Direfencias Ias Usgaap

Learning Outcome Statements Part 2CMA Section A. Financial Accounting Environment (Level A) Part 2CMA Sections A.1.
. Objectives of external financial reporting; 2. External financial statements; users and their needs; and 3. Development of accounting standards The candidate should be able to: identify the objectives of external financial reporting list the various users of financial statements and recognize their different needs demonstrate an understanding of the development of accounting standards in the U.S. identify the user groups that influence accounting standards, including the investing public and financial community, business entities and industrial associations, Financial Executives International and other professional organizations, American Institute of Certified Public Accountants (AICPA), CPA firms, government agencies, the American Accounting Association (AAA), the Institute of Management Accountants (IMA) and other professional accounting groups identify the organizational structure of the Financial Accounting Standards Board (FASB) list the due process steps of developing U.S. accounting standards identify the different types of statements that constitute U.S. Generally Accepted Accounting Principles (GAAP) and recognize which is most authoritative demonstrate an understanding of the FASBs relationship with the Securities and Exchange Commission (SEC) and the SECs influence on standard setting describe in general terms the structure and work products of the International Accounting Standards Board (IASB) Part 2CMA Section A.4. The SEC and its reporting requirements The candidate should be able to: identify the two major Acts establishing the SEC and its powers (Securities Act of 1933 and the Securities Exchange Act of 1934); and demonstrate knowledge of the major provisions of each describe the general reporting requirements of public companies define the integrated disclosure system, standardized financial statements, and Management Discussion and Analysis (MD&A) identify other disclosures regarding business operations identify and describe the SEC disclosure requirements, including the registration with SEC (initial filing), the annual report to SEC or Form 10-K, the quarterly report or Form 10-Q, disclosure of material events or Form 8-K, and proxy solicitations
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Learning Outcomes Statements
Part 2CMA Section A.5. Conceptual framework underlying financial statements The candidate should be able to: identify the goals and purposes of financial reporting identify the qualitative characteristics of accounting information
distinguish between the primary qualities of relevance and reliability and the secondary qualities of comparability and consistency identify the three different ingredients of each of the primary qualities list and define the basic elements of financial statements demonstrate an understanding of recognition and measurement concepts identify and describe the four basic assumptions of financial reporting identify and describe the four basic principles of accounting to record financial transactions identify the constraints that must be considered in preparing financial statements and describe the impact these constraints have on reporting financial information Part 2CMA Section A.6. Differences between IAS and U.S. GAAP The candidate should be able to: identify major recognition and measurement differences between U.S. GAAP and IASB GAAP and infer the effect on the financial statements recognize significance of allowed alternative treatment in several International Accounting Standards (IAS) Part 2CMA Section A.7. Role of external auditing The candidate should be able to: identify and describe the types of services offered by external auditors relating to financial reporting demonstrate an understanding of the distinct responsibilities of management and of auditors for the financial statements identify the type of audit report that would be issued given a specific set of facts determine which types of audit evidence would be most relevant to specific audit objectives and demonstrate an understanding of how that evidence would be maintained, assembled, and presented to the auditors Part 2CMA Section A.8. The annual report The candidate should be able to: identify the basic components of the annual report, including managements statement of responsibility for the financial statements and the independent auditors report demonstrate an awareness of the Audit Committees level of responsibility for the integrity of the financial information presented in the annual reports identify and describe other sections in the annual report, including the letter to shareholders, MD&A, and the statement on social responsibility
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Part 2CMA Section B. The Preparation of Financial Statements (Levels A, B, and C) Part 2CMA Section B.1. Principal financial statements and their purposes For the Statement of Financial Position (balance sheet), the Statement of Earnings (income statement), Statement of Cash Flows, and the Statement of Shareholders Equity, the candidate should be able to:
demonstrate an understanding of the purposes and uses of each type of financial statement identify the major components and classifications of each type of financial statement identify the limitations of each type of financial statement identify statement information that requires supplemental disclosure in the body of the statement or in the footnotes recognize correct format of financial information in the each type of financial statement Part 2CMA Section B.2. Asset recognition, measurement, valuation, and presentation The candidate should be able to: CASH & MARKETABLE SECURITIES define cash and distinguish between what is cash and what is not cash for purposes of asset classification on the balance sheet identify the correct classification of cash demonstrate an understanding of how cash is reported in the balance sheet determine when cash is considered restricted and indicate the proper disclosure requirements for restricted cash define cash equivalents (or marketable securities) ACCOUNTS RECEIVABLES define receivables distinguish between current (short-term) and noncurrent (long-term) receivables distinguish between trade and nontrade receivables define and calculate trade discounts define cash (or sales) discounts calculate and indicate the correct presentation for cash discounts using the gross method and using the net method demonstrate an understanding as to why present value concepts are ignored for shortterm notes when using U.S. GAAP identify issues related to the valuation of accounts receivable define net realizable value identify two methods recording uncollectibles and describe why the allowance method is the generally accepted approach
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calculate the allowance for uncollectibles using the percentage-of-sales (or income statement) approach; and indicate the correct accounting entry and proper presentation on the financial statements calculate the allowance for uncollectibles using the percentage of receivables (or balance sheet) approach; and indicate the correct accounting entry and proper presentation on the financial statements show how write-offs and collection of write-offs are treated in the financial statement demonstrate an understanding of sales returns and allowances
define promissory note discount a long-term note using time value of money tables and indicate its correct valuation at time of sale calculate the interest revenue and discount amortized for each time period of the note and indicate the proper presentation in the financial statements define imputed interest rate indicate the proper financial statement presentation for receivables when they are used as collateral define factoring receivables distinguish between receivables sold on a with recourse basis and those sold on a without recourse basis identify the three conditions that must be met for a sale of receivables to occur for purposes of financial statement presentation identify disclosure requirements for receivables in the body of the financial statements and/or in the footnotes INVENTORIES define inventories and identify the different types of inventories, including merchandise inventory, raw material inventory, work-in-process inventory, and finished goods inventory distinguish between perpetual and periodic inventory systems define modified perpetual inventory system value inventory using perpetual and periodic inventory systems and identify the different entries that would be made define cost of goods available for sale calculate cost of goods sold identify issues in inventory valuation, including which goods to include, what costs to include, and which cost assumption to use define goods in transit and differentiate between f.o.b. shipping point and f.o.b. destination identify when goods should be recorded as purchases define consigned goods demonstrate an understanding of special sale agreements, including sales with a buyback agreement (product financing arrangement), sales with high rates of returns, and sales on installment analyze the effects of inventory errors identify the costs included in inventory, including product costs and period costs
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calculate and indicate the correct entries and financial statement presentation for purchase discounts using the gross method and using the net method
identify and compare cost flow assumptions used in accounting for inventories calculate ending inventory and cost of goods sold using the specific identification, average cost, First-in-first-out (FIFO), and Last-in-last-out (LIFO) methods calculate the effect on income and on assets of using different inventory methods demonstrate an understanding of the LIFO reserve and LIFO liquidation calculate ending inventory and cost of goods sold using dollar-value LIFO identify advantages and disadvantages of the different inventory methods infer the inventory method that would likely be used given a set of facts and management goals apply the lower of cost or market rule identify when inventories are valued at net realizable value demonstrate an understanding of the relative sales value method identify accounting issues related to purchase commitments determine ending inventory by using the gross profit method and by using the retail inventory method identify disclosure requirements for inventory in the body of the financial statements and/or in the footnotes INVESTMENTS define debt securities identify and define the three categories of debt securities, including held-to-maturity securities, trading securities, and available-for-sale securities demonstrate an understanding of the reporting treatment for each category, including valuation, treatment of unrecognized gains or losses, and other income effects calculate discounts, premiums, and interest using the effective interest method and utilizing time value of money tables define holding gain or loss compute the realized gain on the sale of a debt security calculate the securities fair value adjustment for available-for-sale and trading debt securities recognize the correct financial statement presentation of debt securities define equity securities identify the categories of equity securities, including holdings of less than 20% (available-for-sale and trading), holding between 20% and 50%, and holdings more than 50% identify and describe the valuation methods used for each of these categories, including fair value method, equity method, and consolidated method demonstrate an understanding of the reporting treatment for each category, including valuation, treatment of unrecognized gains or losses, and other income effects allocate cost when two or more classes of securities are purchased with a lump sum using the relative sales values and the incremental methods
calculate the securities fair value adjustment for available-for-sale and trading equity securities identify the conditions under which the equity method is used
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apply the equity method given a set of data and compute the carrying amount compare the equity method with the fair value method demonstrate an understanding of reclassification adjustments account for impairment of value and indicate the correct cost basis for the impaired security identify and describe the proper accounting for transfers of investment securities between categories recognize the correct financial statement presentation of investments identify disclosure requirements for investments in the body of the financial statements and/or in the footnotes PROPERTY, PLANT, AND EQUIPMENT (PP&E) identify the major characteristics of PP&E identify the cost basis for valuing PP&E at acquisition calculate the total cost for land, buildings, equipment, and self-constructed assets demonstrate an understanding of the correct accounting treatment for interest costs incurred for the construction or acquisition of PP&E identify the basis on which PP&E would be valued when payment is in the form of stock demonstrate an understanding of accounting for nonmonetary exchanges, including exchanges of similar and dissimilar assets show the correct accounting for costs subsequent to acquisition, including additions, improvements, replacements, reinstallations, and repairs calculate and record the gain or loss on the disposition of PP&E demonstrate an understanding of the concept of depreciation identify the factors involved in the depreciation process, including the base, the useful life, and the method of cost apportionment calculate depreciation using the activity method, the straight-line method, the sum-ofthe years-digits method, declining-balance method, the group method, and the composite method determine the effect on the financial statements of using different depreciation methods analyze the differences between depreciation methods recommend a depreciation method given a set of data and management goals identify the condition under which an impairment should be recognized calculate the loss on impairment and recognize the correct accounting entry apply the proper accounting treatment to a restoration of impairment loss define depletion
identify the factors involved in establishing a depletion base compute a depletion base given acquisition, exploration, development, and restoration costs demonstrate an understanding of the write-off of resource cost identify the special problems unique to depletion accounting recognize the correct financial statement presentation of PP&E, including depreciation and depletion
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identify disclosure requirements for PP&E in the body of the financial statements and/or in the footnotes, including the requirements for depreciation and depletion INTANGIBLE ASSETS define intangible assets and describe their characteristics identify the different types of intangible assets define patents, copyrights, trademarks and trade names, leaseholds, and franchises and licensees distinguish between the valuation of purchased intangibles and internally-created intangibles define amortization and identify the factors to consider when determining useful life identify the costs associated with patents that can be capitalized calculate intangible amortization expense given a set of data define goodwill identify and describe the accounting procedures for recording goodwill contrast the accounting treatment for internally created goodwill with purchased goodwill apply the correct method of amortizing goodwill given a set of data define negative goodwill demonstrate an understanding of the accounting for impairment of intangible assets calculate the loss of impairment for a specifically identifiable intangible asset define Research and Development (R&D) demonstrate an understanding of the accounting procedures for recording R&D identify the costs usually associated with R&D and indicate the correct accounting treatment apply the generally accepted accounting procedures for start-up costs, initial operating losses, advertising costs, and computer software costs recognize the correct financial statement presentation of intangible assets identify disclosure requirements for intangibles in the body of the financial statements and/or in the footnotes OTHER ASSETS demonstrate an understanding of the accounting for other assets, including deferred charges, restricted use assets, sinking funds, prepaid pension expenses (pensions covered below), and deferred tax assets (deferred taxes covered below), etc.
Part 2CMA Section B.3. Liability recognition, measurement, valuation, and presentation The candidate should be able to: CURRENT LIABILITIES, LOSS CONTINGENCIES AND DEFERRED REVENUES define current liability and identify the different types of current liabilities describe how current liabilities are valued demonstrate an understanding of and apply the proper accounting treatment of notes payable, current maturities of long-term debt, short-term obligations expected to be refinanced, dividends payable, returnable deposits, unearned (or deferred) revenues, taxes payable, and employee-related liabilities identify the classification issues of short-term debt expected to be refinanced
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identify the different types of employee-related liabilities contrast the accounting treatment of gain and loss contingencies specify the two conditions under which a loss contingency should be accrued define warranty costs identify when warranty costs should be accrued recognize the entry that is made for estimated warranty costs apply both the expense warranty approach and the sales warranty approach demonstrate an understanding of the accounting for premiums and coupons recognize the correct financial statement presentation of current liabilities and loss contingencies identify disclosure requirements for current liabilities, contingencies, and commitments in the body of the financial statements and/or in the footnotes LONG-TERM LIABILITIES AND BONDS PAYABLE define long-term liabilities/debt define bond indenture and give examples identify the different types of bonds demonstrate an understanding of the valuation of and accounting for bonds issued at par, issued at a discount, and issued at a premium apply the methods of bond discount and premium using the straight-line method and the effective interest method (time value of money tables) calculate interest payable and interest expense and recognize the accounting entry that would be made prepare an amortization schedule of bond discount and bond premium amortization identify the proper classification of bond discount and premium as an adjunct account distinguish long-term notes payable from bonds demonstrate an understanding of the valuation of and accounting for long-term notes payable issued at par, issued at a discount, and issued at a premium apply the effective interest method to notes, including zero-interest-bearing notes define implicit interest rate compute imputed interest account for notes issued for property, goods, and services
calculate imputed fair value and note discount where the stated interest rate is unreasonable define mortgage notes payable define off-balance sheet financing and identify different forms of this type of borrowing indicate the disclosure requirements for off-balance sheet financing recognize the correct financial statement presentation of long-term liabilities identify disclosure requirements for long-term liabilities in the body of the financial statements and/or in the footnotes LEASES define lease, lessor, and lessee list the advantages of leasing to the lessee
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distinguish the basic difference between the accounting of a capitalized lease by the lessee and by the lessor identify the capitalization criteria for the lessee distinguish between a capital lease and an operating lease apply each of the capitalization tests given a set of data and determine if a lease agreement is a capital lease or an operating lease calculate minimum lease payment and amount capitalized using time value of money tables prepare capital lease amortization schedule for lessee calculate depreciation charges on a capital lease prepare schedule of charges to operations, including depreciation, for a capital lease recognize the proper reporting method of current and noncurrent lease obligations apply the operating method for the lessee calculate the difference in annual operating charges between a capital and an operating lease list the advantages of leasing to the lessor enumerate the three classifications of leases by the lessor identify the capitalization criteria for the lessor and determine if a lease is an operating or capital lease distinguish between a direct financing lease and a sales-type lease demonstrate an understanding of the lessors accounting for a direct financing lease define and calculate gross investment, unearned interest revenue, and net investment for a direct financing lease prepare a lease amortization schedule for the lessor recognize the proper reporting method of lease transactions for the lessor, including
current and noncurrent assets apply the operating method for the lessor define residual value calculate the lease payment when there is a residual value demonstrate an understanding of the accounting for residual value from the standpoint of both the lessor and the lessee define and calculate gross investment, unearned interest revenue, sales price of the asset, and cost of goods old for a sales-type lease analyze the impact of a bargain purchase option on the calculation of minimum lease payments distinguish between the term of depreciation for a lease with a bargain purchase option and one with a guaranteed residual value define initial direct costs and apply the correct accounting under various types of leases recognize the correct financial statement presentation of operating and capital leases identify the disclosure requirements for the lessor and for the lessee for both operating and capital leases PENSIONS AND OTHER POSTRETIREMENT BENEFITS define pension plan and qualified plan
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distinguish between a defined benefit plan and a defined contribution plan define the terms funded and vested distinguish accumulated benefit obligation and projected benefit obligation identify and describe the five components of pension expense identify which pension items are not capitalized recognize the accounting entries for pension expense and prepaid/accrued pension cost calculate the projected benefit obligation and the plan assets given beginning balance, service costs, interest cost, actual return, contributions, and benefits demonstrate an understanding of the amortization of unrecognized prior service cost apply the accounting procedure for recognizing unexpected gains and losses using the corridor approach define and calculate the minimum liability recognize the accounting entry made when a minimum liability is recognized identify the financial statement treatment when the additional liability required (based on minimum liability calculation) exceeds the amount of unrecognized prior service cost recognize the correct financial statement presentation of pensions identify disclosure requirements for pensions in the body of the financial statements and/or in the footnotes differentiate between pension benefits and other postretirement benefits in terms of funding, benefits, beneficiaries, timing of benefits, and predictability define expected postretirement benefit obligation and accumulated postretirement
benefit obligation identify and describe the components of postretirement expense identify the required disclosures for postretirement benefit plans in the notes to the financial statements DEFERRED INCOME TAXES identify differences between pretax financial income and taxable income define deferred taxes define and analyze temporary differences define deferred tax liability and deferred tax asset calculate total deferred tax liability given a set of data prepare a schedule by year for a deferred tax liability calculate total deferred tax asset given a set of data define and compute deferred tax benefit calculate deferred tax expense recognize the journal entry to record income tax expense calculate income tax expense to be shown on the financial statement demonstrate an understanding of the purpose and the application of the deferred tax asset valuation allowance differentiate between temporary differences and permanent differences and identify examples of each demonstrate an understanding of how tax rates affect the calculation of deferred taxes calculate deferred tax liability given multiple tax rates over several years
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apply the correct accounting procedures for net operating loss carrybacks and carryforwards calculate the tax effect of a net operating loss and recognize the correct journal entry to record this effect infer the effect on tax expense of other special situations, including tax credits, the alternative minimum tax, and international taxes demonstrate an understanding of intraperiod income tax allocation indicate the proper income statement and balance sheet presentation of income tax expense and deferred taxes identify the disclosure requirements for deferred income taxes OTHER LIABILITIES demonstrate an understanding of the accounting for other liabilities Part 2CMA Section B.4. Equity account recognition, measurement, valuation, and presentation The candidate should be able to: define preferred stock and common stock and identify characteristics of each define capital stock, additional paid-in capital and retained earnings apply the accounting procedures for issuing shares of stock, including par value stock, no-par stock, stock sold on a subscription basis, lump sum sales, and stocks issued in
noncash transactions define treasury stock identify reasons for reacquisition of shares demonstrate an understanding of the accounting for treasury stock, including the cost method and the par or stated value method record a sale of treasury stock at above cost and at below cost and calculate the balance in paid-in capital from treasury stock recognize the journal entry for retiring treasury stock identify the different types of preferred stock distinguish between debt and preferred stock define stock options, warrants and rights and recognize the correct presentation in the financial statements for these instruments identify transactions that affect paid-in capital identify transactions that affect retained earnings define dividends and identify the different types of dividends determine the effect that dividends have on total stockholders equity recognize journal entries for dividend declaration and dividend payment define property dividend and scrip dividends and recognize journal entries for their issuance define liquidating dividends and recognize the appropriate journal entry define stock dividends apply the accounting procedures for stock dividends and explain the different treatment for large and small stock dividends infer the effect on stockholders equity of large and small stock dividends
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define stock split and distinguish between stock dividend name reasons for the appropriation of retained earnings recognize the proper accounting and reporting for retained earnings indicate the proper financial statement presentation of stockholders equity, including common stock, preferred stock, paid-in capital, treasury stock, stock options, warrants, and rights and retained earnings identify disclosure requirements for each element of stockholders equity Part 2CMA Section B.5. Revenue and expenses The candidate should be able to: describe the revenue recognition principle and identify the two preconditions for
revenue recognition define the terms realized, realizable, and earned apply the revenue recognition principle to various types of transactions identify issues involved with revenue recognition at point of sale, including sales with buyback agreements, sales when right of return exists, and trade loading (or channel stuffing) identify instances where revenue is recognized before delivery distinguish between percentage-of-completion and completed-contract methods of accounting for long-term contracts apply the percentage-of-completion method calculate the percentage of completion using the cost-to-cost basis determine the total revenue to be recognized to date and in the current period recognize the correct journal entries for recording cost of construction, progress billings, collections, and gross profit calculate the gross profit to be recognized each year of the contract under percentageof-completion apply the completed-contract method compare and contrast the recognition of costs of construction, progress billings, collections, and gross profit recognized under the two long-term contract accounting methods demonstrate an understanding of the proper accounting for losses on long-term contracts indicate the correct financial statement presentation for contracts accounted for under the percentage-of-completion method identify instances where revenue is recognized after delivery recognize the situations in which each of the following revenue recognition methods would be used: installment sales method, cost recovery method, and deposit method demonstrate an understanding of the accounting procedures under the installment method, the cost recovery method, and the deposit method define gains and losses and indicate the proper financial statement presentation recognize the issues and concerns that the SEC has identified with respect to revenue recognition practices
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Part 2CMA Section B.6. Other income statement issues The candidate should be able to: COMPREHENSIVE INCOME define comprehensive income and other comprehensive income identify the three alternative ways that other comprehensive income may be displayed in the financial statements calculate
comprehensive income DISCONTINUED OPERATIONS define the terms, discontinued operations, measurement date and segment compute the results from discontinued operations demonstrate an understanding of the accounting for discontinued operations with and without phase-out periods identify the two components of the results of discontinued operations recognize the correct presentation of discontinued operations on the financial statements indicate the proper disclosure requirements for discontinued operations EXTRAORDINARY ITEMS identify and define extraordinary items name the two criteria that must be met for an item to be extraordinary compute total extraordinary items net of tax given several fact situations recognize the correct presentation of extraordinary items on the financial statements indicate the proper disclosure requirements for extraordinary items ACCOUNTING CHANGES describe when a change in accounting principle occurs compute the cumulative effect net of income taxes for a change in accounting principle distinguish a change in accounting principle from a change in accounting estimate apply the correct accounting procedure for a change in accounting estimate recognize the correct presentation of accounting changes on the financial statements indicate the proper disclosure requirements for accounting changes EARNINGS PER SHARE compute basic earnings per share (EPS) compute weighted average common shares identify potential common shares and define complex capital structure identify when potential common shares are included in diluted EPS demonstrate an understanding of the computation of diluted EPS apply the treasury stock method for including stock options and warrants in diluted EPS calculate the impact of a convertible security on diluted EPS compute tentative and final diluted EPS indicate the correct presentation and disclosure of EPS on the financial statements EARLY EXTINGUISHMENT OF DEBT/DEBT RESTRUCTURING identify the accounting treatment for the early extinguishment of debt
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calculate the gain/loss on the early extinguishment of debt recognize the correct journal entry for the early extinguishment of debt and indicate the proper financial statement presentation
apply the procedures of troubled debt restructuring from the perspective of both the creditor and the debtor distinguish between and account for a loss on loan impairment, a debt restructuring that results in settlement, and a debt restructuring that results in modification of terms identify the required disclosures for troubled debt restructuring for both debtors and creditors FOREIGN CURRENCY TRANSLATION demonstrate an understanding of the accounting issues faced by a company conducting business when payments are made in a foreign currency apply the proper accounting procedures for a purchase paid in foreign currency to record the purchase and to record the transaction gain or loss upon payment distinguish between the two-transaction perspective and the one-transaction perspective apply the proper accounting procedures for a sale paid in foreign currency to record the sale and to record the transaction gain or loss upon payment apply the proper accounting procedures for a loan payable and a loan receivable in foreign currency identify disclosure requirements for foreign currency transactions Part 2CMA Section B.7. Other financial accounting and reporting issues The candidate should be able to: BUSINESS COMBINATIONS AND CONSOLIDATED STATEMENTS identify the different types of business combinations, including the statutory merger, statutory consolidation, acquisition of common stock, and acquisition of assets demonstrate familiarity with the terms commonly associated with business combinations identify the three components of the cost of a combinee and compute the total cost given a set of data identify the types of costs included in direct out-of-pocket costs allocate the cost of a combinee given fair value of assets and liabilities and determine goodwill define goodwill and negative goodwill demonstrate an understanding of the accounting for goodwill recognize that goodwill and other intangible assets that have an indefinite useful life are not amortized, but should be tested annually for impairment demonstrate an understanding of purchase accounting recognize the correct consolidated balance sheet after a combination using purchase accounting calculate the operating results that would be included in the consolidated income statement using purchase accounting recognize that pooling-of-interest accounting is no longer acceptable practice
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define parent-subsidiary relationship and identify when a company should include another company in its consolidated financial statements define controlling interest and minority interest demonstrate an understanding of the elimination of intercompany accounts, transactions and profits distinguish between a wholly-owned and partially-owned subsidiary calculate balance in minority interest account differentiate between the equity method and the cost method of accounting for the operating results of consolidated purchased subsidiaries in the years subsequent to the date of purchase identify the disclosure requirements for consolidation policy SEC GUIDELINES ON MATERIALITY demonstrate an understanding of the SEC guidelines on materiality identify qualitative factors that can make quantitatively small amounts material SEGMENT REPORTING define operating segment identify the disclosures required for a reportable operating segment determine if a segment is reportable given a set of data MULTINATIONAL COMPANY CONSIDERATIONS recognize the challenges inherent in translating foreign entities financial statement to the parents reporting currency define functional currency distinguish between the monetary/nonmonetary method and the current rate method translate a foreign entitys financial statements from the entitys functional currency to the reporting currency re-measure a foreign entitys financial statement to the functional currency describe the significance of a foreign currency transaction gain (loss) on the financial statements define highly inflationary economy and identify which currency should be used as the reporting currency for a company in this environment identify disclosure requirements for translation of foreign currency financial statements ACCOUNTING FOR DERIVATIVES define derivative and give several examples of a derivative demonstrate a basic understanding of the guidelines for accounting for derivatives identify the classification and valuation of derivatives on the financial statement differentiate between the treatment of gains and losses deriving from speculation and those deriving from a hedging contract define a fair value hedge and apply the proper accounting procedures define a cash flow hedge and apply the proper accounting procedures identify the disclosure
requirements for derivatives

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Part 2CMA Section C. Interpretation and Analysis of Financial Statements (Levels A, B, and C) Part 2CMA Section C.1. Short-term liquidity The candidate should be able to: define and calculate current assets, current liabilities and working capital analyze working capital using the current ratio, the cash ratio, the cash flow ratio and the cash to current liabilities ratio calculate and interpret accounts receivable turnover and inventory turnover and understand the effects on these ratios of changes in one or more elements in the financial statement calculate and interpret days sales in receivables, days sales in inventory and days purchases in accounts payable define operating cycle demonstrate an understanding of the liquidity of current liabilities calculate and interpret the acid-test (quick) ratio calculate and interpret the liquidity index recommend alternative courses of action that could improve the financial ratio picture of the company Part 2CMA Section C.2. Capital structure and solvency The candidate should be able to: define capital structure define solvency distinguish debt from equity and demonstrate an understanding of the effect on the capital structure and solvency of a company with a change in the composition of debt vs. equity define financial leverage calculate and interpret the financial leverage index and the financial leverage ratio and identify the effects on these ratios with changes in capital structure calculate and interpret the following ratios: total debt to total capital, total debt to equity capital, equity capital to total debt, and long-term debt to equity capital (debt to equity ratio) demonstrate an understanding of the effect on these capital structure ratios with a change in one or more elements of the financial statement
define, calculate and interpret common-size statements calculate and interpret the following ratios: earnings to fixed charges, times interest earned, and cash flow to fixed charges recommend alternative courses of action that could improve the financial ratio picture of the company
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Part 2CMA Section C.3. Return on invested capital The candidate should be able to: identify and define the components of return on invested capital list several uses for the ratio return on invested capital demonstrate an understanding of the difficulty of defining invested capital and return identify and calculate adjustments that should be made to capital and income calculate and interpret the return on total assets ratio and return on common equity ratio analyze return on assets and return on equity using the DuPont model calculate and interpret profit margin and asset turnover and demonstrate an understanding of the relationship between these two ratios infer the effect on return on assets of a change in one or more elements of the financial statements disaggregate return on common equity into adjusted profit margin, asset turnover and leverage and be able to calculate these ratios given financial statement data calculate and interpret sustainable equity growth and the dividend payout ratio calculate and interpret return on shareholders investment recommend alternative courses of action that could improve the financial ratio picture of the company Part 2CMA Section C.4. Profitability analysis The candidate should be able to: identify factors to be considered in measuring income, including estimates, accounting methods, disclosure incentives, and the different needs of users recognize the importance of the source, stability, and trend of revenue demonstrate an understanding of the relationship between revenue and receivables and revenue and inventory infer the effect on revenue with changes in revenue recognition and measurement methods
calculate and interpret the gross profit margin analyze and interpret changes in gross profit analyze company expenses using common-size income statements identify and define the major expense categories for a company, including selling expenses, depreciation expense, maintenance, amortization, general and administrative expenses, financing expenses, and income taxes infer reasons for increases over time in any of these expenses as a percent of revenue prepare a variation analysis study given a companys financial statement data over several years calculate and interpret book value per share and the operating cash flow to income ratio
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recommend alternative courses of action that could improve the financial ratio picture of the company Part 2CMA Section C.5. Other factors in financial statement analysis The candidate should be able to: analyze common-size statements identify other factors in financial statement analysis, including international considerations, inflation and nonfinancial considerations demonstrate the impact of inflation and foreign exchange fluctuations on financial ratios distinguish between accounting profit and economic profit distinguish between book value and market value Ethics (May be tested in conjunction with any topic area above) Using the standards of Statement on Management Accounting No. 1C (Revised) Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management, the candidate should be able to: evaluate a given business situation for its ethical implications identify specific standards that may have been violated in a given business situation recommend a course of action for management accountants or financial managers to take when confronted with an ethical dilemma in the business environment
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Learning Outcome Statements Part 2CFM Section A. Financial Statement Analysis (Levels A, B and C) Part 2CFM Section A.1. Accounting standard setting environment The candidate should be able to: demonstrate an understanding of the development of accounting standards in the U.S. identify the organizational structure of the Financial Accounting Standards Board (FASB) list the due process steps of developing U.S. accounting standards identify the different types of statements that constitute U.S. Generally Accepted Accounting Principles (GAAP) and recognize which is most authoritative demonstrate an understanding of the FASBs relationship with the Securities and Exchange Commission (SEC) and the SECs influence on standard setting describe in general terms the structure and work products of the International Accounting Standards Board identify major differences between U.S. GAAP and International Accounting Standards Board (IASB) GAAP identify user groups that influence accounting standards, including the investing public, the financial community, business entities, industrial associations, professional accounting associations including the Institute of Management Accountants (IMA) and the American Institute of Certified Public Accountants (AICPA), government agencies, Financial Executives International (FEI), and the American Accounting Association (AAA) recognize the limitations of financial statement information Part 2CFM Section A.2. Short-term liquidity The candidate should be able to: define and calculate current assets, current liabilities and working capital analyze working capital using the current ratio, the cash ratio, the cash flow ratio and the cash to current liabilities ratio calculate and interpret accounts receivable turnover and inventory turnover and understand the effects on these ratios of changes in one or more elements in the financial statement calculate and interpret days sales in receivables, days sales in inventory and days purchases in accounts payable define operating cycle demonstrate an understanding of the liquidity of current liabilities calculate and interpret the acid-test (quick) ratio recognize the importance of current asset composition and financial flexibility
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calculate and interpret the liquidity index demonstrate knowledge of the SEC requirement for management to discuss the companys liquidity in the Management Discussion and Analysis (MD&A) section of the Annual Report recommend alternative courses of action that could improve the financial ratio picture of the company Part 2CFM Section A.3. Capital structure and solvency The candidate should be able to: define capital structure define solvency distinguish debt from equity and demonstrate an understanding of the effect on the capital structure and solvency of a company with a change in the composition of debt vs. equity define financial leverage calculate and interpret the financial leverage index and the financial leverage ratio and identify the effects on these ratios with changes in capital structure calculate and interpret the following ratios: total debt to total capital, total debt to equity capital, equity capital to total debt, and long-term debt to equity capital (debt to equity ratio) demonstrate an understanding of the effect on these capital structure ratios with a change in one or more elements of the financial statement define, calculate and interpret common-size statements demonstrate an understanding of the importance of asset composition and asset coverage calculate and interpret the following ratios: earnings to fixed charges, times interest earned, and cash flow to fixed charges define Altmans Z-score and identify its applications recommend alternative courses of action that could improve the financial ratio picture of the company Part 2CFM Section A.4. Return on invested capital The candidate should be able to: identify and define the components of return on invested capital list several uses for the ratio return on invested capital demonstrate an understanding of the difficulty of defining invested capital and
return identify and calculate adjustments that should be made to capital and income calculate and interpret the return on total assets ratio and return on common equity ratio analyze return on assets and return on equity using the DuPont model calculate and interpret profit margin and asset turnover and demonstrate an understanding of the relationship between these two ratios
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infer the effect on return on assets of a change in one or more elements of the financial statements disaggregate return on common equity into adjusted profit margin, asset turnover and leverage and be able to calculate these ratios given financial statement data calculate and interpret sustainable equity growth and the dividend payout ratio calculate and interpret return on shareholders investment recommend alternative courses of action that could improve the financial ratio picture of the company Part 2CFM Section A.5. Profitability analysis The candidate should be able to: identify factors to be considered in measuring income, including estimates, accounting methods, disclosure incentives, and the different needs of users recognize the importance of the source, stability, and trend of revenue demonstrate an understanding on the relationship between revenue and receivables and revenue and inventory infer the effect on revenue of changes in revenue recognition and measurement methods calculate and interpret the gross profit margin analyze and interpret changes in gross profit analyze company expenses using common-size income statements identify and define the major expense categories for a company, including selling expenses, depreciation expense, maintenance, amortization, general and administrative expenses, financing expenses, and income taxes infer reasons for increases over time in any of these expenses as a percent of revenue prepare a variation analysis study given a companys financial statement data over several years calculate and interpret book value per share and the operating cash flow to income
ratio recommend alternative courses of action that could improve the financial ratio picture of the company Part 2CFM Section A.6. Earnings-based analysis The candidate should be able to: identify the determinants and indicators of earnings quality define earnings persistence and identify its determinants recast earnings to show persistent earnings for a company, excluding erratic, unusual and nonrecurring items demonstrate an understanding of the relationship between accounting data and stock prices calculate and interpret the fundamental valuation multiples of the Price/Book ratio and the Price/Earnings (P/E) ratio calculate and interpret earnings per share (EPS)
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define earnings power prepare an earnings forecast given financial data and assumptions about the future calculate and interpret earnings yield, dividend yield and dividend payout recommend alternative courses of action that could improve the financial ratio picture of the company Part 2CFM Section A.7. Other factors in financial statement analysis The candidate should be able to: analyze common-size statements identify other factors in financial statement analysis, including international considerations, inflation, and nonfinancial considerations demonstrate the impact of inflation and foreign exchange fluctuations on financial ratios distinguish between accounting profit and economic profit distinguish between book value and market value Part 2CFM Section B. Working capital policy and management (Levels A, B and C)
Part 2CFM Section B.1. Nature of working capital policy and management The candidate should be able to: define working capital and identify its components distinguish between permanent and temporary working capital demonstrate an understanding of the factors involved in determining the optimum level of current assets and current liabilities recognize the need to balance profitability and risk Part 2CFM Section B. 2. Cash management The candidate should be able to: identify factors influencing the levels of cash demonstrate an understanding of the three motives for holding cash recognize the importance of synchronizing cash inflows and outflows identify methods of managing cash collections apply the concept of collection float calculate the net benefit of a lockbox system and determine if it would be advantageous to the company define concentration banking and compensating balance define wire transfer and automated clearinghouse (ACH) electronic transfer identify methods of managing payments define payable through draft and zero balance account demonstrate an understanding of disbursement float and overdraft systems
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define electronic commerce, including electronic data interchange, and electronic funds transfers recognize the benefits and costs of electronic commerce determine a recommended target cash balance using the Baumol model and identify the limitations of this model demonstrate a conceptual understanding of the Miller-Orr model Part 2CFM Section B. 3. Marketable securities The candidate should be able to: define the different types of marketable securities, including money market instruments, T-bills, Treasury notes, Treasury bonds, repurchase agreements, Federal agency securities, bankers acceptances, commercial paper, negotiable Certificates of Deposit (CDs), and Eurodollars demonstrate an understanding of the variables in marketable security selections, including safety, marketability, yield, maturity, and taxability demonstrate an understanding of the risk and return trade-off in the selection of marketable securities list reasons for holding marketable securities
recommend strategies for holding marketable securities recognize the importance of an investment policy statement Part 2CFM Section B. 4. Accounts receivable management The candidate should be able to: identify reasons for carrying accounts receivable and the factors influencing their level demonstrate an understanding of the impact of changes in credit terms calculate the net benefit (cost) of a change in credit policy using time value of money concepts, including changes in the credit period and changes in the cash discount define default risk demonstrate an understanding of the factors involved in determining an optimal credit policy interpret the graphical representation of carrying costs and opportunity costs define credit scoring and identify its uses calculate the average collection period identify different types of credit instruments, including the invoice, promissory note, commercial draft, and conditional sales contracts Part 2CFM Section B. 5. Inventory management The candidate should be able to: identify reasons for carrying inventory and the factors influencing its level name the variables affecting the Economic Order Quantity (EOQ), including usage rates, ordering costs, and carrying costs and analyze how they affect the level of EOQ calculate the EOQ
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define lead time and safety stock define and calculate order point define Just-in-Time (JIT) infer the effect that JIT has on the EOQ model define Kanban Part 2CFM Section B. 6. Short-term credit for financing current assets The candidate should be able to: identify alternative strategies for financing working capital describe the different types of short-term credit, including accrued wages and taxes, trade credit, short-term bank loans, commercial paper, lines of credit, and bankers acceptances define spontaneous financing calculate the annual cost of not taking a cash discount, using both the simple approximate formula and time value of money concepts calculate the annual cost of a revolving credit agreement calculate the effective annual interest rate of a bank loan with a compensating balance
requirement and/or a commitment fee describe the different types of secured short-term credit, including accounts receivable financing and inventory financing calculate the cost of factoring accounts receivable define floating lien, chattel mortgage, trust receipt, terminal warehouse receipt, field warehouse receipt list the advantages and disadvantages of short-term credit demonstrate an understanding of the strategies used to minimize the cost of short-term credit calculate the best financing strategy given several alternatives using time value of money concepts and recommend the best strategy given several alternatives Part 2CFM Section C. Strategic Issues in Finance (Levels A, B and C) Part 2CFM Section C.1. Valuing businesses, business segments, and business combinations The candidate should be able to: demonstrate an understanding of required rate of return concepts calculate a required rate of return using the Capital Asset Pricing Model (CAPM) and/or Arbitrage Pricing Theory (APT) value a business, a business segment, and a business combination using discounted cash flow methods value a business using relative or comparable valuation methods, such as Price/Earnings (P/E) ratios, Price/Book ratios, and Price/Sales ratios
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recognize how income taxes impact valuation Part 2CFM Section C.2. Sources of long-term financing The candidate should be able to: define bonds, intermediate term loans, term loans, common stock, preferred stock, convertible securities, stock warrants and rights, and stock options value bonds, intermediate term loans, term loans, common stock, preferred stock, convertible securities, stock warrants and rights, and stock options recognize various forms of loan covenants, restrictions, and indentures demonstrate an understanding of how retained earnings is a source of financing demonstrate an understanding of lease financing and calculate the net advantage to leasing using discounted cash flow concepts recognize how income taxes impact financing decisions recommend a financing strategy Part 2CFM Section C.3. Capital structure policy The candidate should be able to: demonstrate an understanding of how alternate financing decisions impact optimum capitalization; i.e., the debt/equity decision identify and demonstrate an understanding of alternative theories of capital structure
define the cost of capital and demonstrate an understanding of its applications determine the weighted average cost of capital and the cost of its individual components calculate the marginal cost of capital and demonstrate an understanding of the significance of using the marginal cost as opposed to the historical cost identify and define various models used to determine the cost of capital, including CAPM, the constant growth model or dividend discount model, and APT calculate the cost of capital using each of these models infer the effect of a change in one or more variables on the cost of capital using any one of these models identify the strengths and weaknesses of the CAPM, dividend discount, and APT models when used to calculate the cost of capital recognize how income taxes impact capital structure decisions Part 2CFM Section C.4. Dividend policy The candidate should be able to: demonstrate an understanding of the dividend retention vs. distribution decision define share repurchases and infer the effect of such repurchases on the company and the shareholder define cash dividend, stock dividend, and stock split summarize the standard dividend payment procedures and dates calculate the dividend payout ratio
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demonstrate the irrelevance of dividends according to Modigliani-Miller (MM) identify arguments for dividend relevance identify and demonstrate an understanding of factors that influence dividend policy determine the amount of dividends for a company with a residual dividend policy define dividend reinvestment plans define stock repurchases and recognize motivations for a corporation to undertake a stock repurchase Part 2CFM Section C.5. Corporate restructuring The candidate should be able to: demonstrate an understanding of mergers, acquisitions, and leveraged buyouts determine whether or not a proposed business combination is worthwhile identify defenses against takeovers identify and evaluate divestiture concepts such as spin-offs, split-ups, equity carveouts, and tracking stock evaluate a companys financial situation and determine if a restructuring would be
beneficial to the shareholders define bankruptcy and identify the different types of bankruptcy determine the priority of creditors in a bankruptcy proceeding differentiate between reorganization and liquidation Part 2CFM Section D. Risk Management (Levels A, B and C) Part 2CFM Section D.1. Types of risk; D.2. Measures of risk The candidate should be able to: identify the different types of risk and the components of each demonstrate an understanding of how risk is measured, including the concepts of expected returns, standard deviation, and coefficient of variation calculate expected return, standard deviation, and coefficient of variation identify the different types of attitudes toward risk and infer how attitude might affect the management of risk Part 2CFM Section D.3. Portfolio management; D.4. Approaches to financial risk management The candidate should be able to: define portfolio and distinguish between individual security risk and portfolio risk define covariance and calculate portfolio variance demonstrate an understanding of diversification and asset allocation differentiate between systematic and unsystematic risk define value at risk (VAR) and identify its uses
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demonstrate an understanding of how individual securities affect portfolio risk define beta and analyze the significance of a stocks beta define efficient portfolio and security market line demonstrate an understanding of the relationship between risk and return and calculate the expected risk premium using the CAPM model and multifactor models such as APT define hedging and demonstrate how hedging can be used to manage financial risk show how the concept of correlation is used in hedging distinguish between a long hedge and a short hedge define hedge ratio define immunization demonstrate an understanding of Macauleys and modified duration define portfolio insurance Part 2CFM Section D.5. Derivative financial instruments The candidate should be able to: define a futures contract and a forward contract
distinguish between futures and forwards demonstrate an understanding of the futures market distinguish a long position from a short position define open interest distinguish between a speculator and a hedger demonstrate an understanding of margin and daily settlement identify the common ways of closing a futures position define cost-of-carry or carrying charges calculate and interpret the bid-asked spread demonstrate an understanding of interest rate futures and stock index futures define index arbitrage and program trading define swaps demonstrate an understanding of interest rate swaps define plain vanilla swap identify the notional principal calculate the net payment for an interest rate swap contract define options and distinguish between a call option and a put option define exercise price, strike price, option premium and intrinsic value demonstrate an understanding of the terms in-the-money, out-of-the-money, and atthe-money distinguish between an American option and a European option identify the different types of options, including stock options, index options, and foreign currency options distinguish between a covered and an uncovered or naked call calculate the profit or loss of a long call option contract calculate the profit or loss of a written call option contract
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calculate the profit or loss of a long put option contract calculate the profit or loss of a written put option contract analyze an option contract using graphs demonstrate an understanding of the interrelationship of the variables that comprise the value of an option; e.g., relation between exercise price and strike price, and value of call exhibit a general understanding of the Black-Scholes model for pricing options; i.e.,
candidate is not required to calculate option prices, but should be familiar with the general principles underlying the model and the inputs necessary to calculate a price evaluate alternative strategies and select the strategy that is designed to minimize risk and/or maximize reward using derivatives define caps, floors, swaptions, and other contracts Part 2CFM Section D.6. Foreign operations The candidate should be able to: demonstrate an understanding of foreign currencies and how prices are determined in the foreign exchange market identify the variables that that affect exchange rates and demonstrate an understanding of the determination of exchange rates recognize the foreign exchange risk inherent in cross-border transactions demonstrate how currency futures, currency swaps, and currency options can be used to manage exchange rate risk calculate the net profit/loss of cross-border transactions recommend methods of managing exchange rate risk an calculate the net profit/loss of your strategy given certain assumptions recognize the importance of being aware of political risk Part 2CFM Section D.7. Managing non-financial risk The candidate should be able to: identify the types of risk that commodities are exposed to recognize how commodity risk differs from financial risk identify methods of managing commodities risk define operations and contracting risk identify methods of managing operations risk demonstrate how corporate liability insurance works and calculate the net payment for an insured loss, given coinsurance and deductible amounts
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Part 2CFM Section E. External Financial Environment (Levels A and B) Part 2CFM Section E. 1. Financial markets The candidate should be able to: identify the characteristics of the different types of financial markets and exchanges, including the stock markets, bond markets, commodities market, and derivative markets demonstrate an understanding of the concept of market efficiency, including the strong form, semi-strong form, and weak form of market efficiency identify anomalies and behavioral issues in the financial markets analyze the workings of the foreign exchange markets Part 2CFM Section E. 2. Interest rates
The candidate should be able to: demonstrate an understanding of the term structure of interest rates analyze the yield curve identify and analyze the theories proposed for the shape of the yield curve, including the unbiased expectations hypothesis, the liquidity premium view, the segmented markets (or hedging-pressure) argument, and the preferred habitat (or composite) theory identify uses of the yield curve define and demonstrate an understanding of the principle of interest rate parity Part 2CFM Section E. 3. Investor and shareholder relations The candidate should be able to: recognize the importance of shareholder relations, including the annual shareholder meeting identify the basic corporate by-laws and define the purpose of the corporate charter identify the role of the Board of Directors, including the audit committee and its dealings with external auditors demonstrate an understanding of how the ratings assigned by the major rating agencies can affect the price of stock and the cost of borrowing identify and describe the letter ratings and their meaning for the major rating agencies Part 2CFM Section E. 4. Financial Institutions and E. 5. Raising capital The candidate should be able to: demonstrate an understanding of the roles of investment banks, including underwriting, advice, and trading describe securities underwriting
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define offering price and calculate spread identify and define the terms best efforts distribution, syndicate, and tombstone ad demonstrate a general understanding of the SEC registration process, including the prospectus distinguish between a public offering and a private placement define Initial Public Offerings (IPOs) define subsequent/secondary offerings define dividend reinvestment plans identify the different types of services that a commercial bank offers, including deposit accounts, credit services (including loans), payment and collection services, trade services, and credit enhancement (payment guarantee) identify the different types of external audit opinions and describe how they would impact the companys capacity to raise capital define insider trading and identify why it is illegal under the Securities and Exchange Act of 1934
Part 2CFM Section F. Employee Benefit Plans (Level A) Part 2CFM Section F. 1. ERISA and F. 2. Pension plans The candidate should be able to: list the major provisions of ERISA distinguish between defined benefit plans and defined contribution plans identify, define, and list major characteristics of 401(k) plans, ESOPs, Stock bonus plans, profit-sharing plans, hybrid plans and other plans Part 2CFM Section F. 3. Deferred compensation and non-qualified plans The candidate should be able to: define deferred compensation and non-qualified plans Part 2CFM Section F. 4. Group health plans and benefits The candidate should be able to: define major provisions of group health plans and their benefits identify issues related to choosing and managing a health care provider Ethics (May be tested in conjunction with any topic area above Using the standards of Statement on Management Accounting No. 1C (Revised) Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management, the candidate should be able to: evaluate a given business situation for its ethical implications
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identify specific standards that may have been violated in a given business situation recommend a course of action for management accountants or financial managers to take when confronted with an ethical dilemma in the business environment
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Learning Outcome Statements Part 3 Section A. Cost Measurement (Levels A, B, and C) Part 3 Section A.1. Cost Terminology The candidate should be able to: identify and differentiate all cost items reported on the income statement identify and calculate those costs incurred to complete a product and reported as cost of goods sold identify and calculate those costs incurred for current operations but not included in
cost of goods sold identify and calculate the components of cost concepts such as prime cost, conversion cost, overhead cost, carrying cost, sunk cost, discretionary cost, and opportunity cost demonstrate an understanding of the characteristics that differentiate fixed costs, variable costs, and mixed costs and evaluate the effect that changes in production volume have on these costs describe the importance of timely and accurate costing information as a tool for strategic planning and management decision making Part 3 Section A.2. Cost Measurement Concepts The candidate should be able to: demonstrate an understanding of the behavior of fixed and variable costs in the long and short terms and how a change in assumptions regarding cost type or relevant range affects these costs recognize cost objects and cost pools and assign costs to appropriate activities demonstrate an understanding of the nature and types of cost drivers and the causal relationship that exists between cost drivers and costs incurred demonstrate a thorough understanding of the various methods for measuring costs and accumulating work-in-process and finished goods inventories and a basic understanding of how inventories are relieved identify and calculate the components of cost measurement techniques such as actual costing, normal costing, and standard costing; recognize the appropriate use of each technique; and describe the benefits and limitations of each technique demonstrate an understanding of the characteristics of variable costing and absorption costing and the benefits and limitations of these measurement concepts calculate inventory costs using both variable costing and absorption costing demonstrate an understanding of how the use of variable costing or absorption costing affects the value of inventory, cost of goods sold, and operating income recognize the appropriate use of joint product and by-product costing and demonstrate an understanding of concepts such as split-off point and separable costs
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determine the allocation of joint product and by-product costs using the physical measure method, the sales value at split-off method, gross profit (gross margin) method, and the net realizable value method; and describe the benefits and limitations of each method Part 3 Section A.3. Cost Accumulation Systems For each cost accumulation system identified (Job order costing, Process costing, Activitybased costing), the candidate should be able to: define the nature of the system, understand the cost flows of the system, and recognize its appropriate use calculate inventory values and cost of goods sold
understand how to account for normal and abnormal spoilage understand the strategic value of cost information regarding products and services, pricing, overhead allocations, and other issues understand the benefits and limitations of each cost accumulation system understand the concept of equivalent units in process costing and calculate the value of equivalent units define the elements of activity-based costing such as cost pool, cost driver, resource driver, activity driver, and value-added activity calculate product cost using an activity-based system and compare and analyze the results with costs calculated using a traditional system understand the concept of life-cycle costing and the strategic value of including upstream costs, manufacturing costs, and downstream costs recognize that operation costing is a hybrid cost system utilizing characteristics of both job costing and process costing and identify industry settings where operation costing is appropriate demonstrate an understanding of backflush costing and describe why it is appropriate in a just-in-time setting where manufacturing cells are utilized Part 3 Section A.4. Accumulating and Assigning Overhead Costs The candidate should be able to: demonstrate an understanding of the fixed and variable nature of overhead expenses determine the appropriate time frame for both variable and fixed overhead expenses demonstrate an understanding that overhead rates can be determined in a variety of ways, e.g., plant-wide rates, departmental rates, and individual cost driver rates and describe the benefits and limitations of each of these methods identify the components of variable overhead expense determine the appropriate allocation base for variable overhead expenses calculate the per unit variable overhead expense identify the components of fixed overhead expense identify the appropriate allocation base for fixed overhead expense and demonstrate an understanding that because the allocation base is generally variable (e.g., direct labor hours), fixed factory overhead is often over or under applied
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calculate the fixed overhead application rate demonstrate an understanding of overhead control accounts, overhead allocation accounts, and the expensing of over or under applied overhead expenses compare and contrast traditional overhead allocation with activity-based overhead allocation calculate overhead expense in an activity-based setting and describe the benefits derived from activity-based overhead allocation demonstrate an understanding of the need to allocate the cost of service departments
such as Human Resources or Information Technology to production departments understand and use the direct method, the reciprocal method, and the step-down method to allocate service department costs Part 3 Section B. Planning (Levels A, B, and C) Part 3 Section B.1. Planning Processes The candidate should be able to: demonstrate an understanding that strategic planning determines the path an organization chooses for attaining its long-term goals and missions identify the time frame appropriate for a strategic plan identify the external factors that should be analyzed during the strategic planning process and understand how this analysis leads to recognition of organizational opportunities, limitations, and threats identify the internal factors that should be analyzed during the strategic planning process and understand how this analysis leads to recognition of organizational strengths, weaknesses, and competitive advantages demonstrate an understanding that the analysis of external and internal factors leads to the development of the overall organizational mission and that this mission leads to the formulation of long-term business objectives such as business diversification, the addition or deletion of product lines, or the penetration of new markets recognize the role of capital budgeting and capacity planning in the strategic planning process recognize that short-term objectives, tactics for achieving these objectives, and operational planning (master budget) must be congruent with the strategic plan and contribute to the achievement of long-term strategic goals define value chain analysis identify the steps in value chain analysis show how value chain analysis is used to better understand a firms competitive advantage define contingency planning demonstrate an understanding of the importance of contingency planning, particularly where changes in external factors might adversely impact strategic plans
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Part 3 Section B.2. Planning and Budgeting Concepts The candidate should be able to: demonstrate an understanding of the role that budgeting plays in formulating shortterm objectives and planning and controlling operations to meet those objectives identify the characteristics that define successful budgeting demonstrate an understanding of the role that budgets play in measuring performance against established goals
show how the budgeting process facilitates communication among organizational units demonstrate how the budgeting process enhances coordination of organizational activities define a responsibility center (strategic business unit) and identify various types of responsibility centers (strategic business units) explain the concept of a controllable cost as it relates to both budgeting and performance evaluation prepare an operational budget for a responsibility center (strategic business unit) demonstrate an understanding of the concept of management-by-objective and how it relates to performance evaluation identify the benefits and limitations of management-by-objective demonstrate an understanding of how the planning process coordinates the efficient allocation of organizational resources recognize the appropriate time frame for various types of budgets identify who should participate in the budgeting process for optimum success describe the role of top management in successful budgeting identify the role of top management or the budget committee in providing appropriate guidelines for the budget and identify items that should be included in these guidelines demonstrate an understanding of the use of cost standards in budgeting differentiate between ideal standards and currently attainable standards differentiate between authoritative standards and participative standards identify the steps to be taken in developing standards for both direct material and direct labor define the role of benchmarking in standard setting identify the benefits of benchmarking in creating a competitive advantage show an understanding of the need to have a policy that allows budget revisions that accommodate the impact of significant changes in budget assumptions Part 3 Section B.3. Types of Budget Systems For each of the budget systems identified (Annual/Master budgets, Project budgeting, Activity-based budgeting, Zero-based budgeting, Continuous budgeting, Kaizen budgeting, and Flexible budgeting), the candidate should be able to: define its purpose, appropriate use, and time frame identify the budget components and explain the interrelationships among the components
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demonstrate an understanding of how the budget is developed compare and contrast the benefits and limitations of the budget system calculate budget components on the basis of information presented evaluate a business situation and recommend the appropriate budget solution Part 3 Section B.4. Annual Profit Plan and the Supporting Schedules
The candidate should be able to: demonstrate an understanding of the role the sales budget plays in the development of an annual profit plan identify the factors that should be considered when preparing a sales forecast and evaluate the feasibility of the sales forecast based on business information provided identify the components of a sales budget and prepare a sales budget based on relevant information provided demonstrate an understanding of the relationship between the sales budget and the production budget identify the role that inventory levels play in the preparation of a production budget and define other factors that should be considered when preparing a production budget prepare a production budget based on relevant information provided and evaluate the feasibility of achieving sales goals on the basis of production plans demonstrate an understanding of the relationship between the direct materials budget, the direct labor budget, and the production budget define the use of inventory levels and purchasing policies in developing a direct materials budget and the role that labor skills, union contracts, and hiring policies play in the development of a direct labor budget prepare direct materials and direct labor budgets based on relevant information provided and evaluate the feasibility of achieving production goals on the basis of these budgets demonstrate an understanding of the components of an employee benefit statement, e.g., employer contributions to social security, health and life insurance, and pension contributions understand alternative ways of allocating employee benefit expense, e.g., as a portion of direct labor expense or as overhead, and the effect that allocation has on the financial statements demonstrate an understanding of the relationship between the overhead budget and the production budget demonstrate an understanding that a portion of the overhead budget may vary directly with production quantities while a portion of the overhead budget may consist of fixed expenses define the components of overhead expense and prepare an overhead budget based on relevant information provided identify the components of the cost of goods sold budget and demonstrate an understanding of the relationship between the cost of goods sold budget, the pro forma income statement, and the pro forma statement of financial position
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demonstrate an understanding of contribution margin per unit and total contribution margin, identify the appropriate use of these concepts, and calculate both unit and total
contribution margin prepare a cost of goods sold budget based on relevant information provided identify the components of the selling and administrative budget and demonstrate an understanding of the nature of these expenses describe the relationship between the selling and administrative budget, the pro forma income statement, and the pro forma statement of financial position understand how some components of the selling and administrative budget may affect the contribution margin demonstrate an understanding that an annual profit plan must include adequate capital resources to achieve planned goals demonstrate an understanding of the relationship between the budget for acquisition of capital assets, the cash budget, and the pro forma financial statements define the purposes of the cash budget and understand the relationship between the cash budget and all other budgets identify the elements of a cash budget and demonstrate an understanding of the relationship between credit policies and purchasing (payables) policies and the cash budget prepare a cash budget from information given and recommend the optimal investment/financing strategy define the purpose of a pro forma income statement and understand the relationship between the income statement and all other budgets prepare a pro forma income statement from relevant information provided evaluate a pro forma income statement against stated strategic goals define the purpose of a pro forma statement of financial position and understand the relationship between the statement of financial position and all other budgets prepare a pro forma statement of financial position from relevant information provided evaluate a pro forma statement of financial position against stated strategic goals define the purpose of a pro forma cash flow statement prepare a pro forma statement of cash flows evaluate a pro forma statement of cash flows against stated strategic goals Part 3 Section C. Control and Performance Evaluation (Levels A, B, and C) Part 3 Section C.1. Factors to be Analyzed for Control and Performance Evaluation The candidate should be able to: demonstrate an understanding that performance against operational goals can be measured by a variety of methods including measures based on revenue, manufacturing costs, non-manufacturing costs, and profit depending on the type of center or unit being measured recognize that performance evaluation measures should be directly related to the factors that drive the element being measured, e.g., cost drivers and revenue drivers
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demonstrate an understanding that responsibility centers or business units are often measured on the effectiveness of asset usage and describe the benefits of treating all centers as investment units recognize that performance is frequently evaluated on the basis of non-financial performance measures such as customer satisfaction, quality, and innovation Part 3 Section C.2. Techniques to Control and Evaluate Operations The candidate should be able to: measure performance by comparing actual results to the master budget and calculating favorable and unfavorable variances from budget prepare a performance analysis based on the comparison of actual results to the master budget describe the benefits and limitations of measuring performance by comparing actual results to the master budget prepare a flexible budget based on actual sales (output) volume determine the sales-volume variance and the sales-price variance by comparing the flexible budget to the master (static) budget determine the flexible-budget variance by comparing actual results to the flexible budget investigate the flexible-budget variance to determine individual differences between actual and budgeted input prices and input quantities describe the concept of management by exception identify the benefits and limitations of using management by exception demonstrate an understanding of price (rate) variances and calculate the price variances related to direct material and direct labor inputs demonstrate an understanding of efficiency (usage) variances and calculate the efficiency variances related to direct material and direct labor inputs demonstrate an understanding of spending and efficiency variances as they relate to fixed and variable overhead recognize the significance of a sales-mix variance and its impact on revenue and contribution margin demonstrate an understanding that the efficiency (usage) variances can be further analyzed as mix and yield variances recognize that a mix variance results from using direct material and/or labor inputs in a ratio that differs from standard specifications and calculate a mix variance recognize that a yield variance results because the yield (output) obtained differs from the one expected on the basis of input and calculate a yield variance analyze variances, identify causes, and recommend corrective actions define a standard cost system and identify the reasons for adopting a standard cost system define an ideal (theoretical) standard and identify the benefits and limitations of implementing ideal standards define a currently attainable (practical) standard and identify the benefits and limitations of implementing currently attainable standards
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demonstrate an understanding of the techniques that are used to develop standards such as activity analysis and the use of historical data define benchmarking and describe the benefit of benchmarking when setting standards define a just-in-time system and describe its central purpose identify the operational benefits of implementing a just-in-time system define the term kanban and describe how kanban is used in a just-in-time system demonstrate an understanding of work cells and how they relate to just-in-time processes demonstrate an understanding of the concept of outsourcing and identify the benefits and limitations of choosing this option demonstrate an understanding of the concept of continuous improvement (kaizen) and how it relates to implementing ideal standards and quality improvements demonstrate an understanding of the theory of constraints and the steps involved in theory of constraints analysis define the term throughput and understand its relationship to theory of constraints demonstrate an understanding of a drum-buffer-rope system as a tool for managing product flow analyze a theory of constraints report and recommend corrective action recognize that theory of constraints and activity-based costing are complementary analytical tools recognize other contemporary productivity concepts such as automation and the use of robots, computer-aided design, computer-integrated manufacturing, and flexible manufacturing systems Part 3 Section C.3. Techniques to Evaluate and Report Performance The candidate should be able to: demonstrate an understanding that responsibility centers (strategic business units) represent effective units for performance evaluation and recognize the various types of responsibility centers recognize the role that feedback reporting plays in linking planning, control, and performance evaluations recognize the importance of timing in feedback reporting recognize the value of contribution reporting for performance evaluation analyze a contribution report and evaluate performance recognize that organizations may evaluate performance on the basis of segments such as product lines, geographical areas, or other meaningful segments demonstrate an understanding that the allocation of common costs among segments can be an issue in performance evaluation recognize methods for allocating common costs such as stand-alone cost allocation and incremental cost allocation recognize that performance measurement reports should be tailored to the audience
and level of management to which they are directed recognize that firms may evaluate customers on the basis of profitability and investigate ways to improve profitability or drop unprofitable customers
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Part 3 Section C.4. Performance Measures The candidate should be able to: define and calculate return on investment calculate return on investment based on the Dupont Model and describe how this model enhances basic return on investment calculations analyze and interpret return on investment calculations and evaluate performance on the basis of the analysis define and calculate residual income analyze and interpret residual income calculations and evaluate performance on the basis of the analysis compare and contrast the benefits and limitations of return on investment and residual income as measures of performance define and calculate economic value added demonstrate an understanding of how economic value added differs from return on investment and residual income measures recognize that market value added is another measure of performance demonstrate an understanding that several factors such as revenue and expense recognition policies may affect the measurement of income and reduce comparability among business units and companies demonstrate an understanding that several factors such as inventory measurement policies, joint asset sharing, and overall asset measurement may affect the measurement of investment and reduce comparability among business units and companies define transfer pricing and identify the objectives of transfer pricing recognize the methods for determining transfer prices and identify the advantages and disadvantages of each method recognize how transfer pricing is affected by business issues such as the presence of outside suppliers and the opportunity costs associated with capacity usage recognize how special issues such as tariffs, exchange rates, and the availability of materials and skills affect performance evaluation in multinational companies recognize how special issues such as taxes, currency restrictions, and expropriation risk affect transfer pricing in multinational companies define the concept of a balanced scorecard and identify its components demonstrate an understanding of how to make the most effective use of a balanced scorecard analyze and interpret a balanced scorecard and evaluate performance on the basis of
the analysis recognize that some organizations evaluate performance on the basis of cash flow return on investment compare and contrast cash flow return on investment with return on investment
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Part 3 Section C.5. Quality Considerations The candidate should be able to: define quality as it relates to customer expectations define conformance as it relates to quality and identify the characteristics of goalpost quality conformance and absolute quality conformance describe and identify the components of the costs of quality commonly referred to as prevention costs, appraisal costs, internal failure costs, and external failure costs identify the opportunity costs associated with poor quality management discuss the relationship between quality management and productivity and explain why misconceptions about this relationship can lead to poor decisions identify the core principles (critical factors) of total quality management demonstrate an understanding of the role that communication and training play in successful total quality management programs identify the purpose of quality audits and gap analyses identify the relationship between compensation systems and total quality management systems demonstrate an understanding of methods to analyze quality problems such as control charts, pareto diagrams, and cause-and-effect (fishbone) diagrams define a value-added activity and explain how the value-added concept is related to quality performance demonstrate an understanding of the role that value-chain analysis plays in determining the strategic value of quality performance demonstrate an understanding of the relationship among continuous improvement techniques, activity-based management, and quality performance Part 3 Section D. Behavioral Issues (Levels A and B) Part 3 Section D.1. Alignment of Managerial and Organizational Goals The candidate should be able to: define the concept of goal congruence and recognize the concept of agency theory and how it relates to goal congruence identify the purposes for goal setting as they relate to employee behavior (motivation) explain how goal congruence relates to the success or failure of budgetary plans describe the relationship between employee goals and needs and the goals of the firm differentiate between responsibility and authority demonstrate an understanding of the issues surrounding responsibility without
authority identify ways in which authority is established

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Part 3 Section D.2. Behavioral Issues in Developing Budgets and Standards The candidate should be able to: differentiate between authoritative (top-down) and participative (bottom-up) processes for developing budgets and standards identify the advantages and disadvantages of authoritative budget/standards development describe the likely behavior of employees responsible for implementing and achieving authoritative budgets and standards describe the role that top management should play in an effective participative budget process identify the advantages and disadvantages of participative budget and standards development describe the likely behavior of employers responsible for implementing and achieving participative budgets and standards demonstrate an understanding of the role that communication plays in effective budgeting and standard setting define the term budgetary slack describe how budgetary slack can have both positive and negative effects on the budgeting process describe the behavioral issues that should be considered when adopting ideal (theoretical) standards describe the likely behavior of employees being measured by practical (currently attainable) standards Part 3 Section D.3. Behavioral Issues in Reporting and Performance Evaluation The candidate should be able to: identify the objectives of management compensation/recognition identify and define the various types of management compensation/recognition describe how the various types of compensation affect employee behavior demonstrate an understanding that management compensation plans should be grounded in the firms strategic direction and life cycle demonstrate an understanding of how compensation plans can manage risk aversion recognize that feedback provides the link between planning, control, and evaluation recognize that the timing and frequency of feedback is dependent on how critical the measures are to the success of the business demonstrate an understanding of the purposes of feedback and alternative means of feedback such as reports, interviews, and team meetings demonstrate an understanding of the issues surrounding the controllability of costs,
motivation, and performance evaluation demonstrate an understanding of how the methods used to allocate common costs can affect behavior and performance
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describe the role of a flexible budgeting process and variance analysis in performance evaluation recognize that there is an hierarchy to variances and that the investigation of variances should positively influence behavior rather than fix blame identify the advantages and disadvantages of using multiple performance measures recognize that goal congruence may be optimized by using a combination of financial and non-financial performance measures demonstrate an understanding of how the method used to establish transfer prices can affect motivation and divisional performance describe the likely behavior of employees under varying types of transfer pricing Ethics (May be tested in conjunction with any topic area above) Using the standards of Statement on Management Accounting No. 1C (Revised), Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management the candidate should be able to: evaluate a given business situation for its ethical implications identify specific standards that may have been violated in a given business situation recommend a course of action for management accountants or financial managers to take when confronted with an ethical dilemma in the business environment
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Learning Outcome Statements Part 4 Section A. Decision theory and operational decision analysis (Levels A, B, and C) Part 4 Section A.1 Logical steps to reach a decision The candidate should be able to: demonstrate an understanding of the steps needed to reach a decision identify the steps needed to reach a decision, i.e., (a) obtain information, (b) identify alternative courses of action, (c) make predictions about future costs, (d) choose an alternative, (e) implement a decision, and (f) evaluate performance to provide feedback
Part 4 Section A.2 Relevant data concepts in the decision process The candidate should be able to: recognize the importance of focusing on relevant revenues (expected future revenues) and relevant costs (expected future costs) understand that future costs and future revenues, to be relevant, must differ among alternative courses of action recognize and identify cost behavior patterns, cost tractability, cost relevance as it relates to various cost objects for which decisions are to be made demonstrate an understanding of various costs incurred in the value chain (research and development, design, production, marketing, distribution, and customer service) and the composition of such costs for decisions such as pricing, alternative manufacturing options, contracts negotiations, and outsourcing decisions differentiate between costs that are avoidable or unavoidable in a decision process setting recognize that relevant costs are also referred to as incremental or differential costs define sunk costs differentiate between qualitative and quantitative relevant information distinguish between quantitative factors measured in numerical terms that can be (a) financial (e.g., cost of direct labor) or (b) nonfinancial (e.g., reduction in new-product development time) define qualitative factors as outcomes that cannot be measured in numerical terms, e.g., employee morale demonstrate an understanding of opportunity costs as the contribution to income that is forgone by not using a limited resource in its best alternative use demonstrate an understanding of the impact of income taxes on the relevant revenue and cost data employed in the decision process
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Part 4 Section A.3 Cost/volume/profit analysis for decision making The candidate should be able to: demonstrate an understanding of how cost/volume/profit (C/V/P) analysis (or breakeven analysis) examines the behavior of total revenues, total costs, and operating income as changes occur in output levels, selling prices, variable costs per unit, or fixed costs differentiate between costs that are fixed and costs that are variable with respect to levels of output demonstrate an understanding of the behavior of total revenues and total costs in relation to output within a relevant range recognize that the classification of fixed vs. variable costs is affected by the timeframe being considered, i.e., the shorter the period of time involved a higher percentage of total costs can be viewed as fixed
understand the importance of contribution margin per unit in C/V/P analysis calculate contribution margin per unit and total contribution margin calculate the breakeven point in units and dollar sales to achieve targeted operating income or targeted net income demonstrate an understanding of how changes in unit sales mix affect operating income in multiple-product situations demonstrate an understanding of why there is no unique break-even point in multipleproduct situations analyze and recommend a course of action using the cost/volume/profit analysis method demonstrate an understanding of the impact of income taxes on cost/volume/profit analysis Part 4 Section A.4 Marginal analysis The candidate should be able to: recognize that marginal analysis includes decisions covering (a) introduction a new product or a changes in output levels of existing products, (b) acceptance or rejection of special orders, (c) making-or-buying a product or service, and (d) adding or dropping a segment identify relevant information as the future revenues and future costs that will differ between the decisions in any type of marginal analysis recognize that any cost, including any allocated costs, that do not differ between alternatives, should be ignored in marginal decision analyses demonstrate an understanding of opportunity cost in marginal analysis calculate the effect of opportunity cost in a marginal analysis decision recommend a course of action in a marginal analysis situation calculate the effect on operating income when changes in output levels occur
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calculate the effect on operating income of a decision to accept or reject a special order when there is idle capacity and the order has no long-run implications identify qualitative factors in make-or-buy decisions, such as product quality and dependability of suppliers calculate the effect on operating income of a decision to make-or-buy a product or service differentiate between avoidable and unavoidable costs in the decision to drop or add a segment demonstrate an understanding of the impact of income taxes on marginal analysis decisions Part 4 Section A.5 Cost-based pricing The candidate should be able to: recognize the cost-behavior patterns, cost traceability, cost drivers, and cost relevance
to measure the costs of products demonstrate an understanding of how the pricing of a product or service is affected by the demand for the product or service, as well as the supply availability identify and explain how the major influences on demand and supply are customers, competitors, and costs recognize that pricing decisions can be either short-run or long-run decisions calculate the relevant costs associated with short-run special product purchase orders factor in competitors anticipated bids for short-run special orders in setting prices above relevant costs recognize that stable and predictable costs over an extended time period are preferred for long-run pricing decisions demonstrate an understanding of the market-based approach to the pricing decision recognize that market-based pricing strategies are generally used when operating in a competitive commodities type market recognize that market-based or cost-based pricing strategies are generally used when operating in a market where there is product differentiation differentiate between a cost-based approach and a market-based approach to setting prices define target pricing identify techniques to setting prices based on understanding customers perceptions of value, competitors' technologies, products, costs, and financial conditions calculate the target operating income per unit and target cost per unit identify the main steps in developing target prices and target costs define and distinguish between a value-added cost and a nonvalue-added cost define the pricing technique of cost plus target rate of return define a product life cycle and life cycle costing define price discrimination in setting prices define peak-load pricing evaluate and recommend pricing strategies under specific market conditions or opportunities
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Part 4 Section B. Investment decision analysis (Levels A, B, and C) Part 4 Sections B.1 through B.8 The candidate should be able to: define capital budgeting demonstrate an understanding of capital budgeting applications in making decisions for investments in projects and programs identify the steps or stages undertaken in developing and implementing a capital budget for a project
identify and calculate the relevant cash flows of a capital investment project on both a pretax and after-tax basis recognize that discounted cash flow (DCF) methods measure all incremental expected future cash inflows and outflows of a project and incorporate the time value of money demonstrate an understanding of the two main DCF methods, net present value (NPV) and internal rate of return (IRR) demonstrate an understanding of the weighted average cost of capital approach to NPV calculations calculate the NPV and IRR using time value of money tables recognize that under NPV analyses only projects with zero or positive net present values are acceptable projects demonstrate an understanding that the payback method measures the time it will take to recoup the initial net investment and, thus, focuses on a projects liquidity and the projects potential level of risk identify the advantages and disadvantages of the payback method calculate payback periods and discounted paybacks rank capital investment projects and recommend optimal investments using the profitability index; also be able to use alternatives ranking methods demonstrate an understanding of the advantages and disadvantages of the different methods of evaluating capital investment projects identify assumptions of the different methods of evaluating capital investment projects identify alternative approaches to dealing with risk in capital budgeting recognize the qualitative considerations in making capital investment decisions evaluate and recommend capital investment alternatives to meet specific situations demonstrate an understanding that when project cash flows are more or less risky than is normal for a firm, a rate specifically adjusted for risk should be used recognize that risk-adjusted discount rates adjust for both time and risk demonstrate an understanding that in the capital budgeting process there may be real options that must be considered recognize that there are at least four common real options, viz., the option to (a) make follow-on investments if the immediate investment project succeeds, (b) abandon a project, (c) wait and learn before investing, or (d) vary a firms output or its production methods
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recognize that the Black-Scholes formula and the binomial methods are accepted option-valuation models demonstrate an understanding of the variables and factors that affect the value of options Part 4 Section C. Quantitative methods for decision analysis (Levels A and B)
Part 4 - Section C.1 Forecasting analysis (Levels A and B) The candidate should be able to: demonstrate an understanding of the regression equation and the measures associated with it identify the assumptions of simple regression analyses demonstrate an understanding of learning curve analyses calculate the results under a cumulative average-time learning model and under an incremental unit-time learning model demonstrate an understanding of exponential smoothing demonstrate an understanding of time series analyses, including objectives and patterns, i.e., trend, cyclical, seasonal, and irregular list the benefits and shortcomings of regression analysis, learning curve analysis, and time series analysis Part 4 - Section C.2 Linear programming The candidate should be able to: demonstrate an understanding that linear programming is an optimization technique used to maximize total contribution margin of a mix of products given multiple constraints define and identify the objective function as the quantitative goal to be maximized or minimized demonstrate an understanding of the mathematical formulation of a constraint calculate the optimal solution by the use of linear programming using the graphical method list the benefits and shortcomings of linear programming Part 4 Section C.3 Sensitivity analysis The candidate should be able to: identify the uses of sensitivity analysis recognize sensitivity analysis is useful when probabilities for the states of nature and the payoffs are based on subjective assessments perform a sensitivity analysis with different values for the probabilities of the states of nature and/or the payoffs
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list the benefits and shortcomings of sensitivity analysis Part 4 Section C.4 Network analysis The candidate should be able to: recognize that network analysis includes the critical path method (CPM) and the program evaluation review technique (PERT) explain how CPM and PERT are used for scheduling projects develop a project network analysis identify the critical path after a network is developed
calculate the critical path through a network and all the related start, finish, and slack times demonstrate an understanding of what makes critical activities different from other activities demonstrate an understanding of the cost impact of shortening a critical path list the benefits and shortcomings of network analysis Part 4 Section C.5 Probability concepts and expected value The candidate should be able to: recognize that the probabilities for all values of a random variable must equal 1 develop a probability distribution table calculate the expected value of random variables list the benefits and shortcomings of probability concepts and expected value techniques Part 4 Section C.6 Decision trees The candidate should be able to: construct a decision tree analysis, analyze decisions and infer results based on the decision tree define and identify the assumptions of the decision tree analysis technique explain the relationship between decision trees and investment decisions explain the difference between a decision node and a probability node describe the process used to estimate the cash flow and probability values used in decision tree analysis list the benefits and shortcomings of a decision tree analysis Part 4 Section C.7 Simulation The candidate should be able to: demonstrate an understanding of the uses of simulation models recognize that any simulation model has two inputs; controllable inputs and probabilistic inputs demonstrate an understanding of the simulation approach called a what-if analysis
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demonstrate an understanding of how what-if analyses can generate various scenarios that allow assessments of the probabilities of possible results demonstrate an understanding of how simulations can be used to model and learn about the behavior of complex systems list the benefits and shortcomings of simulation models Part 4 Section D. Information Systems (Levels A and B) Part 4 Section D.1 Nature and purpose of an information system The candidate should be able to: identify the different types of business information systems, e.g., transaction
processing, management information, decision support, etc. recognize that information systems support the business functions of accounting, finance, marketing, operations management, and human resources identify and define the two basic ways that transaction processing systems process data; i.e., (a) batch processing and (b) realtime processing recognize that management information systems provide information and support the day-to-day decision-making needs of management Part 4 D.2 System development and design The candidate should be able to: recognize that most computer-based information systems are conceived, designed, and implemented using a systematic development process recognize that end-users and information technology specialists should design information systems based on an analysis of an organizations information requirements define a systems development life cycle (SDLC) and understand that the SDLC involves activities that are highly related and interdependent outline the steps of an SDLC and explain how they are related recognize that systems feasibility studies should encompass cost/benefit analyses which include both tangible and intangible benefits identify both the tangible and intangible benefits of a cost/benefit analysis Part 4 D.3 Technology of information systems The candidate should be able to: recognize that the use of telecommunications systems allows companies to move data from distant points, generally at lower costs demonstrate an understanding of the different types of communications networks being used in business environments describe wide area networks (WANs) describe local area networks (LANs)
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demonstrate an understanding of client/server networks recognize that client/server computing is an alternative technology to mainframe or hierarchical networks recognize that client/server systems process data on any computer in the network recognize that software applications, such as spreadsheets, generally reside on the client computer, while the databases and related software are stored on the server computers, typically networked minicomputers distinguish between mainframe systems typically centralize everything, including control of the system, and client/server applications, that distribute data and software among the servers and client computers identify the advantages and disadvantages of client/server systems
demonstrate an understanding of how a database management system (DBMS) is used to control the development, use, and maintenance of the firms many databases in mainframe and midrange computer systems recognize that a DBMS is not a database but, rather, a set of separate computer programs that enable users to create, modify, and utilize database information demonstrate an understanding of Decision Support Systems (DSS) recognize that DSS use (a) analytical models, (b) specialized databases, (c) decision makers insights and judgments, and (d) an interactive computer-based modeling process to support making semi-structured and unstructured decisions recognize that DSS are ad hoc, quick response systems initiated and operated by the end-users recognize that Artificial Intelligence (AI) encompasses other applications including expert systems, fuzzy logic, neural networks, etc. and can capture management reasoning in software define expert systems as software programs that use facts, knowledge, and reasoning techniques to solve problems that typically require human expert capabilities demonstrate how to use a spreadsheet for business analysis, planning, and modeling construct a spreadsheet used for accounting reporting or analysis purposes analyze a spreadsheet report and determine which formulas are causing errors, and how to correct the formulas Part 4 Section D.4 Electronic Commerce The candidate should be able to: define and identify major characteristics of Electronic Data Interchange (EDI) explain how EDI differs from electronic commerce applications that use the internet define Business-To-Business (B2B) commerce and demonstrate an understanding that it involves both electronic marketplaces and the direct market links between businesses summarize the importance of the internet for Business-To-Business (B2B) commerce demonstrate an understanding of how B2B electronic commerce has affected the industrial supply chain demonstrate an understanding of other e-commerce technologies, including Online Transaction Processing and Electronic Funds Transfer (EFT)
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Part 4 Section D.5 Uses of the internet and corporate intranets The candidate should be able to: describe the internet as an international network of computers and smaller networks all linked together define and identify the components of the internets backbone recognize that the internet allows users to inexpensively communicate and transmit data globally
demonstrate an understanding of the uses of browser software define the term intranet recognize that internal networks (intranets) can be navigated with browser software but are closed to the general public identify how intranets enable companies to share expertise among its organizational units. Part 4 Section D.6 Integrated enterprise-wide model The candidate should be able to: define enterprise-wide planning (ERP) demonstrate an understanding of ERP and recognize that ERP is reliant on an enterprise-wide database, which comprehends a large repository of organizational data that comes from and is available to a wide range of employees recognize that an enterprise-wide database, also known as a data warehouse, represents data from separate applications and several databases that are combined into a large common body of information explain how data warehousing facilitates data mining, which is the capability to explore and search data repositories for corporate purposes Part 4 Section E. Management Controls (Levels A and B) Part 4 Section E.1 Internal Controls The candidate should be able to: recognize how a companys organizational structure, policies, objectives, and goals, as well as its management philosophy and style, influence the scope and effectiveness of the control environment explain how developing an organizational structure for an entity involves defining the key areas of authority and responsibility and assigning these roles to the appropriate individuals or lines of reporting describe how and why the board of directors of a company is responsible for seeing that the company is operated in the best interests of the stockholders recognize that boards of directors are generally composed of inside members (officers and employees of the company) and outside members
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understand why outside members generally are selected to serve on the audit committee of the board of directors recognize that the audit committee serves as an intermediary between the internal and external auditors and management identify the audit committees functions to include (a) nominating the public accounting firm that will conduct the annual external audit, (b) discuss the scope of audits with the internal and external auditors, and (c) inviting direct audit communications on major problems encountered during the course of internal and
external audits demonstrate an understanding of the importance of well designed, effective forms of control that should always be in force recognize that internal controls are designed to provide reasonable assurance regarding achievement of an entitys objectives involving (a) effectiveness and efficiency of operations, (b) reliability of financial reporting, and (c) compliance with applicable laws and regulations recognize that a typical method of control used by management is to establish policies, plans, and procedures for the entitys operations and, also, to comprehend laws and regulations imposed from outside the organization identify reasons why personnel policies and procedures, particularly with the employment and promotion of competent personnel, is integral to an efficient control environment define and give examples of segregation of duties identify and explain why at least the following four types of functional responsibilities should be performed by different organizations or people, i.e., (a) authority to execute transactions, (b) recording transactions, (c) custody of assets involved in the transactions, and (d) periodic reconciliations of the existing assets to recorded amounts demonstrate an understanding of why independent checks, performed by someone other then the person responsible for the original operation, are generally more effective in assuring that transactions are processed and activities are performed more accurately provide examples of forms of safeguarding controls recognize that the most visible safeguarding controls are designed and implemented to protect an organizations assets, including protection from losses due to natural disasters like floods and tornadoes recognize that the use of pre-numbered forms, as well as specific policies and procedures detailing who is authorized to receive specific documents, etc., is a means of control and safeguard of documents define inherent risk, control risk, and detection risk understand that risk encompasses both total dollar value of assets that are exposed to loss, as well as the probability that such a loss will occur explain why controls should be designed to limit risk wherever risk exposure is determined to exist (i.e., in the form of loss of assets or misstatements of accounting or management information) recognize that while controls designed to prevent fraud are important and make perpetration of fraud more difficult, they are not complete insurance against fraud
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identify major provisions of the Foreign Corrupt Practices Act (FCPA), including the primary purpose which was to prevent the bribery of foreign officials in order to
obtain business Part 4 Section E.2 Internal Auditing The candidate should be able to: define the internal audit function recognize that the internal audit function furnishes analyses, appraisals, recommendations, counsel, and information concerning activities reviewed to assist members of the organization in the effective discharge of their responsibilities recognize that the scope of internal auditing encompasses the examination and evaluation of the adequacy and effectiveness of an organizations system of internal control, the reliability of generated data, the effective and efficient use of an entitys resources, and the degree to which individuals are effectively carrying out assigned responsibilities identify incidents that internal auditors should report to management or the board of directors demonstrate an understanding that financial audits are generally performed by external, independent auditors, who issue an opinion on the accuracy and fairness of managements assertions regarding the financial statements demonstrate an understanding that company management, as well as external auditors, have legal responsibilities to issue financial statements that do not contain serious errors and mistakes explain why the best assurance against errors and mistakes are strong internal control systems identify how internal and external auditors can coordinate their work plans understand how the competency of both the internal and external audit groups affects the level and effectiveness of their coordination define a compliance audit understand that the objective of compliance audits is to ensure that the entity is operating in an orderly way, effectively and visibly conforming to the specific requirements of its policies, procedures, standards, or laws and government regulations define an operational audit and recognize that operational audits are designed to examine and evaluate systems of internal control and overall company operations recognize that the internal audit function has a responsibility to test the reliability of generated data demonstrate an understanding of how flowcharts of activities are used by auditors to understand existing procedures, highlight the internal control points, and assess the effectiveness of a firms internal controls
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Part 4 Section E.3 Systems controls and security measures The candidate should be able to: demonstrate an understanding of how systems development controls are used to
enhance the accuracy, validity, safety, security, and adaptability of systems input, processing, output, and storage functions recognize that hardware controls encompass both the physical access to the hardware and the logical (ability to use) access to the hardware identify procedures to limit access to physical hardware identify how protection of programs and databases from unauthorized use can be accomplished describe how specialized software packages can monitor and control the use of hardware, software, and data resources of a computer system and/or a computer network design or identify an input control, a processing control, and an output control and describe why each of these controls is necessary describe the similarities and relationships between output controls and input controls (e.g., control totals on output are compared to control totals generated during the input cycle) describe the various types of storage controls and when and why they are used recognize that appropriate controls for the input, processing, output, and storage need to be considered when documents are designed to ensure that the information system produces proper, accurate, and reliable information outline the inherent risks of using the internet as compared to data transmissions over secured transmission lines define data encryption and describe why there is a much greater need for data encryption methods when using the internet identify a firewall and its uses outline the reasons why all program and data files should be backed up regularly and frequently and stored at a secure remote site develop an outline of a disaster recovery plan describe how document controls should be developed and disaster recovery plans designed so that data processing capacity can be restored as smoothly and quickly as possible in the event of a major disaster understand that an objective of disaster recovery plans is to minimize the extent of disruptions, damages, and losses and to temporarily establish alternative means of processing information recognize that disaster recovery plans require training personnel with emergency operations
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Learning Outcomes Statements 06/30/03 Page 70
Ethics (May be tested in conjunction with any topic area above)
Using the standards of Statement on Management Accounting No. 1C (revised) Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management, the candidate should be able to: evaluate a given business situation for its ethical implications identify specific standards that may have been violated in a given business situation recommend a course of action for management accountants or financial managers to take when confronted with an ethical dilemma in the business environment

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Learning Outcome Statements Part 2CMA Section A. Financial Accounting Environment (Level A) Part 2CMA Sections A.1.

requirements for derivatives

Learning Outcomes Statements

authority identify ways in which authority is established

Ethics (May be tested in conjunction with any topic area above)

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