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A Brief Guide to Stock Price Changes


By John Alexander Adam

The factors that impact the value of a company’s stock can appear a complete mystery to the uninitiated. How can tech companies yet to make a profit, or even break-even, achieve market capitalizations in the billions? And why do investors pay more for stock in some companies making far less money or profit or both than others? Stock market valuations are complex. Companies in different industries and with different kinds of activities are valued in a different way as are companies at different stages of maturity. Even the experts don’t always agree on exactly how or why to value different companies in different ways. But that is also part of the inherent competition of trading and investing in the stock market. To be successful, anyone buying or selling stock must decide on the direction the value of that stock will take before it does so. While hundreds of whole books have been written on the details of the many factors that can influence the direction of stock prices, here’s a few of the main ones described in brief.

Fundamental Valuation

A company’s fundamentals are the most traditional way to value it. Fundamentals include the company’s revenues, profit margins, operating costs, assets and liabilities. They pay no attention to current popular sentiment around the company and look at only the hard, stripped down facts of its current financial strength. If investors believe a company’s fundamentals are strong or weak in comparison to its current stock price this will, over the longer term, influence the trend of its share price up or down.

Technical Analysis

Technical analysis of a company’s worth is almost the opposite of a fundamental valuation. A technical assessment of stock price focuses on patterns in buying and selling behavior. By looking at charts and applying different theoretical principles, investors believe that the past pattern of the stock’s price provides a good indication of its future direction. Technical analysis often becomes a self-fulfilling prophecy with short term traders controlling vast sums of money following technical analysis principles. As a result, when a trend starts to take shape billions of dollars start to be placed on that trend, either through the buying or selling of stock, which drives the market further in that direction. This relies on the principle of interpreting general investor sentiment and tends to mainly impact stock price valuations in the shorter to medium term.

Market Share

If we go back to the example of companies being assigned huge values while making little or no profit, the main reason for such seemingly ludicrous valuations is their market share, or rather, the growth trajectory of their market share. It could be an entirely new market the company is creating for itself, such as in the case of social media giants Facebook and Twitter, or it could be an existing market they are making quick inroads into through an innovative approach. While not yet listed on the stock exchange, currency exchange and transfer service TransferWire is a good example of the latter. Investors will look at a company showing significant growth or loss in market share and be ready to pay a premium to get in on what they expect to be the next big thing, or take a hit by selling out of a company they consider to be on the decline.

Wider Industry Sentiment

The stock price of companies can go up or down due to investor sentiment towards the wider industry they are a part of. Finance and banking stocks for example often show valuation trends up or down without any actual change in the company’s profit, loss or market share because investors because investors believe an external factor such as a change in interest rates will impact the entire sector. Another example could be new technology meaning investors fear what a particular group of companies does could soon become obsolete.

Economic Shocks

Investors are a nervous bunch and any big shocks to the financial system, or geo-political disruption, tends to send them scurrying for the exits. When the financial crisis hit in 2007-08, stock prices crashed across the board. In theory, companies whose main activities are focused on basic goods and services, such as utilities companies, manufacturers of staple food products and so on would not see demand for their products reduced as a result of lending constraints on banks. We might choose not to buy that slightly pricey bottle of wine when things get a little tight but do we eat less bread or sit in a cold house? Nonetheless, history shows that such shocks impact general investor confidence and stock prices fall in unison, regardless of what the companies do.

There are other factors and many more sub-factors that influence stock price changes and predicting them is so complicated as they work together, pushing and pulling prices in different directions simultaneously. However, the five listed here are a good starting point that a majority of influences can be traced back to.

If you would like to improve your understanding of business and finance, why not take a qualification such as the CFA® Program! Morgan International offers a number of different professional finance, investment and accounting qualification programs at locations across the Middle East.

6 Key Rules for Effective Portfolio Management-02

6 Key Rules for Effective Portfolio Management


By John Alexander Adam

Managing, and more crucially growing, money is not easy. If it were we would all be a lot richer than we are. Even professionally trained active fund managers at the top of their profession notoriously often fail to beat the market. That can be attributed in large part to fee structures draining profits, but still highlights the scale of the challenge that faces portfolio managers. However, there are many successful investment portfolio managers, private and professional, that do consistently outperform markets. This is especially true when fund managers crippled by their fund’s fee structure are taken out of the equation.

While even the most adept portfolio manager will make the occasional bad call, the real secret to effective portfolio management is in the consistent avoidance of costly errors. In an article for Forbes Magazine, Peter Andersen, Chief Investment Officer at Congress Wealth Management, posits that cutting mistakes down to the bare minimum is what separates consistently successful portfolio managers from the rest. He argues that most mistakes can also be traced back to violations of several key money management rules. So let’s take a look at some of those key rules for successful portfolio management. Some are those mentioned by Andersen and some are not. While this is by no means a comprehensive list, hopefully they will get you thinking about the important things to keep in mind when it comes to minimizing the mistakes that can be the difference between effective portfolio management and disappointed clients, or even a disappointing performance for your own personal investment portfolio.

  1. Patience

Although it can be worded in different ways, from ‘trust the fundamentals’ to ‘long term investing’ ‘patience’ is, with justification, the most commonly cited piece of advice when it comes to a successful investment strategy.

Especially in the news-hungry modern world which continuously updates us on our holdings, it is important to block out all but the most important information and focus on the underlying, longer term fundamentals that original decisions were based on. Markets have more and less volatile periods and while it is crucial to stay alert for significant changes which could impact your holdings, it is just as crucial to cancel out most of the noise and ignore short term volatility.

  1. The Trend Isn’t Always Your Friend

Groupthink may be harder to spot in investment trends than it is at the golf club or between a group of friends but make no mistake, it permeates financial markets to a frightening extent. As a portfolio manager one of the most fundamental pieces of advice you should heed is to ignore what the markets and media are saying and always think for yourself. If you are a day or short-term trader the trend may well be your friend, but as a portfolio manager it is more like peer pressure to skip school. You might gain short-term kudos but it isn’t going to do anything positive for your long term prospects.

  1. Always Have a Pre-Nup and a Plan B

We have already mentioned that it is important to commit to portfolio holdings, to remember your original reasoning, not to follow the crowd and not to be distracted by short-term volatility. However, that doesn’t mean you should both blindly sail into the storm and then stay with a sinking ship when things don’t pan out in the way you initially expected.

When you choose to invest in any holding, go through all of the potential scenarios, positive and negative, that could significantly impact your initial suppositions. You will then know if conditions have changed in a pre-empted way to mean your commitment is no longer be tenable, know the terms of divorce and be able to react. And of course, you need to have Plans B and C in place so you are not scrabbling around trying to figure out what to do when negative scenarios do come to pass.

  1. Know Your Strengths and Fortify Against Your Weaknesses

If you have expert or in-depth knowledge in a particular industry or sphere, use that. Andersen cites the example of an investment manager with particular knowledge of adolescent epilepsy, new medications and potentially break-through treatments and how that had come in useful when it came to certain stock picks. If you are a portfolio manager with a better track record in value-based picks rather than growth picks, focus on what you are good at and bring in someone with complementary strengths, either in an official capacity or as an advisor.

  1. Embrace Technology

There is a wealth of new technology out there that can help portfolio managers hugely when it comes to screening different equities and other assets. They take a lot of the manual process out of value assessment by different metrics and while they are restricted to data-based filtering can be an invaluable tool to flag options for further attention. Embracing these kind of screening tools, and other technology out there, can help portfolio managers make picks from a much vaster range of options than was previously possible.

  1. Communicate

Finally, with the best of intentions, impeccable approach, knowledge and skill, professional portfolio management requires communication if the manager is to be successful. When a fund underperforms the market investors are twice as disappointed as they are happy when it outperforms. The same is true of a portfolio manager’s clients. There will always be times when a portfolio loses value, it is unavoidable. However, clear communication with clients on the decision making process, correct expectation setting and regular updates will reduce the chances of clients panicking when that does happen. Don’t try to make your skill set seem mysterious and out-of-reach. Educate your clients as much as possible on investment principles and your approach. The better they understand what you are doing the less likely they are to be phased by setbacks and appreciate successes.

If you would like to improve your understanding of business and finance, why not take a qualification such as the CFA® Program. Morgan International offers a number of different professional finance, investment and business-related qualification programs at locations across the Middle East.



5 Key Ethical Guidelines for Best Practice in Financial Services


By John Alexander Adam

It should be stated from the outset that while financial services as a wider industry get a bad rap, there is nothing intrinsically unethical about it as a sector. An external observer subject to regular headlines denouncing the latest scandal involving bankers, traders and other financial services professionals bending, or outright breaking, the rules in the pursuit of financial gain might, however, be under a different impression. On the one hand, the huge sums of money swirling around financial markets, the competitive element to who makes money and who doesn’t and intrinsic human greed mean that financial services professionals and companies are under more pressure than most to make ethical choices. On the other, financial services are a vital component to a functioning modern economy and are not in any shape or form inherently ‘unethical’. In fact, financial services’ intrinsic role is that of the protector of wealth and the smooth functioning of the global economy.

As such, it is even more important than in other industries that financial services are conducted according to a strong code of ethics and adhere to a moral compass that, in some cases, can go even beyond legal and regulatory frameworks governing how their work is done. So, what does an ethical financial services industry look like? If the culture of financial services professionals and the companies and institutions they work for follow these 5 principles unerringly, we will all live in a better world that would provide greater wealth and opportunity for everyone:

  1. Profit, but Not at Any Cost

A modern, capitalist economy has at its very foundation the principle of profit. Without a surplus, or profit, the economy doesn’t work. As such, financial services professionals are obliged to pursue a profit as the result of their activities. However, a modern economy only works if that profit is earned within a framework of rules and regulations that apply and are adhered to by everyone. Financial services are obliged to pursue profit maximization within the applicable framework and not by seeking an advantage by conducting activities that could be considered outside of that framework. Like sprinters competing in the 100 meters, the conditions should be the same for all competitors and the race conducted in an ‘honorable’ fashion.

  1. The Client’s Interests First

Financial Services is a wide sector and the ‘client’ may take many shapes and forms. At the highest level, in the case of a country’s central bank, the ‘client’ would be at one step removed the ‘Government’, and ultimately the population of the country.  At another level further down the ladder, the ‘client’ would be the investors in a fund or the private investor whose money a CFA® charterholder manages. Whoever the ‘client’ might be, an ethical approach to Financial Services will always put the client’s interests first. A doctor is paid but receives that payment on the understanding that their primary responsibility is to look after the health of their patients, not their own financial wellbeing. A doctor whose work routinely meant that the health of their patients suffered, would not receive their salary for long. In the same way, Financial Services should see their own income as reward for improving the financial health of their clients. There is nothing wrong with a fund or its manager making money, but their profit should not come at the expense of their clients. A truly ethical Financial Services industry would not see a small profit eaten up by fees, leaving the client with far less gain, or even a loss, while the financial services professionals and company supposedly working for that client make a tidy profit.

  1. A Commitment to Excellence

An ethical approach to financial services would see professionals and the organizations that they represent constantly striving to do the best job they possibly can under the circumstances. This means avoiding a mentality of doing ‘enough’, and stopping there. Commitment to both excellent results and technical accuracy in each step of the processes leading to that result is required.

  1. Ethics Prioritized Over Client Instruction

Of course, unethical behavior in Financial Services can also be provoked by clients themselves. Whether it be through strong encouragement to help them minimize tax within the gray areas of international tax law, or any other activity that could be interpreted as giving them an unfair advantage, it is far from uncommon for financial services professionals to be put under pressure by their clients to conduct activities they may not consider ethical. Financial Services run ethically will prioritize ethical conduct even when by doing so they may decline to undertake activities expressly requested by the client, even at the risk of losing that client’s business.

  1. Legal is Not Always Ethical

While legal and regulatory frameworks are, in theory, in place to govern ethical practice in Financial Services, there may be many instances where a particular course of action may be considered unethical despite not directly contravening laws or regulations. The legal framework governing Financial Services is not perfect and finding loopholes or other means to circumvent it is common. In fact, many areas of Financial Services specialize in doing just that. However, ethical Financial Services means choosing not to act in a certain way, or perform certain activities, despite the fact that doing so may not technically mean breaking any laws. Choosing not to exploit technicalities that may mean an activity is legal because it is considered unethical is the mark of a truly ethical approach.

If you would like to improve your understanding of business and finance, why not take a qualification such as the CFA® Program. Morgan International offers a number of different professional finance, investment and accounting qualification programs at locations across the Middle East.



Financial Simulation Analysis Explained


By John Alexander Adam

Anyone who has ever been responsible for the financial wellbeing of a company will know only too well that there is the original plan and then what actually happens. Economies are dynamic and whatever the nature of a particular business there are external factors which influence, that cannot be controlled. The price of raw materials could go up, or interest rates. The regulatory framework may change or unions could provoke a strike. Good financial planning involves looking at all the potential scenarios in terms of costs and income projections deviating from the course of the original plan expectations.

Companies use financial simulation analysis to build models of how different courses of action and external variables may impact their finances, building models that allow them to react quickly, with a plan already in place. Financial simulation analysis is also often referred to as ‘sensitivity analysis’ and ‘what if analysis’: how robust financial planning based on the expected scenario is to potential changes to external influences.

A Simple Guide to Building a Financial Simulation Analysis

Bigger businesses with more complex structures and interconnecting parts to their operations will build financial simulation analyses that can become quite complex. However, regardless of the complexity of any simulation analysis, it will basically boil down to these key considerations:

  1. Develop and begin with your forecast business plan including forecasted income statement, fixed and variable costs.
  2. Increase and decrease your income based on sales volumes
  3. Increase and decrease your expenses based on potential changes to fixed costs
  4. Increase and decrease your expenses based on potential changes to variable costs
  5. Create a range of different scenarios bases on changes to income, variable and fixed costs

Scenario Analysis vs. Simulation Analysis

Financial Simulation Analysis looks at abstracted changes to revenues and expenses, without attaching probable cause to them. They simple show what the impact would be to the bottom line when different income and expense variables are adjusted. Sometimes prior knowledge means scenarios can be more specific and this is then referred to as a Scenario Analysis. For example, for a retail operation there may be a clear statistical correlation between footfall and sales. In this case, a financial simulation analysis could look at the impact on footfall of planned construction works in the area, such as the renovation of a pedestrian street. This would help the business reach a decision as to whether it remains financially viable, or advisable, to keep the store open for the duration of the construction work.

If you would like to improve your understanding of business and finance, why not take a qualification such as the CFA® Program. Morgan International offers a number of different professional finance, investment and accounting qualification programs at locations across the Middle East.


Gain and Maintain your CFA© Charter

By Rebecca Langdon

The Chartered Financial Analyst credential is arguably the most respected investment management qualification in the world. At Morgan, we have helped many candidates undertake the CFA© program and become fully accredited. To enter the program you do not need to have a background in finance, but you need 4 years of relevant experience which might be:

  • A Bachelors degree (or equivalent)
  • Work experience
  • Or a combination of education and professional experience

To become a Charterholder you will need to do the following:

  • Agree to follow the CFA Institute Code of Ethics and Standards of Professional Conduct
  • Pass the CFA© program exams for Levels I, II, and III
  • Have four years of qualified work experience in investment decision making
  • Become a regular member of CFA Institute and apply for membership in a CFA member society

At Morgan we are committed to helping candidates pass the CFA © exams, but we can also assist with finding an appropriate job role via our online platform, Morgan Connect. The platform is available to access free of charge for Morgan alumni who have passed their exams, and it allows reputable employers to post jobs and find sought after qualified talent. As a candidate it offers you the opportunity to network with potential employers who are looking for individuals just like you.


Follows CFA Institute Prep Provider Guidelines. CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by Morgan International. CFA Institute, CFA© and Chartered Financial Analyst(R) are trademarks owned by CFA Institute.


Brexit to Mean Fewer Jobs for CFA Chartered Investment Professionals in the UK?


By John Alexander Adam


Brexit, the term coined to refer to the UK’s potential disentanglement from EU-membership is, as of the

June 23 rd referendum, now a reality in motion. With 51.9% of the electorate of the United Kingdom of

Great Britain and Northern Ireland voting in favor of the country relinquishing its status as a member of

the EU, it is accepted that at some point over the next several months the UK’s government will officially

invoke Article 50 of the Lisbon Treaty. This will officially trigger the process of the UK’s voluntary

withdrawal from the EU. While no one really knows at this stage how the upcoming negotiations will

shape the new relationship between the UK, the EU and the rest of the world, it is almost certain to have

a major impact on the future nature of trade relationships and agreements. One major British industry set

to be particularly affected by Brexit is financial services and its City of London hub. As such, the

international financial industry and its vanguard of CFA-accredited investment professionals is watching

nervously to see how the Brexit fallout impacts business volumes, and therefore jobs, in the UK’s financial

services sector.


City of London to Lose EU Trade?

While the City of London was certainly a major international finance and trading hub before the existence

of the EU, the world has changed immeasurably over the intervening decades. It is far from certain

whether London can maintain capital volumes passing through its banks and other financial institutions in

the present day, without free access to EU markets.


The EU operates a ‘passporting’ system for financial institutions, which means banks and other financial

services providers can conduct activities across the member-states of the EU from a base in any other.

Over the decades since the formation of the EU, London built upon its initially strong position to become

the locale of choice for global financial institutions doing business across the entirety of the EU.


The City of London’s status as the world’s central hub for the trading of the euro, a market turning over $2

trillion a day, looks to be in particular jeopardy. Last year the ECB failed in a move to stop clearing

houses not located within the Eurozone from handling wholesale euro transactions. The move was

blocked by the European Court of Justice, protecting London’s dominance of the market, a decision

widely considered to have been heavily influenced by the UK’s status as a member of the EU, despite not

being a part of the Eurozone. Any new post-Brexit attempt by the ECB to table a similar motion is unlikely

to meet the same level of resistance and would likely succeed.


London to Relinquish its Crown as Europe’s Primary Employer of CFAs?

Aside from the euro trading market, international banks such as HSBC and JP Morgan have already

intimated that the UK no longer being a part of the EU’s passporting system would negate the logic of

them employing so many staff in London. Roles directly connected to EU markets would have to be

relocated to EU member states with alternative financial centers such as Paris, Frankfurt and Dublin likely

to be amongst the main beneficiaries of such relocation.


With 11% of The City’s financial services professionals coming from other EU member states, any change

in freedom of labor laws post-Brexit would also inevitably result in a brain drain of EU talent no longer

able to easily work in the UK. This would also make London a less attractive base for international



It is expected that job locations would be fragmented between different European bases rather than one

city taking over a dominant role. However, a domino effect of such fragmentation would likely be financial

institutions being less inclined to necessarily base other positions dealing with international non-EU trade

in a London office no longer considered as the European HQ. Some observers have predicted that such a

fragmentation of Europe’s financial services industry would have the knock on effect of it being less

competitive internationally across the board.


International Migration of CFA Jobs – Where Will They Go?

The result of all of the above would be a fanning out around the globe of many of the positions for CFAs

currently concentrated in the City of London. Other European capitals would likely become host to

positions dealing directly with EU markets. What would happen to positions dealing with other

international markets based in London is less clear. Financial institutions may yet decide to keep all or a

part of those positions based in London but for those who don’t the main beneficiaries would likely be the

other established and developing financial hubs. Singapore and Hong Kong in South-East Asia, New

York and the developing financial services industry in the Middle East in cities such as Dubai, would

expect to stand to gain from London’s loss.


Can London Retain Its Position?

The extent to which the potentially seismic changes to the UK’s financial services sector outlined above

come to pass will largely be shaped by negotiations between the UK and the EU over the months and

years after Article 50 is officially invoked. If the UK were to seek to adopt a model mirroring Norway’s and

apply to join the EEA and gain EFTA membership, existing pan-EU regulatory frameworks governing

financial services would remain in place along with the passporting system. This could mean that

London’s position with the international financial services industry would remain largely unchanged.


Alternatively, a UK-EU free trade agreement would give the UK freedom to create its own regulatory

framework for its financial services sector. This would likely result in a patchwork model where some UK-

EU financial trade would remain as currently is with other parts restricted. Pro-Brexit voices have opined

that this kind of arrangement would allow a part of EU-trade focused positions to remain viable as

London-based, with lighter regulation making London a more attractive location for other kinds of jobs

than it is at present.


Time Will Tell

Like the rest of us, London-based CFAs will be finding it hard to as of yet predict the eventual outcome of

Brexit on the British economic and trade model in general, and specifically how that will impact the

financial services industry that is their employer. Until Article 50 is triggered, negotiations get underway

and the UK and the EU outline their positions on how they see their future partnership taking shape we’ll

all, CFAs included have to watch and wait to see how the international FS industry will be reshaped.


Aspiring CFA charterholders can take preparatory courses and their CFA

exams from Level I to III with Morgan International. For further information, please contact us!


CFA vs. CPA: Which is Right for Me?


By John Alexander Adam


The CFA and CPA qualifications are the two most well-known internationally recognized professional qualifications for

accountaing and financial services professionals but respectively focus on very different specializations. The CFA charter

is governed by the Chartered Financial Analyst Institute (CFAI) and is designed to verify excellence in

professional and ethical standards of individuals managing investment capital. The CPA is managed by

the American Institute of Chartered Public Accountants (AICPA) and has become an international standard for

English-speaking accountancy professionals via the Uniform CPA Examination administration.


The Similarities

While the CFA and CPA qualifications apply to two distinct fields of financial services professionals,

investment managers and accountants, and thus have curriculums covering largely distinct knowledge

and skills sets, there are a number of similarities.


1.) Standard of Excellence: firstly, both are considered as the international standard of excellence

for professionals in their respective fields. Holding either CFA or CPA accreditation marks

professionals out as having the ‘black belt’ in investment or accountancy skills and knowledge.

2.) Professional Advancement: both open the door to positions of greater responsibility and

potentially higher remuneration as well as being required by employers for certain positions.

3.) Hard work: both require extensive study (approx. 250 hours per CFA level and 400 for the CPA

exam) and significant professional experience in order to be attained. From beginning an

education in accountancy to full CPA qualification takes an average of 8 years while CFA

accreditation would be expected to take at least 6 years.

4.) High Bar: both are difficult to be awarded with pass rates at an average of less than 50%. Less

than a 5th of candidates applying for Level I of the CFA accreditation process complete Level III

within 5 years.

5.) Practical Application: both demonstrate that holders have the theoretical knowledge, skills and

ethical understanding relevant to professional investment managers and accountants

respectively, as well as being able to apply those to practical situations.

6.) English Language: both exams are in English with all official study materials also exclusively

available in English.


The Differences

The most telling difference between the CFA and CPA qualifications is of course the different sets of

professional knowledge and skills assessed, investment management and accountancy. Otherwise, there

are a number of other notable differences.


1.) Optional or Mandatory: The CFA charter is not an official requirement to work as an

investment professional and it is possible to begin your career without holding the CFA

qualification. However, professionals who hold the CFA are generally both more competitive on

the jobs market, many employers prefer or demand CFA accredited candidates, especially for

more senior positions, and demand greater professional authority. The CPA accreditation on the other

hand is a basic requirement for many accountancy jobs such as public accounting and

independent auditing.

2.) Centralized/Decentralized Pass Criteria: The CFA charter is issued directly through the

central body of the CFA Institute, a US-based NGO, though exam centers can be found

internationally. Accreditation criteria is universal and based upon meeting a minimum work

experience requirement of 4 years in a relevant role and passing all three examination levels. The

CPA exam, however, while set by the AICPA, requires candidates to apply through a particular

US State, which have slightly different rules in terms of work experience and education.

3.) Three Exams or One: attaining the CFA charter requires candidates pass three levels of

exams which will usually be taken over at least 3 years, presuming each level is successfully

taken at the first time of asking. Most successful candidates require at least 4 years to take all

three levels. On the other hand, applicants need only to have completed the first year of a

bachelor degree before beginning the process, or alternatively have a minimum of 4 years of

direct work experience in the investment industry. To register for the CPA exam however,

candidates must already have completed a bachelor degree including 24-30 semester hours in

accounting. However, once a prospective candidate has the pre-requisite educational

background, CPA accreditation is achieved by passing one exam broken down into 4 sections

over 14 hours.

4.) Examination Locations: while the CFA exams can be taken in a large number of countries and

locations around the world, CPA exams are administered in a more limited variety of locales

outside of the USA. Bahrain, Kuwait, Lebanon and the UAE in the Middle East, Brazil in South

America and Japan in Asia host CPA exams via participating state boards of accountancy.

5.) Examination Schedules: the CFA examination takes place only once a year, in June, or twice for

Level I, in June and December. While the CPA examination takes place four times a year in most


6.) Curriculum: the primary difference of course is the subject matter that the two professional

qualifications cover. The CFA exams cover ethical and professional standards in investment

management, investment tools, asset evaluation and portfolio management and wealth planning.

The CPA curriculum and exam questions are focused on financial accounting and reporting, audit

and attestation, regulation and business environment and concepts.


Which Qualification is for Me?

Both the CFA and CPA are the only licensed qualifications in investment and accounting respectively. As

such, the decision as to which of the two examination processes to apply for entirely depends upon

whether you plan a career as an investment or accountancy professional.


Morgan International facilitates aspiring CFA and CPA candidates in both

preparing for and sitting the exams. Please get in touch for further information!


Depreciation and Impairment of Property, Plant and Equipment-02

Depreciation and Impairment of Property, Plant and Equipment


By Rebecca Langdon


In this article we are going to take a look at depreciation and impairment of property, plant and

equipment under IFRS. Specifically, we are interested in how assets are recognized and accounted

for. Property, plant and equipment (PPE) are tangible assets held by an entity for their own use or

for rental to others. They are also expected to be held by the entity for more than one period.


Depreciation under IFRS

The depreciable amount should be allocated on a systematic basis throughout the useful life of the

PPE asset. The useful life of an asset and the residual value should be reviewed periodically. Where

the result of the review differs from the estimate, the change should be accounted for under IAS 8.


Depreciation starts from when the asset is enabled for the use intended by the company.


Depreciation will cease at the earlier of its derecognition or it being reclassified as being held for

sale. Derecognition refers to the asset being sold or scrapped. In the event of the PPE asset being

temporarily idle, that does not result in depreciation ceasing, as it is recognized that the asset may

hold future economic benefit for the organization.


Impairment under IFRS

Just a quick recap then on what an impairment is; it is an amount by which the carrying amount of

the PPE asset exceeds its recoverable amount. The carrying amount is the recognised value of the

asset on the balance sheet after accumulated depreciation and accumulated impairment losses are

recognised. Impairment is accounted for according to the principles set out in IAS 36. IAS 36 seeks to

ensure that an entity’s assets are not carried at more than the recoverable value. Under IAS 36

companies are required to carry out impairment tests where there is any indication of an impaired



We hope thishas served as a useful recap for those of you that are studying already, and for those of

you who may be interested in a certified finance or accounting qualification, we would welcome you

to take a look at the DipIFR and CPA course outlines.


The CFA Charter: A Standard of Excellence for Investment Professionals


By John Alexander Adam

The CFA charter is the gold standard for investment professionals and is governed by The CFA Institute, a Charlottesville, USA-based NGO. Every year tens of thousands of hopefuls (172,682 candidates from 183 countries in 2016) sit one of the three bands of CFA exams designed to demonstrate their competence in the knowledge and skill set required for them to manage investment portfolios for a living.


An Accreditation Standard with History

The history of CFA charter stretches right the way back to 1947, when the Financial Analysts Federation (FAF), forefather of the CFA, was founded as a service organization for investment professionals. Originally members qualified exclusively on the basis of their work experience within the investment industry before the 1963 establishment of an examination process. In 1990, the FAF merged with the Association for Investment Management and Research (ICFA), and the Institute of Chartered Financial Analysts (ICFA), to create the present day CFA Institute.


What the CFA charter Means

The premise of CFA program for investment industry professionals is that they not only possess the knowledge and skills base necessary to be trustworthy guardians and managers of investment funds but also conduct their activities within a framework of high ethical standards. The ethical principles of the CFA charter process is designed to instill in successful candidates to the charter what are considered as a necessary compliment to the regulatory framework, providing trust and confidence in financial and investment markets.


The three bands of CFA exams cover a curriculum that encompasses:

  • Ethics and Professional Standards
  • Standards of Practice
  • Quantitative Methods of Analysis
  • Economics, Business Cycles, and Market Forces
  • Currencies and Exchange Rates
  • Monetary and Fiscal Policy
  • Financial Reporting and Analysis
  • Financial Ratios, Debt, and Taxation
  • Corporate Finance, Mergers, and Acquisitions
  • Individual Security Analysis
  • Portfolio Analysis and Management

While levels I to III all cover a broad range of knowledge on the above topics, the focus of the questions set builds up from a more theoretical knowledge requirement of professional and ethical standards in Level I. Level II moves on to the practical application of those standards in real life scenarios investment professionals are likely to encounter, while Level III further crystalizes their application within the context of portfolio management and compliance.


A Standard of Excellence

Passing the three levels of CFA program is no mean feat with pass rates marking out holders of the qualification as adhering to a true standard of professional quality. The pass rate for Level I in 2016 has been 43% of all candidates, roughly similar to pass rates over the previous two years. Level II’s pass rate this year was 46%, identical to the previous two years and in 2015 (2016 Level III results have not yet been released) 53% of Level III candidates passed the exam, similar to 2014’s 54% success rate.


The gradually improving pass rates through the three Levels demonstrates the effectiveness of the system in ‘separating the wheat from the chaff’. Less able or hard working candidates fail to make the grade at either Level I or Level II, improving the quality of the pool of candidates sitting the exam for the subsequent Level. This can be seen to lead to a gradually improving pass ratio.


However, the weighted average completion rate of all candidates initially enrolling to sit the Level I exam who ultimately successfully progressed to passing Level III between 2004 and 2013 was only 12.5%. As such, holders of the CFA charter can both be immensely proud of their own achievement as well as having demonstrated that they are deserving of the trust placed in them in their professional activities.


CFA Accreditation in the Middle East

Within the global context, the pass rate of candidates from the Middle East over all three levels of the CFA exams is relatively low, around 10% less than the overall international average. This is generally attributed to the fact that all CFA exams and curriculum course work are in English, making study and answering the exam questions a greater challenge for individuals with a less thorough command of English. Investment professionals from the Middle East in possession of the CFA charter, or who are successfully working their way through the three exams, can therefore be particularly proud of their achievement.


Aspiring CFA charter holders can take preparatory courses and their CFA exams from Level I to III with us. For further information, please contact us!

Investment Securities and How to Account for Them-02

Understanding Investment Securities and How to Account for Them


By Rebecca Langdon


There are three different categories of investment securities that you need to be aware of if you are

going to be sitting your CFA, or CPA exam; or perhaps you are reading this article because you have a

general interest in the topic. We will also explain how to account for them.


1) Trading securities

These are securities that a company intends to buy and sell to achieve a short term profit. These

securities should be accounted for at their fair market value. Any gains and losses should be

included on the income statement and will be classified as unrealised holding gains or loses. In

terms of the balance sheet, the counter account will allow for the adjusted short term



2) Held to maturity

This class of securities is held by a company that intends to hold them until they mature. In

terms of accounting treatment, they should be accounted for at cost, which is the purchase

price plus communions and any other fees. Gains and losses are only accounted for upon sale of

the securities.


3) Available for sale

This category is similar to ‘trading securities’ and is generally a default category. The key

difference between available for sale and trading relates to how changes in value are

recognised. As we have already said, for trading securities, any changes in value will be recorded

in the income statement. Whereas for available for sale securities all changes in value are noted

in a special account called “unrealised gain/loss in other comprehensive income.” Therefore the

income statement itself is not affected.


We hope this has served as a useful recap for those of you that are studying already, and for those of

you who may be interested in a finance or accounting qualification, we would welcome you to take a

look at the CPA and CFA course outlines.