General Principle A fundamental principle of accrual accounting is that revenue is recognised (reported on the income statement) when it is earned, so the company’s financial records reflect revenue from the sale when the risk and reward of ownership is transferred; this is often when the company delivers the goods or services. If the delivery…
Monitoring Developments in Financial Reporting Standards New Products or Types of Transactions Evolving Standards and the Role of CFA Institute
International Organisation of Securities Commissions IOSCO’s comprehensive set of Objectives and Principles of Securities Regulation is updated as required and is recognised as an international benchmark for all markets. The principles of securities regulation are based upon three core objectives: IOSCO’s principles are grouped into 10 categories, including principles for regulators, for enforcement, for auditing, and for…
The role of financial statement analysis is to use financial reports prepared by companies, combined with other information, to evaluate the past, current, and potential performance and financial position of a company for the purpose of making investment, credit, and other economic decisions. In evaluating financial reports, analysts typically have a specific economic decision in…
Financial Statement Analysis Framework Phase Sources of Information Output Articulate the purpose and context of the analysis. The nature of the analyst’s function, such as evaluating an equity or debt investment or issuing a credit rating.Communication with client or supervisor on specific needs and concerns.Institutional guidelines related to developing specific work product. Statement of the…
In general, the relationship between a current or present value (PV) and future value (FV) of a cash flow, where r is the stated discount rate per period and t is the number of compounding periods, is as follows: If the number of compounding periods t is very large, that is, t→∞t\rightarrow \infin , we…
Implied Return for Fixed-Income Instruments Fixed-income instruments are characterised by contractual interest and principal cash flows. If we observe the present value (or price) and assume that all future cash flows occur as promised, then the discount rate (r) or yield-to-maturity (YTM) is a measure of implied return under these assumptions for the cash flow…
A measure of central tendency specifies where the data are centred. For a return series, a measure of central tendency shows where the empirical distribution of return is centred, essentially a measure of the “expected” return based on the observed sample. Measures of location, mean, median, and mode include not only measures of central tendency…
