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  • ACCAP5 Study TextAdvanced PerformanceManagement

    PublishingPublishing

  • ACCA

    PublishingPublishing

    Visit us at www.emilewoolfpublishing.com

    distancelearning@emilewoolfpublishing.com tel: +44(0) 1483 225746

    Using a blended learning approach, our distance learning package will steer you towardsexam success.

    Our aim is to teach you all you need to know and give you plenty of practice, withoutbombarding you with excessive detail. We therefore offer you the following tailored package:

    ACCA Distance Learning Courses Learn quickly and efficiently

    Access to our dedicated distance learning website where youll find a regular blog from the distancelearning department reminders, hints and tips, study advice and other ideas from tutors, writers and markers as well as access to your course material

    Tutor support by phone or by email, answered within 48 hours The handbook outlining distance learning with us and helping you understand the ACCA course

    The key study text covering the syllabus without excessive detail and containing a bank of practice questions for plenty of reinforcement of key topics

    A key study guide guiding you through the study text and helping you revise

    An online question bank for additional reinforcement of knowledge

    Study phase

    An exam kit essential for exam preparation and packed with exam-standard practice questions

    2 tutor-marked mock exams to be sat during your studies

    Key notes - highlighting the key topics in an easy-to-use format

    Revision phase

    Total price: 160.95

  • AC

    CA

    Paper

    P5

    Advanced performance management

    PublishingPublishing

    Welcome to Emile Woolfs study text for Paper P5 Advanced Performance Management which is:

    Written by tutors

    Comprehensive but concise

    In simple English

    Used around the world by Emile Woolf Colleges including China, Russia and the UK

  • ii Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides EWP

    Second edition published by EmileWoolfPublishingLimitedCrowthorneEnterpriseCentre,CrowthorneBusinessEstate,OldWokinghamRoad,Crowthorne,BerkshireRG456AWEmail:info@ewiglobal.comwww.emilewoolfpublishing.com

    EmileWoolfPublishingLimited,September2010

    Allrightsreserved.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmitted,inanyformorbyanymeans,electronic,mechanical,photocopying,recording,scanningorotherwise,withoutthepriorpermissioninwritingofEmileWoolfPublishingLimited,orasexpresslypermittedbylaw,orunderthetermsagreedwiththeappropriatereprographicsrightsorganisation.

    Youmustnotcirculatethisbookinanyotherbindingorcoverandyoumustimposethesameconditiononanyacquirer.NoticeEmileWoolfPublishingLimitedhasmadeeveryefforttoensurethatatthetimeofwritingthecontentsofthisstudytextareaccurate,butneitherEmileWoolfPublishingLimitednoritsdirectorsoremployeesshallbeunderanyliabilitywhatsoeverforanyinaccurateormisleadinginformationthisworkcouldcontain.BritishLibraryCataloguinginPublicationsDataAcataloguerecordforthisbookisavailablefromtheBritishLibrary.ISBN:9781848430853PrintedandboundinGreatBritainAcknowledgementsThesyllabusandstudyguidearereproducedbykindpermissionoftheAssociationofCharteredCertifiedAccountants.

  • EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides iii

    Paper P5 Advanced performance management

    c

    Contents

    Page

    Syllabus and study guide 1

    DCF tables 11

    Chapter 1: Revision: ABC and other accounting methods 13

    Chapter 2: Accounting for decision-making 37

    Chapter 3: Decision-making with risk and uncertainty 57

    Chapter 4: Quantitative techniques in budgeting 73

    Chapter 5: Discounted Cash Flow (DCF) and long-term decisions 93

    Chapter 6: Introduction to strategic management accounting 115

    Chapter 7: Strategic planning techniques 143

    Chapter 8: Budgets and alternative budgeting models 171

    Chapter 9: Behavioural aspects of budgeting. Beyond budgeting 191

    Chapter 10: Changes in business structure and management accounting 209

    Chapter 11: Economic, fiscal and environmental factors. Pricing strategy 233

    Chapter 12: Performance measurement systems 261

    Chapter 13: Measuring performance 283

    Chapter 14: Strategic models and performance measurement 319

    Chapter 15: Decentralisation and divisional performance 335

    Chapter 16: Transfer pricing 363

    Chapter 17: Alternative views of performance measurement 393

    Chapter 18: Developments in management accounting and performance management 409

  • iv Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides EWP

    Practice questions 447

    Answers to practice questions 489

    Index 553

  • EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides 1

    Paper P5 Advanced performance management

    S

    Syllabus and study guide

    AIM

    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 organization and its strategic development.

    MAIN CAPABILITIES

    On successful completion of this paper, candidates should be able to:

    A. Use strategic planning and control models to plan and monitor organisational performance

    B. Assess and identify relevant macroeconomic, 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.

    Rationale

    The Advanced Performance Management syllabus further develops key aspects introduced in Paper F5, Performance Management, at the skills level and draws on aspects of the material covered from a more strategic and operational planning perspective in Paper P3, Business Analysis. The syllabus introduces candidates to the strategic role of management accounting as a discipline for planning and controlling performance so that strategic objectives

  • Paper P5: Advanced performance management

    2 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides EWP

    can be set, monitored and controlled. It also covers the impact of external factors on strategic management issues, such as macroeconomic, fiscal, market and environmental impacts on performance. From appreciating the strategic context of performance management and the impact of wider factors, the syllabus examines, at an operational level, the issues relating to performance measurement systems and their design. The syllabus then moves from performance management systems and their design to the scope and application of high-level performance measurement techniques in a variety of contexts, including not-for-profit organisations and multinational businesses. Having covered the strategic aspects of performance management and operational systems for the measurement and control of performance in a variety of contexts, candidates are then expected to synthesise this knowledge in the role of an advisor to senior management or independent clients on how to assess and control the performance of an entity, including the recognition of whether a business is facing difficulties or possibly failure. Finally, the syllabus deals with current developments in performance management and with emerging issues as they might affect or influence the management of performance within organisations.

    Detailed syllabus

    A Strategic planning and control

    1. Introduction to strategic management accounting

    2. Appraisal of alternative approaches to budgeting for control

    3. Changes in business structure and management accounting

    4. Effect of Information Technology (IT) on modern management accounting

    B Economic, fiscal and environmental factors

    1. Impact of world economic and market trends

    2. Impact of national fiscal and monetary policy on performance

    3. Other environmental and ethical issues

    C Performance measurement systems and design

    1. Management accounting and information systems

    2. Internal sources of management information

    3. External sources of management information

    4. Recording and processing methods

    5. Management reports

  • Syllabus and study guide

    EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides 3

    D Strategic performance measurement

    1. Performance hierarchy

    2. Scope of strategic performance measures in private sector

    3. Strategic performance issues in complex business structures

    4. Divisional performance and transfer pricing issues

    5. Scope of strategic performance measures in not-for-profit organisations

    6. Behavioural aspects of performance measurement

    E Performance evaluation and corporate failure

    1. Alternative views of performance measurement

    2. Non-financial performance indicators

    3. Predicting and preventing corporate failure

    F Current devel

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