53124472 Acca p5 Advanced Performance Management Key Notes June 2011

Download 53124472 Acca p5 Advanced Performance Management Key Notes June 2011

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<p>PRO ACTIVE RESOLUTIONS</p> <p>ACCA P5 EXAM SUPPORT NOTES</p> <p>Mahmood RezaFRSA, MCMI, ATT, FCCA, DMS, PGCE, BSc (Hons)</p> <p>www.proactiveresolutions.com</p> <p>ACCA P5 Exam Support Notes</p> <p> Pro Active Resolutions - Mahmood Reza</p> <p>ACCA P5 EXAM SUPPORT NOTES: CONTENTS PAGE Introduction Examiners guidance, approach, syllabus change &amp; exam Exam Reports: examiners comments SYLLABUS SECTION A Strategic analysis, choice and implementation Benchmarking Budgeting ABC, ABB, BPR 13 13 14 17 18 Page Number 3 4 9</p> <p>SYLLABUS SECTION B Risk and uncertainty Activity one: risk Pricing Stakeholder analysis PESTLE and SWOT 20 20 21 22 23</p> <p>SYLLABUS SECTION C Responsibility Accounting Systems 25</p> <p>SYLLABUS SECTION D Mission and Vision Aims and Objectives Rewards and Values The Strategic Triangle Divisionalisation and transfer pricing Activity two: transfer pricing Porter: industry analysis - the five forces Boston Box or the BCG Matrix Ansoff product matrix 27 27 27 28 28 32 32 35 35</p> <p>ACCA P5 Exam Support Notes</p> <p>1</p> <p> Pro Active Resolutions - Mahmood Reza</p> <p>Performance measures o o o o o o Return on investment (ROI) Residual income Economic value added Net present value Internal rate of return EPS</p> <p>36 36 37 37 38 38 39 39 40</p> <p> Activity three: performance measures Human resource management o Vrooms Expectancy Theory o Agency theory SYLLABUS SECTION E Performance management &amp; evaluation Establishing a performance management system Criteria for designing performance indicators Types of performance measures Performance Pyramid, Lynch and Cross (1991)</p> <p>42 42 43 44 44 46 49 50</p> <p> Balanced scorecard Table of potential scorecard measures ABM</p> <p>SYLLABUS SECTION F Target costing Performance prism Total Quality Management (TQM) 51 52 52 55 56 57 59</p> <p>LIST OF RELEVANT ACCA ARTICLES Activity one: solution Activity two: solution Activity three: solution</p> <p>ACCA P5 Exam Support Notes</p> <p>2</p> <p> Pro Active Resolutions - Mahmood Reza</p> <p>INTRODUCTIONThese ACCA P5 exam support notes are based on my experience, not only in respect of teaching ACCA P5 but over 25 years of teaching business and management. These notes are not meant to be a comprehensive overview of the syllabus but focus on selected parts. The notes are provided to supplement existing texts and focus on areas that, in my experience, students find more challenging. Any feedback regarding the notes (positive or negative) would be greatly welcomed. I have adopted a sectional approach to the notes, i.e. notes are provided by syllabus section, some sectional notes being greater than others. ACCA P5, in common with the other option papers does not enjoy significantly high pass rates. However, people do pass the exam; a structured and focused approach to studying is highly recommended, as well reading around the subject. It is worth remembering that are an abundant level of support resources available to assist you in passing your exams. However, unless you have a photographic memory you will need to apply conventional techniques to passing your exams, e.g. question practice, question practice, question practice you get the picture. These support notes are to aid and assist your study programme and to reflect student requirements, any suggestions for future improvements are greatly welcomed.</p> <p>ACCA QualificationThe current ACCA Qualification syllabus was first examined in December 2007; a review of the pass rates for the option papers is shown below. Paper Dec 07 Jun 08 Dec 08 Jun 09 Dec 2009 June 2010 P4 31 36 36 30 41 34 P6 P7 28 33 36 33 41 39 37 37 39 39 35 32</p> <p>The ACCA Professional syllabuses were updated with effect from June 2011, these notes are based on that syllabus and study guide for the June 2011 exam diet. The strategic planning process was examined in detail in the P3 paper. In P5 the focus is more on the performance management aspects of strategic planning and the role of strategic management accounting.</p> <p>ACCA P5 Exam Support Notes</p> <p>3</p> <p> Pro Active Resolutions - Mahmood Reza</p> <p>EXAMINER'S GUIDANCE AND REPORTSAlex Watt is the new ACCA P5 examiner, his first exam diet being December 2010; he wrote an article explaining his approach in Student Accountant August 2010. This guidance was updated in Student Accountant February 2011; in addition Alex Watt also wrote an article in Student Accountant February 2011 outlining the changes to the syllabus and explains the rationale behind them and the effect on the Paper P5 exam. The update article is reproduced in full, a summary of the syllabus changes are included below. The examiners exam reports complements the approach article and is very useful when tackling the paper for the first time, giving you a real insight into what the examiner is looking for in terms of exam performance. It covers the main themes of the paper, information on how the exam is structured, advice on exam technique, tips on how to succeed and potential pitfalls to avoid.</p> <p>Examiners approach: Paper P5Alex Watt is the new ACCA P5 examiner, his first exam diet was in December 2010 and he has published his views on the ACCA P5 paper contained in PDF format, video and podcast and published on ACCAs website. His article is reproduced in full below</p> <p>Updated examiner's approach to Paper P5As a relatively new examiner and having managed the marking (though not the writing) of the June 2010 paper and both the writing and marking of the December 2010 paper, I felt that it would be helpful to try to give candidates further clarification of the style of questions and skills that will be tested in Paper P5, Advanced Performance Management. Key issues to consider The paper will test a candidates ability to assess different approaches to performance management from a variety of perspectives. This will entail the candidate knowing what the approaches are and more importantly being able to compare one with another in the context of a scenario, for example, profit and value approaches, financial and nonfinancial perspectives, short-term and long-term issues. The questions set in Paper P5 will be based around an organisation. The scenario will describe the organisation, its objectives and its business environment. A good candidate will show how they have taken in this information and then applied it to the performance management of that organisation. For example, when assessing different performance management approaches, a useful question to ask is Does this meet the objectives/needs of the organisation? so obviously, the candidate must have identified these from the scenario. Candidates must make sure that they can: 1. Assess the current situation of the organisation (e.g. its existing performance management systems) and then 2. Consider how to apply a new approach to performance management (e.g. valuebased or based on one of the many models mentioned in the syllabus such as the performance prism or the building block model) and 3. Assess whether this new approach will be an improvement.</p> <p>ACCA P5 Exam Support Notes</p> <p>4</p> <p> Pro Active Resolutions - Mahmood Reza</p> <p>Lists of rote-learned advantages and disadvantages for different approaches will not produce a complete answer as a candidate will be expected to tailor this knowledge to the situation given in the question. So for example, Question 2 of December 2010 asked for an evaluation of two costing systems within a laptop manufacturer. A good answer considered the advantages and disadvantages of the absorption costing and activitybased costing in a dynamic, competitive, bespoke-manufacturing environment. Cover the whole syllabus Remember that, broadly, the exam will test the capabilities listed in the syllabus that are required of a candidate. There are six capabilities and most will feature to some extent in every diet: v Use strategic planning and control models to plan and monitor organisational performance v Assess and identify relevant macroeconomic, fiscal and market factors and key external influences on organisational performance v Identify and evaluate the design features of effective performance management information and monitoring systems v Apply appropriate strategic performance measurement techniques in evaluating and improving organisational performance v Advise clients and senior management on strategic business performance evaluation and on recognising vulnerability to corporate failure v Identify and assess the impact of current developments in management accounting and performance management on measuring, evaluating and improving organisational performance The paper will aim to address issues at both the strategic and operational levels and will often require a candidate to understand the connections between these levels. For example, the question of how strategic objectives flow through critical success factors to performance indicators as in Question 1 of the December 2010 paper. Another example of the type of question that arises is how does the choice of operational performance measures impact on the strategic performance of the organisation? A phrase that rings true in many situations is Druckers dictum What gets measured gets done. This phrase succinctly points to the impact that the choice of performance metrics have on the management activity of the firm. Now these points should illustrate why it is a misapprehension that the paper is predominantly about performance measurement, it is a performance management paper. This error often manifests in a candidates over-concentration on detailed elements of Section D (strategic performance measurement) of the syllabus. As indicated above, it is important to remember that the ideas contained in the various metrics need to be coherently applied to meet the strategic needs of an organisation and this is where other sections of the syllabus will connect to a question, for example, Section A on how strategic performance fits with the planning and control structures or Section B on external drivers of performance. Create information The candidate is expected to be able to calculate numbers using the various techniques of the paper; however, it is more important that the candidate can explain what their numbers mean and what importance to place on them.ACCA P5 Exam Support Notes</p> <p>5</p> <p> Pro Active Resolutions - Mahmood Reza</p> <p>A valuable management accountant will create information from the detailed data given in a question. It is often best to begin by considering the big picture (what is the overall objective); next, break down the data into smaller but meaningful (and manageable) chunks; finally, discuss the individual lines of the data table and even then, a candidate should focus on the data that explains the overall picture of emission changes. A good example of this was Question 4 Part b) of the December 2010 paper. 1. Consider the big picture whether the overall target for emission reduction be met. 2. Break down the data into smaller but meaningful (and manageable) chunks road, rail and air transport 3. Discuss the individual lines of the data table focusing on the data that explains the overall picture of emission changes the switch from petrol to diesel powered motor vehicles is complete in commercial vehicles and has led to large reductions in emissions but such a change may be more difficult in company cars as employees may resist such a change. Note specifically, this will require answers that go beyond repeating, in sentence form, the data given in (say) a table in that question. There many candidates wasted their time by limiting their comments to only writing out statements such as Commercial Fleet Diesel use has fallen from 105.4 to 70.1 or even Commercial Fleet Diesel use has gone down. First, this is stating the obvious to anyone who read the table but also importantly, this is far too detailed for most reporting purposes. Candidates will be expected to analyse not merely calculate numerical data given from a scenario. Overall A candidate would be advised to ask him/herself if the answer they have produced would help the organisation to answer the question requirement. Remember try to add value with your answers by way of comments relevant to the issue at hand.</p> <p>Article end ACCA P5 SYLLABUS CHANGES: SUMMARY Paper P5 syllabus changes for 2011June 2011 will see an amended syllabus introduced for a number of ACCA papers including Paper P5, Advanced Performance Management. In this article, I will run through these changes explaining the rationale behind them and the effect on the Paper P5 exam. The article begins with an overview of the main changes and concludes with a detailed discussion of the changes to the study guide. Overview The changes to the Paper P5 syllabus are not fundamental. The six learning capabilities that a candidate must be able to demonstrate are unchanged. However, there are a number of changes to the syllabus and detailed Study Guide which are outlined below. Some of the changes were motivated by a requirement to move some of the strategic management accounting topics out of an optional paper and into an essential paper; some of the changes arose from a desire to more clearly differentiate</p> <p>ACCA P5 Exam Support Notes</p> <p>6</p> <p> Pro Active Resolutions - Mahmood Reza</p> <p>Paper P5 from Paper F5, Performance Management and Paper P3, Business Analysis and the remainder were made in order to clarify and update the previous syllabus. The substantive changes are: Two new areas have been added to the syllabus from Paper P3. They are quality and human resource management. Questions on these areas will connect to the rest of syllabus by being focused on their impact on the performance of the organisation and its performance management systems. On quality management, the new areas seek to differentiate the different types of activity involved in quality management and the impact of such initiatives on existing performance management systems. For example, a candidate may have to give advice on how quality initiatives require: v The need for new information of a more subjective or qualitative nature v Changes to the key performance measures used in the organisation v The culture and style of management to alter (team working) v Changes to human resources management (staff training, recruitment, and empowerment). The application of quality management practices is not, in itself, new to Paper P5 having been a current issue for some time and so the extension to cover these other areas is quite natural. On human resource management and reward systems, once again the change is an extension of topics that have already been in the Paper P5 syllabus. The connection between appraisal and reward systems and the motivation of staff to improve the performance of an organisation has been present in the syllabus for some time. The additional elements should be seen as adding greater depth to those points. Appraisal and reward systems have been a topic of current debate with many commentators argu...</p>


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