ACCA P5 - Advanced Performance Management - Study Text 2013

690 Pages·2012·7.588 MB·English

by  BPP Learning Media

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S
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PAPER P5 T
E
X
ADVANCED PERFORMANCE
T
MANAGEMENT
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for the ACCA qualification. In this, the only Paper P5 study text to be reviewed by the
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FOR EXAMS UP TO JUNE 2014
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eISBN 9781 4453 9217 2
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ii
Contents
Page
Introduction
Helping you to pass – the ONLY P5 Study Text reviewed by the examiner! v
Studying P5 vii
The exam paper x
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..........................................................................................125
Part C Performance measurement systems and design
5 Performance management information systems..................................................................................................153
6 Management information, recording and processing and management reports...................................................185
Part D Strategic performance measurement
7 Performance hierarchy.........................................................................................................................................221
8 Scope of strategic performance measures in the private sector...........................................................................255
9 Divisional performance and transfer pricing issues.............................................................................................305
10a Strategic performance measures in not-for-profit organisations..........................................................................333
10b Non-financial performance indicators..................................................................................................................355
11 The role of quality in management information and performance measurement
systems...............................................................................................................................................................375
12 Performance measurement: strategy, reward and behaviour................................................................................425
Part E Performance evaluation and corporate failure
13 Alternative views of performance measurement and management.......................................................................459
14 Strategic performance issues in complex business structures.............................................................................499
15 Predicting and preventing corporate failure.........................................................................................................531
Part F Current developments and emerging issues in performance
management
16 Current developments, issues and trends............................................................................................................559
Mathematical tables 581
Question bank 585
Answer bank 603
Index 645
Review form
Contents i ii
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iv
Helping you to pass – the ONLY P5 Study Text reviewed
by the examiner!
BPP Learning Media – the sole Platinum
Approved Learning Partner – content
As ACCA’s sole Platinum Approved Learning Partner – content, BPP Learning Media gives you the
unique opportunity to use examiner-reviewed study materials for the 2013 exams. By incorporating the
examiner’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 do 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 the examiner expects
you 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, or how they might be examined in the future.
Using the Syllabus and Study Guide
You can find the syllabus and Study Guide on pages xi - xix 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
recall what you have learnt.
We include Questions – lots of them - both within chapters and in the Question Bank, as well as Quick
Quizzes at the end of each chapter to test your knowledge of the chapter content.

Introduction v
Chapter features
Each chapter contains a number of helpful features to guide you through each topic.
Topic list
Topic list Syllabus reference What you will be studying in this chapter and the relevant
section numbers, together the ACCA syllabus references.

Puts the chapter content in the context of the syllabus as
Introduction
a whole.
Study Guide
Links the chapter content with ACCA guidance.
Highlights how examinable the chapter content is likely to
Exam Guide
be and the ways in which it could be examined.
What you are assumed to know from previous
Knowledge brought forward from earlier studies
studies/exams.
Summarises the content of main chapter headings,
FAST FORWARD
allowing you to preview and review each section easily.
Demonstrate how to apply key knowledge and
Examples
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).

Gives you essential practice of techniques covered in the
Question
chapter.

Case Study Real world examples of theories and techniques.

Chapter Roundup A full list of the Fast Forwards included in the chapter,
providing an easy source of review.

A quick test of your knowledge of the main topics in the
Quick Quiz
chapter.

Found at the back of the Study Text with more
Question Bank
comprehensive chapter questions. Cross referenced for
easy navigation.

vi Introduction
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.
The P5 examiner
The examiner for this paper is Alex Watt. He 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. Dr Watt has stressed that topics in P5 will not 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.
The examiner is keen that students demonstrate evidence of wider reading and the ability to incorporate
aspects of real life examples into their answers where relevant and appropriate. Dr Watt has written
several articles in Student Accountant, including one in the August 2010 issue, on how to approach the
paper. Make sure you read this article to gain further insight into what the examiner is looking for.

Introduction v ii
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
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 you do need to keep up to date with your professional reading and be aware of the world around you.
At this high level, you also need to see how the subjects you previously studied begin to fit together and
begin to take a birds-eye view of the organisation.
Importantly, P5 will 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 comparing 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 are expected to
evaluate different systems of performance management and apply strategic performance measurement
techniques in evaluating and improving performance. You are expected to advise on strategic performance
evaluation and the possibility of corporate failure. Finally you are expected to be aware of the current
developments in management accounting and performance management as these affect organisations.
There are six parts to the syllabus and we outline these 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?
Refer to the syllabus outline in part 1 above. Look at the action verbs identified there. You are expected to
be able to assess, advise and evaluate, as well as to identify and monitor.
These are the skills that you are expected to demonstrate in the exam. You have moved beyond merely
demonstrating your knowledge of a model or technique. For example, the examiner expects you to know
viii Introduction