Loan from an Employer
KNOWLEDGE EXPECTED OF: QAFP® Professionals
Highest Knowledge Level: Understanding
Knowledge Levels and Associated Verbs
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Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
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Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
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Application
Ability to put information to use / to use knowledge for relevant, practical purposes
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Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
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Define
To state exactly the meaning of
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Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
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Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
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Determine
To ascertain / to come to a decision, such as by investigation or reasoning
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Compare
To note the similarities and differences between two or more things
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Estimate
To determine an approximate value for
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Calculate
To find the value using mathematics
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Convert
To change from one form or purpose to another
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Evaluate
To reach a conclusion or make a through careful study
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Interpret
To give the meaning of / to construe or understand / to translate orally
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Hold cursor over or click on each term to read its definition.
- Explain the purposes for which a loan from an employer may be used.
- Define the prescribed interest rate.
- Identify the current prescribed interest rate.
- Identify how often the prescribed rate is reset by the Canada Revenue Agency (CRA).1
- Identify when a taxable benefit exists for an employee who has borrowed from their employer.
- Explain the tax treatment of interest on a loan from an employer.
REFERENCES
1 http://www.cra-arc.gc.ca/interestrates/
KNOWLEDGE EXPECTED OF: CFP® Professionals
Highest Knowledge Level: Evaluation
Knowledge Levels and Associated Verbs
|
Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
|
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
|
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
|
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
|
||||||
|---|---|---|---|---|---|---|---|---|---|
|
Define
To state exactly the meaning of
|
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
|
Hold cursor over or click on each term to read its definition.
- Explain the purposes for which a loan from an employer may be used.
- Define the prescribed interest rate.
- Identify the current prescribed interest rate.
- Identify how often the prescribed rate is reset by the Canada Revenue Agency (CRA).1
- Identify when a taxable benefit exists for an employee who has borrowed from their employer.
- Explain the tax treatment of interest on a loan from an employer.
Additional Knowledge Expected of CFP Professionals
- Explain for whom a loan from an employer may be suitable.
- Calculate the taxable benefit to an employee who has borrowed from their employer.
- Calculate the tax impact to the employee when using a loan from an employer.
- Estimate the terms for a loan from an employer.
- Determine how each of these factors may impact the suitability of a loan from an employer:
- Purpose of credit or borrowed funds
- Amount of credit requested / required
- Ongoing need for borrowing capacity
- Expected variability of interest rates
- Cost, including interest and fees
- Impact on cash flow
- Payment options (schedule, amounts, options)
- Expected prepayments
- Collateral requirements
- Expected lifetime of collateral (if applicable)
- Closure requirements / costs
- Tax impact
- Evaluate how each of the factors may impact the suitability of a loan from an employer.
REFERENCES
1 http://www.cra-arc.gc.ca/interestrates/
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