ACCA Paper P5 (INT) Advanced Performance management - Pocket notes - Kaplan

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Introduction to strategic management accountingIntroduction to strategic management accounting Chapter 1

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The response – the implications for strategic planning

usestructuredmethodssuchasscenarioplanningandsensitivityanalysistoquantifythe•

impactofdifferentfactorsonthelong-termplan.

Constantscanningoftheenvironment.•

Quantifytheprobabilityandimpactoverashortertimescaleandtakeamoregeneralview•

ofthelong-termdirection.

Developstrategyincrementallyinaprocesswhichallowsflexibilityinresponsetochanges•

intheenvironment.

Establishwide-rangingdiscussionsinsideandoutsidetheorganisation,inparticularwith•

operationalstaff.

Reviewtheaccuracyofinformationonacontinuousbasistoimproveforecastingability.•

Introduction to strategic management accounting

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Introduction to strategic management accounting Chapter 1

Expected valueiscomputed

bymultiplyingthevalueof

eachpossibleoutcomebythe

probabilityofthatoutcome,

andsummingtheresults.a

matrixcanbeausefulway

torepresentandanalysea

scenariowherethereisa

rangeofpossibleoutcomes

andavarietyofpossible

responses.

RISK VS UNCERTAINTY

Theterm‘risk’isused

forscenarioswhereitis

possibletoidentifydifferent

possibleoutcomesand

assignprobabilitiestothem

and‘uncertainty’isusedfor

scenarioswherethisisnot

possible

Sensitivity analysisisa

techniquewhichissimilarto

the‘whatif?’facilityprovided

byacomputerspreadsheet.

byusingthistechniqueitis

possibletoestablishwhich

estimates(variables)are

morecriticalthanothersin

affectingadecision.

*sensitivitymargin=[npV/

pVofuncertaincashow]*

100

Themaximax ruleappliestoan

optimistwhoseekstomaximise

themaximumpossiblegain

ofpossibleoutcomes.The

maximumruleinvolves

selectingthealternativethat

maximisestheminimum

payoffachievable.pessimist!

Theminimaxregretstrategy

istheonethatminimisesthe

maximumregret.‘soreloser’

whodoesnotwishtomakethe

wrongdecision.

Introduction to strategic management accountingIntroduction to strategic management accounting Chapter 1

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Recent past exam questions

December 2008, Question 4 c/d

June 2008 Q4 NPV with sensitivity

The examiner was surprised at how many

students did not even attempt to calculate

sensitivity.

The impact of government

policy

Government policy is a key ingredient in the

political environment facing enterprises.

Taxation levels.•

Interest rates.•

Exchange rates.•

Incentive schemes.•

Public expenditure levels.•

Environment protection.•

Restrictive practices.•

Consumer and worker protection.•

Exam focus

Introduction to strategic management accounting

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Notes:

Environmental influences

In this chapter

Analysing the environment.•

Government policy.•

Stakeholders.•

Ethical issues.•

Pricing.•

chapter

Environmental influences

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Environmental influences Chapter 2

Strategic analysis tools are used not only in the develop of strategies but in the identification of

key performance management issues and the design of appropriate performance management

systems.

Exam focus

Environmental influences

Environmental influences Chapter 2

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assessingperformanceofcompetitors,

customersandsuppliers

benchmarking

gapanalysis

understanding

stakeholderexpectations

Reviewof

targets

budgetary

management

Environmentalanalysiscanbeusedfor

identicationofCsFs

Environmental influences

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Environmental influences Chapter 2

Tools for environmental analysis

PEST(EL) analysis

Approach to analysing the macro-

environment:

Political influences and events•

Economic influences•

Social influences•

Technological influences•

Ecological influences•

Legal influences.•

Porter’s five forces

Approach to industry level analysis

Past exam questions

June 2008 - Q3

Exam focus

Notes:

Environmental influencesEnvironmental influences Chapter 2

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Recent exam question

December 2007 - Q5

A number of students failed to apply the model to the scenario given.

Competitiverivalry

suppliers’

bargainingpower

Threatsfrom

potentialentrants

Threatsfrom

substitutes

buyers’

bargainingpower

Exam focus

Environmental influences

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Environmental influences Chapter 2

Government policy

Macroeconomic policy

Macroeconomic policy is the management of the economy by government to influence the

performance and behaviour of the economy as a whole. The objectives are:

full employment of resources, especially of the labour force•

price stability•

ACCA Paper P5 (INT) Advanced Performance management - Pocket notes - Kaplan - 2010

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