 Portfolio Risk and Return Part I
LM02 Security Market Indexes
LM02 Security Market Indexes
LM02 The Firm and Market Structures
LM02 Time Value of Money in Finance
LM02 Understanding Business Cycles
LM03 Aggregate Output, Prices and Economic Growth
LM03 Analyzing Balance Sheets
LM03 Business Models & Risks
LM03 Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits
LM03 Derivative Benefits, Risks, and Issuer and Investor Uses
LM03 Derivative Benefits, Risks, and Issuer and Investor Uses
LM03 Fiscal Policy
LM03 Fixed-Income Issuance and Trading
LM03 Guidance for Standards I-VII
LM03 Guidance for Standards I–VII
LM03 Introduction to Fixed Income Valuation
LM03 Investments in Private Capital: Equity and Debt
LM03 Market Efficiency
LM03 Market Efficiency
LM03 Portfolio Risk & Return: Part II
LM03 Portfolio Risk and Return Part II
LM03 Private Capital, Real Estate, Infrastructure, Natural Resources, and Hedge Funds
LM03 Probability Concepts
LM03 Statistical Measures of Asset Returns
LM03 Understanding Income Statements
LM04 An Introduction to Asset-Backed Securities
LM04 Analyzing Statements of Cash Flows I
LM04 Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives
LM04 Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives
LM04 Basics of Portfolio Planning & Construction
LM04 Basics of Portfolio Planning and Construction
LM04 Capital Investments
LM04 Common Probability Distributions
LM04 Fixed-Income Markets for Corporate Issuers
LM04 Introduction to the Global Investment Performance Standards (GIPS)
LM04 Introduction to the Global Investment Performance Standards (GIPS)
LM04 Monetary Policy
LM04 Overview of Equity Securities
LM04 Overview of Equity Securities
LM04 Probability Trees and Conditional Expectations
LM04 Real Estate and Infrastructure
LM04 Understanding Balance Sheets
LM04 Understanding Business Cycles
LM04 Working Capital and Liquidity.
LM05 Analyzing Statements of Cash Flows II
LM05 Capital Investments and Capital Allocation
LM05 Company Analysis: Past and Present
LM05 Fixed-Income Markets for Government Issuers
LM05 Introduction to Geopolitics
LM05 Introduction to Industry and Company Analysis
LM05 Monetary and Fiscal Policy
LM05 Natural Resources
LM05 Portfolio Mathematics
LM05 Pricing and Valuation of Forward Contracts and for an Underlying with Varying Maturities
LM05 Pricing and Valuation of Forward Contracts.
LM05 Sampling and Estimation
LM05 The Behavioral Biases of Individuals
LM05 The Behavioral Biases of Individuals
LM05 Understanding Cash Flow Statements
LM05 Understanding Fixed-Income Risk and Return
LM05 Working Capital & Liquidity
LM06 Analysis of Inventories
LM06 Capital Structure
LM06 Cost of Capital-Foundational Topics
LM06 Equity Valuation: Concepts and Basic Tools
LM06 Financial Analysis Techniques
LM06 Fixed-Income Bond Valuation: Prices and Yields
LM06 Fundamentals of Credit Analysis
LM06 Hedge Funds
LM06 Hypothesis Testing
LM06 Industry and Competitive Analysis
LM06 International Trade
LM06 Introduction to Geopolitics
LM06 Introduction to Risk Management
LM06 Introduction to Risk Management
LM06 Pricing and Valuation of Futures Contracts
LM06 Pricing and Valuation of Futures Contracts
LM06 Simulation Methods
LM07 Analysis of Long-Term Assets
LM07 Business Models
LM07 Capital Flows and the FX Market
LM07 Capital Structure
LM07 Company Analysis: Forecasting
LM07 Estimation and Inference
LM07 International Trade and Capital Flows
LM07 Introduction to Digital Assets
LM07 Introduction to Linear Regression
LM07 Inventories
LM07 Pricing and Valuation of Interest Rate and Other Swaps
LM07 Pricing and Valuation of Interest Rates and Other Swaps
LM07 Technical Analysis
LM07 Yield and Yield Spread Measures for Fixed-Rate Bonds.
LM08 Currency Exchange Rates
LM08 Equity Valuation: Concepts and Basic Tools
LM08 Exchange Rate Calculations
LM08 Fintech in Investment Management
LM08 Hypothesis Testing
LM08 Long Lived Assets
LM08 Measures of Leverage
LM08 Pricing and Valuation of Options
LM08 Pricing and Valuation of Options
LM08 Topics in Long-Term Liabilities and Equity
LM08 Yield and Yield Spread Measures for Floating-Rate Instruments
LM09 Analysis of Income Taxes
LM09 Income Taxes
LM09 Option Replication Using Put-Call Parity
LM09 Option Replication Using Put–Call Parity
LM09 Parametric and Non-Parametric Tests of Independence
LM09 The Term Structure of Interest Rates: Spot, Par, and Forward Curves
LM10 Financial Reporting Quality
LM10 Interest Rate Risk and Return
LM10 Non-current (Long-Term) Liabilities
LM10 Simple Linear Regression
LM10 Valuing a Derivative Using a One-Period Binomial Model
LM10 Valuing a Derivative Using a One-Period Binomial Model
LM11 Financial Analysis Techniques
LM11 Financial Reporting Quality
LM11 Introduction to Big Data Techniques
LM11 Yield-Based Bond Duration Measures and Properties
LM12 Applications of Financial Statement Analysis
LM12 Introduction to Financial Statement Modeling
LM12 Yield-Based Bond Convexity and Portfolio Properties
LM13 Curve-Based and Empirical Fixed-Income Risk Measures
LM14 Credit Risk
LM15 Credit Analysis for Government Issuers
LM16 Credit Analysis for Corporate Issuers
LM17 Fixed-Income Securitization
LM18 Asset-Backed Security (ABS) Instrument and Market Features
LM19 Mortgage-Backed Security (MBS) Instrument and Market Features
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Category: Essential Concepts for Level II

Essential Concept 21: Investments in Associates and Joint Ventures

An investment is considered an “associate company” when the investor has (or can exercise) significant influence, but not control, over the investee’s business activities. Significant influence is presumed with 20 – 50% ownership or voting power of the associate (investee). Significant influence may be evidenced by: Representation on the board of directors Participation in the policy-making process Material transactions between the investor and the investee Interchange of managerial personnel Technological dependency Joint ventures are ventures undertaken and controlled by two or more parties. IFRS identifies two characteristics of joint ventures as: A contractual arrangement exists between two or more venturers…. Read More

101 concepts level II

Essential Concept 22: Business Combinations

Under IFRS, there is no distinction between business combinations. Under US GAAP, there are four types: merger, acquisition, consolidation, and variable interest entity. The acquisition method is used for business combinations. Acquisition method The major points related to the acquisition method are listed below: Identifiable tangible and intangible assets (brand names, patents etc.) and liabilities of the acquired company are measured at fair value on the date of the acquisition. Assets and liabilities that were not previously recognized by the acquiree must be recognized by the acquirer. The acquirer must recognize any contingent liability if it can be reliably measured… Read More

101 concepts level II

Essential Concept 23: Components of Pension Costs

Total periodic pension costs (TPPC) is equal to the contributions plus change in the pension liability during the year. Total periodic pension costs = net pension liability at the end of the period – net pension liability at the start of the period + employer contribution Each period, the periodic pension cost is recognized in profit or loss (P&L) and/or in other comprehensive income (OCI). Under IFRS, the periodic pension cost is viewed as having three components: IFRS Component IFRS Recognition Service costs Recognized in P&L. Net interest income/expense Recognized in P&L as the following amount: Net pension liability or… Read More

101 concepts level II

Essential Concept 24: Impact of Key DB Pension Assumptions

Assumption Impact of Assumption on Balance Sheet Impact of Assumption on Periodic Cost Higher discount rate. Lower obligation. Periodic pension costs will typically be lower because of lower opening obligation and lower service costs. Higher rate of compensation increase. Higher obligation. Higher service costs. Higher expected return on plan assets. No effect, because fair value of plan assets is used on balance sheet. Not applicable for IFRS. Lower periodic pension expense under US GAAP.

101 concepts level II

Essential Concept 25: Stock Options

Compensation expense related to stock options is reported at fair value. The fair value has to be estimated using an appropriate valuation model. The fair value of stock options is sensitive to inputs and assumptions of the valuation model: Exercise price up  ?  value of option down Stock price volatility up  ?  value of option up Estimated life of each award  ?  value of option up Estimated dividend yield up  ?  value of call option down Risk free rate up  ?  value of call option up In accounting for stock options, there are several important dates, including the grant date,… Read More

101 concepts level II

Essential Concept 26: Translation Methods

Many companies have operations in foreign countries. Subsidiaries located in foreign countries usually prepare their financial statements in the local currency. IFRS and US GAAP require parent companies to prepare consolidated financial statements in which the assets, liabilities, revenues, and expenses of both domestic and foreign subsidiaries are added to those of the parent company. To prepare consolidated financial statements, parent companies must translate the foreign currency financial statements into the parent’s presentation currency. If the foreign subsidiary’s functional currency is different from the parent’s presentation currency, the current rate method must be used. If the foreign subsidiary’s functional currency… Read More

101 concepts level II

Essential Concept 27: Comparison of Current Rate and Temporal Methods

Current Rate Method Temporal Method Monetary assets and liabilities Current rate Current rate Non-monetary assets and liabilities measured at current value Current rate Current rate Non-monetary assets and liabilities measured at historical cost Current rate Historical rates Equity (other than retrained earnings) Historical rates Historical rates Equity (retained earnings) Beginning balance plus translated net income less dividends translated at historical rate Revenue Average rate Average rate Most expenses Average rate Average rate Expenses related to assets translated at historical exchange rate Average rate Historical rates Treatment of the translation adjustment in the parent’s consolidated financial statements Accumulated as a separate… Read More

101 concepts level II

Essential Concept 28: The CAMELS Approach to Analyzing a Bank

The ‘CAMELS’ approach has six components which addresses the following questions: Capital adequacy – Does the bank have sufficient capital given its assets? Asset quality – What is the quality of the bank’s financial assets? Management capabilities – Is the management effective? What is its track record? Earnings – What is the level of earnings? What is the quality of earnings? Are earnings trending up or down? Liquidity: How strong is the liquidity position of the bank? What are the sources of funding? Are the sources of funding stable? Sensitivity to market risk: How sensitive are the bank’s earnings to… Read More

101 concepts level II

Essential Concept 29: Analyzing a Property & Casualty Insurance Company

Operations: Products and Distribution Property insurance protects against loss or damage to property. Casualty insurance also called liability insurance protects against legal liability related to a third party. The premiums are collected at the start of the insurance contract. These premiums are then invested during the float period. The float period represents the time difference between receiving premiums and making insurance payouts. In order to minimize payouts, insurance companies follow a prudent underwriting process. They charge a sufficient price for the risks borne by them. They also try to diversify their risks by not concentrating on one kind of policy,… Read More

101 concepts level II

Essential Concept 30: Analyzing a Life and Health Insurance Company

Operations: Products and Distribution There are three major sources of revenue for life and health insurance companies. Premiums Investment products and services Investment returns L&H polices are longer term compared to P&C policies. Also, L&H claims are more predictable compared to P&C claims. For these reasons, L&H companies can take more risk and therefore earn a higher return on their investments. Earnings characteristics The major expense components for L&H companies are: Benefit payments Annuity contract payments Contract surrender expenses: Some insurance policies accumulate cash value and policy holders have a right to cancel these policies before maturity. If cancelled, the… Read More

101 concepts level II
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