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ACCA APPROVED CONTENT PROVIDER ACCA Approved Study Text Free access to our Exam Paper P5 Success site Advanced Performance Look inside Management Study Text for examsup to June 2015ThiNganHang.com ThiNganHang.com
Inhalt des Dokuments
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S T U D Y PAPER P5 T E ADVANCED PERFORMANCE X MANAGEMENT T BPP Learning Media is an ACCA Approved Learning Partner – content. This means we work closely with ACCA to ensure this Study Text contains the information you need to pass your exam. In this, ACCA examination-team reviewed Study Text we: Highlight the most important elements in the syllabus and the key skills you need Signpost how each chapter links to the syllabus and the study guide Provide lots of exam focus points demonstrating what is expected of you in the exam ThiNganHang.comEmphasise key points in regular fast forward summaries Test your knowledge in quick quizzes Examine your understanding in our practice question bank Reference all the important topics in our full index BPP's Practice & Revision Kit and i-Pass products also support this paper. FOR EXAMS IN DECEMBER 2014 AND JUNE 2015 ThiNganHang.com
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First edition 2007 All rights reserved. No part of this publication may be Seventh edition June 2014 reproduced, stored in a retrieval system or transmitted, in ISBN 9781 4727 1089 5 any form or by any means, electronic, mechanical, Previous ISBN 9781 4453 9657 6 photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd. eISBN 9781 4453 6744 6 We are grateful to the Association of Chartered Certified British Library Cataloguing-in-Publication Data Accountants for permission to reproduce past examination questions. The suggested solutions in the A catalogue record for this book practice answer bank have been prepared by BPP is available from the British Library Learning Media Ltd, unless otherwise stated. Published by BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www.bpp.com/learningmedia Printed in the United Kingdom by RICOH UK Limited Unit 2 Wells Place Merstham RH1 3LG Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable sustainable sources. ThiNganHang.com © BPP Learning Media Ltd 2014 ii ThiNganHang.com
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Contents Page Introduction Helping you to pass v Studying P5 vii The exam paper xii Syllabus and study guide xiii Part A Strategic planning and control 1 Introduction to strategic management accounting ................................................................................................... 3 2 Performance management and control of the organisation .................................................................................... 43 3 Business structure, IT developments and other environmental and ethical issues ................................................. 59 Part B External influences on organisational performance 4 Changing business environment and external factors.......................................................................................... 123 Part C Performance measurement systems and design 5 Performance management information systems .................................................................................................. 153 6 Management information, recording and processing and management reports................................................... 187 Part D Strategic performance measurement 7 Performance hierarchy......................................................................................................................................... 223 8 Scope of strategic performance measures in the private sector ........................................................................... 257 9 Divisional performance and transfer pricing issues ............................................................................................. 307 10a Strategic performance measures in not-for-profit organisations.......................................................................... 335 10b Non-financial performance indicators.................................................................................................................. 359 11 The role of quality in management information and performance measurement systems ............................................................................................................................................................... 379 12 Performance measurement: strategy, reward and behaviour ................................................................................ 429 Part E Performance evaluation and corporate failure 13 Alternative views of performance measurement and management ....................................................................... 469 14 Strategic performance issues in complex business structures............................................................................. 509 15 Predicting and preventing corporate failure ......................................................................................................... 541 Part F Current developments and emerging issues in performance management 16 Current developments, issues and trends............................................................................................................ 569 Mathematical tables 599 ThiNganHang.comPractice question bankPractice answer bank 603621 Index 663 Review form Contents iii ThiNganHang.com
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A note about copyright Dear Customer What does the little © mean and why does it matter? Your market-leading BPP books, course materials and e-learning materials do not write and update themselves. People write them: on their own behalf or as employees of an organisation that invests in this activity. Copyright law protects their livelihoods. It does so by creating rights over the use of the content. Breach of copyright is a form of theft – as well as being a criminal offence in some jurisdictions, it is potentially a serious breach of professional ethics. With current technology, things might seem a bit hazy but, basically, without the express permission of BPP Learning Media: Photocopying our materials is a breach of copyright Scanning, ripcasting or conversion of our digital materials into different file formats, uploading them to facebook or emailing them to your friends is a breach of copyright You can, of course, sell your books, in the form in which you have bought them – once you have finished with them. (Is this fair to your fellow students? We update for a reason.) Please note the e-products are sold on a single user licence basis: we do not supply ‘unlock’ codes to people who have bought them second-hand. And what about outside the UK? BPP Learning Media strive to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website. A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that do. If they act illegally and unethically in one area, can you really trust them? ThiNganHang.com iv ThiNganHang.com
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Helping you to pass BPP Learning Media – Approved Learning Partner - content As ACCA’s Approved Learning Partner – content, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examining team. By incorporating the examination team’s comments and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your studies. The PER alert Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil a three year practical experience requirement (PER). To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the ‘PER alert’ feature. You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement. Your achievement of the PER should now be recorded in your on-line My Experience record. Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments. The different features of the text, the purposes of which are explained fully on the Chapter features page, will help you whilst studying and improve your chances of exam success. Developing exam awareness Our Texts are completely focused on helping you pass your exam. Our advice on Studying P5 outlines the content of the paper, the necessary skills you are expected to be able to demonstrate and any brought forward knowledge you are expected to have. Exam focus points are included within the chapters to highlight when and how specific topics were examined, how they might be examined in the future, and how different topics within the syllabus fit together. Using the Syllabus and Study Guide You can find the syllabus and Study Guide on pages xiii – xxi of this Study Text. Testing what you can do Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can ThiNganHang.comrecall what you have learnt.We includeQuick QuizzesQuestionsat the end of each chapter to test your knowledge of the chapter content.– lots of them – both within chapters and in the Practice Question Bank, as well as Introduction v ThiNganHang.com
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Chapter features Each chapter contains a number of helpful features to guide you through each topic. Topic list Topic list Syllabusreference What you will be studying in this chapter and the relevant section numbers, together with ACCA syllabus references. Introduction Puts the chapter content in the context of the syllabus as a whole. Study Guide Links the chapter content with ACCA guidance. Exam Guide Highlights how examinable the chapter content is likely to be and the ways in which it could be examined. Knowledge brought forward from earlier studies What you are assumed to know from previous studies/exams. Summarises the content of main chapter headings, FAST FORWARD allowing you to preview and review each section easily. Examples Demonstrate how to apply key knowledge and techniques. Definitions of important concepts that can often earn you Key terms easy marks in exams. When and how specific topics were examined, or how Exam focus points they may be examined in the future. Formulae that are not given in the exam but which have to Formula to learn be learnt. Gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER). Question Gives you essential practice of techniques covered in the chapter. Case Study Real world examples of theories and techniques. ThiNganHang.comChapter Roundup A full list of the Fast Forwards included in the chapterproviding an easy source of review. , Quick Quiz A quick test of your knowledge of the main topics in the chapter. Found at the back of the Study Text with more Practice Question Bank comprehensive chapter questions. Cross referenced for easy navigation. vi Introduction ThiNganHang.com
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Studying P5 As the name suggests, this paper examines advanced performance management topics and is particularly suited to those who are thinking about a career in management accountancy or are likely to be involved in strategic management decisions. ACCA expects you to demonstrate a professional approach to all questions – not just presenting information in a professional manner, but also integrating knowledge and understanding of topics from across the syllabus. The examining team has stressed that candidates should not expect topics in P5 exams to be examined in isolation. One of the major skills you will be expected to demonstrate in the P5 exam is being able to draw on knowledge gained across your studies to date, in order to present complete solutions to relatively broad business issues or problems. 1 What P5 is about The syllabus for Paper P5 further develops key aspects and skills introduced in Paper F5, and it draws on aspects of the material about strategic and operational planning and performance covered in Paper P3, Business Analysis. However, whereas Paper P3 only assesses principles of management accounting as part of the wider analysis of a business situation, Paper P5 could examine aspects of management accounting – such as budgeting or costing techniques – in their own right. The stated aim of the P5 syllabus is: ‘To apply relevant knowledge, skills and exercise professional judgement in selecting and applying strategic management accounting techniques in different business contexts and to contribute to the evaluation of the performance of an organisation and its strategic development.' Read this aim carefully. You are no longer just a 'number cruncher' drawing up budgets and producing calculations to include management reports. You are expected to understand the wider issues that affect organisations. These issues are often written about in newspapers and journals such as the Financial Times and the Economist, so it is important you read the financial press to help you identify how the issues you are studying in P5 relate to the real world context. At this level in your studies, you also need to recognise how the subjects you previously studied begin to fit together. You need to begin to take a holistic view of an organisation, and to see how the various parts of it and various processes affect overall performance – rather than looking at individual issues in isolation. Importantly, the P5 exam is likely to also test your ability to assess different approaches to performance management, from a variety of perspectives. As well as knowing what the approaches are, you will also need to be able to compare them with one another in the context of a scenario; for example, the ThiNganHang.comcomparing the long-term and short-term issues affecting an organisation’s performance. Snapshot of the syllabus The syllabus expects you to understand how organisations set their strategy and the external influences that affect strategic plans and operational outcomes. You will be expected to evaluate different systems of performance management and apply strategic performance measurement techniques in evaluating and improving performance. You may also be expected to advise on strategic performance evaluation and the possibility of corporate failure. Finally you need to be aware of the current developments in management accounting and performance management as these affect organisations. Introduction vii ThiNganHang.com
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There are six parts to the syllabus, as summarised below: (a) Use strategic planning and control models to plan and monitor organisational performance (b) Assess and identify relevant macro-economic, fiscal and market factors and key external influences on organisational performance (c) Identify and evaluate the design features of effective performance management information and monitoring systems (d) Apply appropriate strategic performance measurement techniques in evaluating and improving organisational performance (e) Advise clients and senior management on strategic business performance evaluation and on recognising vulnerability to corporate failure (f) Identify and assess the impact of current developments in management accounting and performance management on measuring, evaluating and improving organisational performance We expect most of these capabilities (if not all) to be tested to some extent in every P5 exam. 2 What skills are required? Look back at the action verbs in the six parts of the syllabus outlined above. You are expected to be able to assess, advise and evaluate, as well as to identify and monitor. The need for these skills of assessing, advising and evaluating highlights that, at P5 level, you are expected to have moved beyond merely demonstrating your knowledge of a model or technique, and instead you have to apply that knowledge to practical situations. For example, the examiner will expect that, by the time you reach P5, you can already calculate basic financial ratios. In P5, though, the examiner will expect you to be able to interpret the information provided by those ratios to understand how an organisation is performing, and to make sensible suggestions (where appropriate) about how its performance could be improved. The questions set in P5 exams will be based around case study scenarios which describe an organisation, its objectives and its business environment. You will need to relate your answers specifically to the scenario given in the question. There will be very few marks available for simply describing models or theories. Evidence from past exam sittings suggests that candidates who simply learn models and theories, but then do not apply their knowledge to the question scenarios, typically score between 20-30% in their P5 exams. The P5 paper has a large written element, with well over half the marks being earned for written answers (discussion, analysis, evaluation) rather than calculations. Again, this is designed to reflect the position of a qualified accountant working in a business. The accountant can expect a number of the routine calculations and figures to be produced by their more junior colleagues, but the accountant should then expect to identify the issues or implications being identified by those figures. ThiNganHang.comWe have summarised here the skills you are expected to demonstrate in P5.(a) brought forward for Paper P5.Core knowledge. The contents of Paper F5 Performance Management – assumed knowledge (b) Numerical skills. Those skills demonstrated in Paper F5. You only learn a small number of new mathematical techniques in this paper, but, alongside these, you are also expected to remember those you learnt previously. (c) Written skills These are key skills on this paper. You will be expected to write reports and notes explaining issues you encounter. (d) Analysis and interpretation of question data or calculations. The examiner has stressed that candidates will be expected to analyse (not merely calculate) numerical data given in a scenario. (e) Wider business awareness or application of skills in a practical context. viii Introduction ThiNganHang.com
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3 How to pass The examiner provides a lot of useful feedback in the ‘Examiner's reports’ to past exams. This feedback highlights areas where students have struggled in exams, and also indicates the skills the examiner expects candidates to be able to demonstrate. Looking at the post exam guidance can also be useful for reminding yourself about essential areas of exam technique. Therefore you are strongly recommended to read these guides which are available in the ‘Qualification resources’ section of ACCA’s website: http://www.accaglobal.com The points highlighted in the Examiner’s reports include the following: (a) Read questions very carefully and answer the question asked, not the question you hoped had been asked. In particular, if a question asks you to ‘evaluate’ or ‘assess’ the usefulness of a performance measure for assessing performance in an organisation, this is not asking you to evaluate or assess the organisation’s performance. Instead, the focus of your answer must be on the performance measure itself. (b) Answers which consist of rote-learned definitions or explanations with no application to the scenario will score very few marks. It is vital that you apply your knowledge to the context described by the question scenario. (c) Look at the mark allocation to help you manage your time allocation and plan your answer. (d) Read all the parts of the question before you prepare your answer, so that you avoid repeating the same points in answering different parts of the question. We recommend you read the ‘P5 Examiner's approach’ article published in October 2012 and available on ACCA’s website. This illustrates how some of the skills required to pass P5 have been tested in recent exam sittings, and provides some useful hints about how to approach the paper. Approach to the exam – In the article, the Examiner suggested that the best approach to the exam can be summarised as: (a) Cover the whole syllabus – Candidates often appear to over-concentrate on Section D of the syllabus (strategic performance measurement). However, it is important to understand how, for example the choice of performance measures fits with planning and control structures (Section A of the syllabus) or how well the measures chosen relate to external drivers of performance (Section B of the syllabus). (b) Be prepared to apply your knowledge of syllabus topics to a business scenario – answers which provide lists of rote-learned points (or rote-learned advantages and disadvantages for different techniques and approaches) will not earn sufficient marks to pass a question. Candidates will be expected to tailor their knowledge specifically to the situation given in the question scenario. (c) Read and answer the question set – Candidates earn marks where their answers are technically correct and relevant to the question asked. However, candidates have a tendency to write answers to the question they wish had been asked, rather than the question the examiner actually set. This ThiNganHang.comapproach scores little or no credit though. (d) Add value to the organisation that is being advised – Candidates need to demonstrate their ability to add value by taking data already produced and identifying and analysis the key issues in that data and the commercial implications of it. Candidates need to be prepared to analyse numerical data given in a scenario, not merely to perform calculations on it. Importantly, the Examiner’s article also stresses that P5 is a paper about performance management, not simply about performance measurement. Whilst it is important for an organisation to measure how well it is performing, this performance measurement takes place within the wider context of strategic planning and control, and is subject to both internal and external factors which can affect performance. In Paper P5 you need to be aware of this context and its impact on performance, not simply how an organisation can measure performance. Performance management also considers how the management of an organisation Introduction ix ThiNganHang.com
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can be informed by the results of performance measurement; for example, through the way in which staff are rewarded for their performance. Question practice The importance of tailoring your answer to the question actually set, rather than simply rote-learning models and theories, also highlights the importance of question practice in preparing for your P5 exam. You can develop application skills by attempting questions in the BPP Learning Media Practice and Revision Kit. 4 Brought forward knowledge You will be expected to build on the skills and knowledge you acquired when you studied Paper F5, Performance Management. That paper introduces topics such as budgeting and pricing that continue into the higher level syllabus. Paper F5 also covers cost and management accounting techniques including activity-based costing that you will encounter in this paper. You will also be expected to draw on your knowledge of performance measurement and control techniques that were introduced in this earlier paper, because candidates sitting P5 will be expected to have a thorough understanding of the F5 syllabus. In addition, you might also be expected to draw on topics covered in Paper P3, Business Analysis, particularly in relation to aspects of strategic planning and control, and performance measurement. ThiNganHang.com x Introduction ThiNganHang.com
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Analysis of past papers The table below provides details of when each element of the syllabus has been examined and whether it was examined as part of a compulsory (C) or optional (O) question. Further details about questions can be found in the Exam Focus Points in the relevant chapters. Text Dec June Dec June Dec June Dec June Dec chapter 2013 2013 2012 2012 2011 2011 2010 2010 2009 STRATEGIC PLANNING AND CONTROL 1 Introduction to strategic O C management accounting 2 Performance management and O C C C control of the organisation 3 Business structure, IT developments C C and other environmental and ethical issues EXTERNAL INFLUENCES ON ORGANISATIONAL PERFORMANCE 4 Changing business environment and C O O C O C O external factors PERFORMANCE MEASUREMENT SYSTEMS AND DESIGN 5 Performance management 0 O, O C information systems 6 Management information and O C O reports STRATEGIC PERFORMANCE MEASUREMENT 7 Performance hierarchy C C, O O 8 Scope of strategic performance C, O C C C measures in the private sector 9 Divisional performance and transfer O C O O pricing issues 10a Strategic performance measures in O O not-for-profit organisations 10b Non-financial performance O C indicators 11 The role of quality in management O O O information and performance measurement systems 12 Performance measurement: O C C O O ThiNganHang.com13 PERFORMANCE EVALUATION ANDCORPORATE FAILUREstrategy, reward and behaviourAlternative views of performance O C O C C, O C, O O, O measurement and management 14 Strategic performance issues in O O O complex business structures 15 Predicting and preventing corporate O O failure CURRENT DEVELOPMENTS IN PERFORMANCE MANAGEMENT 16 Current developments, issues and O O 0 O trends Introduction xi ThiNganHang.com
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The exam paper Format of the paper Paper P5 is examined in a three-hour paper consisting of two sections. You will be given 15 minutes reading time before the three hours begin, to read the questions and start planning your answers. Important note: The format of the exam paper changed in June 2013. If you are looking at past exams (on ACCA’s website) from 2012 or earlier, it is vital that you remember this point. Section A Section A will contain one compulsory question comprising 50 marks in total. This question will comprise several sub-sections, and will usually assess and link a range of subject areas from across the syllabus. The Section A question will require students to demonstrate high-level capabilities to evaluate, relate and apply the information in the case study to the question requirements. Section B You need to answer two questions in Section B, from a choice of three, comprising 25 marks each. Section B questions are more likely to assess a range of discrete subject areas from the main syllabus section headings. However, they will still require evaluation and synthesis of information contained within the case study scenarios, and will require the application of this information to the question requirements. A small number of professional marks will be available. The examiner has emphasised that in order to gain the marks available, candidates must write in the specified format (such as a report or memo). Reports must have terms of reference, conclusion, appendices and appropriate headings. Make sure you are familiar with how different types of documents are constructed to improve your chances of gaining maximum professional marks. Syllabus and Study Guide The P5 syllabus and study guide can be found on the following pages. ThiNganHang.com xii Introduction ThiNganHang.com
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