ACCAqualificationP5supportnotes

1、PRO ACTIVE RESOLUTIONSACCA P5 EXAM SUPPORT NOTESSYLLABUS SECTION AStrategic analysis, choice and implementationBenchmarki ngRisk and uncertaintyActivity o neBudgeti ngABC, ABB, ABMBPRPESTLE and SWOTSYLLABUS SECTION BPricingStakeholder analysisSYLLABUS SECTION CResponsibility Accounting SystemsSYLLAB

2、US SECTION DMission and VisionAims and ObjectivesRewards and ValuesThe Strategic TriangleDivisionalisation and transfer pricingActivity two： transfer pric爲(wèi)Porter: industry mnalysis the five forcesBoston Box or the BCG MatrixAnsoff product matrixPerformance measureso Return on investment (ROI)oResidu

3、al incomeoEconomic value addedoNet present valueoInternal rate of returnEPSActivity three: performance measuresSYLLABUS SECTION EPerformance management & evaluationEstablishing a performance management systemCriteria for designing performanee indicatorsTypes of performance measuresPerformance Pyrami

4、d, Lynch and Cross (1991)Balanced scorecardTable of potential scorecard measuresSYLLABUS SECTION FTarget costingPerformance prismTotal Quality Management (TQM)INTRODUCTIONThese ACCA P5 exam support notes are based on my experienee, not only in respect of teachi ng ACCA P5 but over 25 years of teachi

5、 ng busi ness and manageme nt. 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 experienee, students find more challenging. Any feedback regarding the notes (positiv

6、e or negative) would be greatly welcomedI have adopted a sectional approach to the notes, i.e. notes are provided by syllabus section, some sectional notes being greater than othersACCA P5f in common with the other option papers does not enjoy significantly high pass rates. However, people do pass t

7、he exam; a structured and focused approach to studying is highly recommended, as well reading around the subject.It is worth remembering that are an abun da nt level of support resources available to assist you in passing your exams. However, unless you have a photographic memory you will need to ap

8、ply 8nventional techniques to passing your exams, e.g. question practice, question practice, question practice 一 you get the pictureThe syllabus and relational diagramThe syllabus 8ntains six sections - designed to provide the comprehensive knowledge necessary to enable students to make a significan

9、t contrbution to toda/s business organisations. All sections are intersnnected, and the syllabus, as a whole, focuses onthe issues that are essential to the understanding of how performance management con tributes to orga nisational performa nee.Section A of the syllabus focuses on strategic plannin

10、g and control. This involves a detailed exami nation of the role that strategic man ageme nt account! ng should play in todays organisations. This section also requires students to appraise alternative approaches to budgeting in order to facilitate better control of business organisations. We live i

11、n an ever-changing business environment and Section A 8nsiders the effects of both evolving business structures and information technology on modem management accounting practices.Section B of the syllabus considers the impact of world 8nomic and market trends, as well as the impact of national fisc

12、al and monetary policy on the performance of business organisations. This section also explores other environmental and ethical issues facing business organisations.Section C is focused on performanee measurement systems and their design. Particular consideration is given to management accounting an

13、d information systems, and the sources of internal and external informatio n available to busi ness orga nisations .In addition, Section C considers the recording and processing methods and management reports used in business organisationsSection D of the syllabus is focused on the need for strategi

14、c performanee management in both public and private sector organisations. This section considers strategic performance issues in complex organisations as well as divisional performanee and transfer pricing issues Consideration is also en to behavioural aspects of performanee management.Section E of

15、the syllabus is focused on the evaluation of business performance and corporate failure Consideration is give n to alter native views of performance measurement and the use of non-financial performanee indicators This section also considers the prediction and prevention of corporate failureSection F

16、, is focused on current developments and emerging issues in management accounting and performance management.In an area as fast moving as management accounting, the importanee of keeping abreast of current developments is essential for management accountants across the globe KEY AREASAs indicated in

17、 the syllabus, the key or core areas are:Using strategic planning and control models to plan and monitor organisational performa neeAssessi ng and identifyi ng releva nt macro-eco no mic, fiscal, and market factors and key exter nal in fluences on orga nisational performanceIdentifying and evaluatin

18、g the design features of effective performance management information and monitoring systemsApplying appropriate strategic performance measurement techniques in evaluating and improving organisational performanceAdvising clients and senior mgnagement on strategic business performance evaluation, and

19、 on recognising vulnerability to corporate failureIdentifying and assessing the impact of current developments in management accounting and performance management on measuring, evaluating. and improving organisational performanee.CONCLUSIONIn order to pass the Paper P5 exam, students should:Clearly

20、understand the objectives of the exam as explained in the Syllabus and Study GuideEnsure that preparation for a Paper P5 exam has been based on aOogramme of study set for the required syllabus and exam structureUse an ACCA-approved 怕xtbook for Paper P5. Not only are they written especially for the s

21、yllabus, but they are also reviewed by the examiner, making them invaluable in terms of coverage and insight into what is examinable Practise computational, analyticalf and discursive questions under exam snditions in order to improve speed and presentation skillsCarefully study all articles that ap

22、pear in student accountant (or elsewhere), which are relevant to topics within the syllabus for Paper P5Be able to clearly communicate understanding and application of knowledge in the context of a Professi on al level exam.SECTION AStrategic analysis, choice and implementationJohnson and Scholes* 3

23、stage model of strategic planning is a useful framework for seeing the bigger picture* of performanee management and strategic management accounting issuesThe term strategic mznagement accounting，refers to the full range of management accounting practices used to provide a guide to the strategic dir

24、ection of an orgznisation.Strategic management accounting gives a financial dimension to strategic management and control, providing infonmation on the financial aspects of strategic plans and planning financial aspects of their implementation. It supports managers throughout the organisation in the

25、 task of managing the organlsalion in the interests of all its stakeholdersStrategic management accounting places an emphasis on using infonmation from a wide variety of intemal and external sources in order to evaluate performanee appraise proposed projects and make decisionsIt focuses on the exter

26、nal environment, such as suppliers, customers, competitors and the economy in general as much as on the organisation itself. Strategic management accounting monitors performanee in line with the organisation s strategic objectives in both financial and nonfinancial termsBENCHMARKINGBenchmarking is t

27、he practice of measuring an organisations products or services against best practice*1; the primary objective is to improve processes or activities. Through benchmarking, organisations learn about their own practices and procedures, and the best practices of others Benchmarking enables them to ident

28、ify where they fall short of current best practice and determine action programmes to help then match and surpass it.Benchmarking originated in the USA in the 1970s, pioneered by Rank Xerox ard was exported* to Europe and the UK in the 1980s A number of commercial, public sector and not for profit o

29、rganiAtinns have siiccftfisfully Rmhracftd th。tAchniquft, and it ia a popular and effective management processAny activity that can be measured can also be benchmarked However this is neither feasible nor practical. The starting point for any benchmarking exercise is to determine the key performanee

30、 areas; those are the areas that are critical to the organisation, operationally and strategically They should focus on those areas that (a) tie up most of the resources; (b) significantly improve the relationship with their client groups; (c) impact on the viability of the organisation. For example

31、 a charitable organisation that relies on grant aid as its main source of income might benchmark fund raising activitiesOnce the key performanee areas have been decided upon an organisation must then set the key slandards and variables to measure, these are commonly known as “key performance indicat

32、ors (KPIs). Having defined the benchmarks the hunt is on for information to establish the benchmark performance There are four types of ben chmarkingInternal: this is done within an organisation arid generally between closely related divisions, plants or operations. This is an easy way to start benc

33、hmarking, but is limited to internal criteria onlyFunctional: this is a comparison of performanee and procedures between similar functions, but in different organisations and industries. It is more likely than internal benchmarking to generate ben efits to the specific fun ction, but it is unlikely

34、to give wide benefits throughout the organisationCompetitive: this focuses on direct competitors within the same industry and with specific comparable business operations, or on indirect competitors in related industries with complementary business operations There can be practical difficulties in a

35、chieving this.Generic: this is undertaken with external companies in different industries that represent the Mbest-in-class for particular aspects of the selected business operations.Organisations then need to specify programmes and actiuns to close the gap. Having measured ones actual performance a

36、nd compared it with some form of target, benchmarking moves from simple measurement through to performanee improvements. Many organisations forget this stage and therefore miss the real benefit of benchmarking. It is essential that programmes and actions are implemented and that ongoing performanee

37、is monitored.Successful and effective benchmarking requires commitment and support from the board and senior management. Managers need to be as specific as possible when identifyi ng areas to ben ch mark For example, a company that wishes to ben chmark customer service needs to decide what specific

38、aspect of customer service needs to be examined Customer service encompasses a diverse range of activities, such as dealing with enquiries, handling disappointed customers, issuing refunds and taking payments Each of these activities is different, each with its own thought processes, techniques and

39、controls.Once the best practices have been identified, the benchmarking team collects the data, analyses it, and then plots their performance against best practice to help identify improvement opportunitiesFinally the team decides what is needed to adapt the best practices to suit their own particul

40、ar circumstances, this will a re-evaluation and re-design of existing procedures and approaches A cost-benefit exercise will usually be carried out and an implementation timetable with priorities is established.RISK AND UNCERTAINTYRisk management is the process of managing your organisations exposur

41、e to potential liabilities. It gives man a gers, staff, clients, the board and other stakeholders the con fide nee to pursue their mission without the fear of legal actio n or harm, and approaches risk in a structured and calculated manner, rather than being haphazard.Risk con sists of three element

42、s, n amely choice, likelihood and con sequence Some choice is needed in the situation, if there is no choice, a manager does not have a risky situation a rather a bounded one beyond the managers control; Likelihood infers somelevel of uncertainty; and some unwanted con sequence must exist in one or

43、more of the choices available to the manager.Decisions under uncertainty are effectively whereOutcomes are knownAssociated probabilities are unknownDecisions under risk are effectively whereOutcomes are knownAssocia怕d probabilities are knownA number of techniques exist for decision making under unce

44、rtainty, the more popular being contingency tables and its associated interpretation:Contingency TableThis is used for decisions made under uncertainty; it identifies & records all payoffs where action affects outcomesMaximinThis maximises the smallest pay-off, it is indicative of a pessimistic and

45、Risk-averting approachMaximaxThis has the highest maximum pay-off, it is indicative of an optimistic approach, albeit with the risk of loss to low returnsMinimax regretThis minimises the maximum possible regret and limits the potential opportunity1 loss. Regret is seen as the pay-off lost v. not pur

46、suing optimal actionExpected Values (EV)This is used where decisions subject to riskEV = Total of probabilities of outcome x returnsACTIVITY ONEA retailer needs to decide how many kilos of fruit he needs to buy from the market and has assessed the possible daily demand as 60, 100, 125 or 175 kgHe ca

47、n buy quantities of 50, 100,150 or 200 kg ata price of 4 per 10 kg. The selling price is 1 per kg with any unsold apples being scrappedRequireda)Construct a contingency tableb)How many kilos should be bought if the following approach were adopted?MaximinMaximaxRegretc)Calculate expected contribution

48、 (EV)BUDGETINGBudgets have multiple functions, namelyPlanningManagement produce detailed plans for implementationCoordinationActions of different parts of organisation are brought together Communicatio nEveryone is informed of the plans and policies; top management communicates to lower level manage

49、mentMotivationThis in fluences managerial behaviour, i ndh/iduals motivated to perform in line with objectives This can encourage in efficiency and conflict between man agers ControlAssists managers in con trolling activities with managements attenti on concentrated on deviations from a pre-set plan

50、Performance EvaluationMeasuring success of achievi ng the budget, rewards like bonuses are given in some companies and is meant to iin flue nee human behaviourIncremental budgetingIndirect cost and support activities are prepared incrementallyZero based budgetingActivities are justified & prioritise

51、d before decisions are taken. The approach is that budgeted* expenditure starts from base zero and description of each activity is included in a decision package, they are evaluated, ranked and resources allocated The ben efits are that the deficie ncies of traditi onal budgeti ng are avoided, resou

52、rces are allocated by need or benefit; a questioning attitude is created and the focus is on attention on outputs in relation to value for moneyAnthony (1965) categorised control into three main types:Strategic ControlThe setting of corporate strategy and long term objectives for the organisation.Op

53、erational ControlOperational control is ensuring that specific tasks are carried out. This is primarily 8ncemed with the processing of inputs and raw materials to get outputsManagement ControlManagement control is the coordination of the day to day activities in an organisation to ensure that inputs

54、 and raw materials are used efficiently and effectively towards achieving long term goals Management control therefore, links strategic control and operational control.Management control utilises regular feedback reporting systems so that corrective action can taken where variances from plan are ide

55、ntified The budget plays an important role here in provid i ng controls to aid man a gement control.The systematic comparison of planned inputs to actual results made using the budget, followed by corrective action where deviations from plan exist, is known as a control system*. The system providing

56、 the reports for this control system is known as 4responsibility account!ng This will be discussed in more detail later in the session.Feedback and Feed-forward ControlsFeedback control - occurs where actual outputs are monitored against desired outputs and corrective action is taken where there is

57、a varianee between the two. Feed-forward control 一 predictions are made atout future outputs and compared to desired outputs and action is taken where there is a differenee between the two.So, v/ith feed-forward controls any likely errors can be foreseen and actions taken to avoid them, whereas, wit

58、h feedback control actual errors against the plan are identified and corrective actions taken to achieve the remainder of the plan.The budgeting process is an example of both a feed-forward and feedback control system.Budgets as feed-forward controlIn putting budgets together, and submitting them to

59、 the budget committee, they are compared against the future expectations of the organisation as outlined in the long term plan. If the budget falls short of these expectations then it may be adjusted and alternatives considered. This process may 8ntinue until a budget is agreed that will meet long t

60、erm expectationsBudgets as feedback controlDuring the budget period actual results are compared to lhe budget and any deviations from budget ide ntified Corrective actio ns are then take n to en sure that future results are in line with the budget.BEYOND BUDGETINGBudgets have conflict!ng roles and a