Professional Examinations Paper P5 Advanced Performance Management EXAM KIT P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by: Kaplan Publishing UK Unit The Business Centre Molly Millar’s Lane Wokingham Berkshire RG41 2QZ ISBN: 978-1-78415-236-9 © Kaplan Financial Limited, 2015 Printed and bound in Great Britain The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties Please consult your appropriate professional adviser as necessary Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials All rights reserved No part of this examination may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without prior permission from Kaplan Publishing Acknowledgements The past ACCA examination questions are the copyright of the Association of Chartered Certified Accountants The original answers to the questions from June 1994 onwards were produced by the examiners themselves and have been adapted by Kaplan Publishing We are grateful to the Chartered Institute of Management Accountants and the Institute of Chartered Accountants in England and Wales for permission to reproduce past examination questions The answers have been prepared by Kaplan Publishing ii KA PL AN P U BLI SH IN G CONTENTS Page Index to questions and answers v Analysis of past papers xi Exam technique xiii Paper specific information xv Kaplan’s recommended revision approach xix Kaplan’s detailed revision plan xxiii Formulae and mathematical tables xxix Section Practice questions – Section A Practice questions – Section B 29 Answers to practice questions – Section A 133 Answers to practice questions – Section B 187 Pilot paper – questions and answers In addition to providing a wide ranging bank of real past exam questions, we have also included in this edition: • An analysis of all of the recent examination papers • Paper specific information and advice on exam technique • Our recommended approach to make your revision for this particular subject as effective as possible This includes step by step guidance on how best to use our Kaplan material (Complete text, pocket notes and exam kit) at this stage in your studies • Enhanced tutorial answers packed with specific key answer tips, technical tutorial notes and exam technique tips from our experienced tutors • Complementary online resources including full tutor debriefs and question assistance to point you in the right direction when you get stuck KA PL AN P U BLI SH IN G i ii P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T You will find a wealth of other resources to help you with your studies on the following sites: www.mykaplan.co.uk www.accaglobal.com/students/ Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to mykaplanreporting@kaplan.com with full details, or follow the link to the feedback form in MyKaplan Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions iv KA PL AN P U BLI SH IN G INDEX TO QUESTIONS AND ANSWERS INTRODUCTION Past exam questions have been modified (sometimes extensively) to reflect the current P5 syllabus KEY TO THE INDEX PAPER ENHANCEMENTS We have added the following enhancements to the answers in this exam kit: Key answer tips All answers include key answer tips to help your understanding of each question Tutorial note All answers include more tutorial notes to explain some of the technical points in more detail Top tutor tips For selected questions, we “walk through the answer” giving guidance on how to approach the questions with helpful ‘tips from a top tutor’, together with technical tutor notes These answers are indicated with the “footsteps” icon in the index KA PL AN P U BLI SH IN G v P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T ONLINE ENHANCEMENTS Timed question with Online tutor debrief For selected questions, we recommend that they are to be completed in full exam conditions (i.e properly timed in a closed book environment) In addition to the examiner’s technical answer, enhanced with key answer tips and tutorial notes in this exam kit, online you can find an answer debrief by a top tutor that: • works through the question in full • points out how to approach the question • how to ensure that the easy marks are obtained as quickly as possible, and • emphasises how to tackle exam questions and exam technique These questions are indicated with the “clock” icon in the index Online question assistance Have you ever looked at a question and not know where to start, or got stuck part way through? For selected questions, we have produced “Online question assistance” offering different levels of guidance, such as: • ensuring that you understand the question requirements fully, highlighting key terms and the meaning of the verbs used • how to read the question proactively, with knowledge of the requirements, to identify the topic areas covered • assessing the detail content of the question body, pointing out key information and explaining why it is important • help in devising a plan of attack With this assistance, you should then be able to attempt your answer confident that you know what is expected of you These questions are indicated with the “signpost” icon in the index Online question enhancements and answer debriefs will be available on MyKaplan at: www.mykaplan.co.uk vi KA PL AN P U BLI SH IN G IN DE X TO Q UE S T ION S A N D A N S WE R S SECTION A TYPE QUESTIONS Page number Question Answer Past exam BSN 133 – P Group 137 – Snowwell 142 Dec 03(A) Boltzman 10 147 Dec 14 Cantor 13 152 Jun 14 16 158 Dec 09(A) The RRR Group (RRR) JHK Coffee Machines Co 19 163 Jun 11(A) Metis Restaurants 21 169 Jun 12(A) Kolmog Hotels 23 175 Jun 13 10 Lopten Industries 26 180 Dec 13 Note: (A) signifies that the question has been amended from the original, either to match the current syllabus or, more usually, to match the current format of the exam SECTION B TYPE QUESTIONS STRATEGIC PLANNING AND CONTROL Page number Question Answer Past exam Dec 07(A) 11 The Healthy Eating Group (HEG) 29 187 12 Divisional actions 30 191 – 13 Business process re-engineering 31 193 – 14 Briggs plc 31 195 – 15 Alternative budgeting 32 198 Jun 06 16 Performance management 32 200 Jun 06(A) 17 Godel 33 202 Jun 14 18 Universal University (UU) 34 206 Jun 09(A) 19 Booxe 35 209 Jun 14 20 The Rubber Group (TRG) 36 212 Jun 08 21 Robust Laptops Co (RL) Ganymede University 38 216 220 Dec 10(A) 22 KA PL AN P U BLI SH IN G 40 Jun 12(A) v ii P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T EXTERNAL INFLUENCES ON ORGANISATIONAL PERFORMANCE Page number Question Answer Past exam 23 Boardman Foods (BF) 41 223 – 24 Social responsibility 42 225 – 25 Turing 43 228 Jun 14 26 MTM Group 45 232 Nov 05(A) 27 Franchising For You Ltd (F4U) 45 234 Jun 09 28 29 The Equine Management Academy (EMA) 47 Jun 10 FGH Telecom (FGH) 49 238 241 30 31 Stillwater Services Stokeness Engineering 50 244 248 Dec 12(A) 52 Dec 10(A) Jun 13 PERFORMANCE MEASUREMENT SYSTEMS AND DESIGN 32 Precision parts 53 252 – 33 Motor component manufacturer 54 255 Dec 02 34 35 GMB Co The Ornamental Company (TOC) 55 257 56 260 Dec 07(A) Dec 08(A) 36 Bluefin School 57 264 Dec 11(A) 37 Quark Healthcare 59 268 Dec 13 STRATEGIC PERFORMANCE MEASUREMENT 38 Statutory transport authority 60 271 – 39 Universal Pottery Company (UPC) 61 273 – 40 Gibson & Chew 63 278 – 41 Equiguard 64 281 – 42 43 Business Solutions Telecoms at Work (TAW) 65 66 285 287 Jun 02 Jun 08(A) 44 Westamber 68 290 Pilot 07 (A) 45 Bettaserve Alpha Division 71 292 Beeshire Local Authority (BLA) 72 75 294 298 Pilot 07 Dec 07 48 49 Superior Software House (SSH) SSA Group 76 78 301 305 Dec 08 Dec 09(A) 50 Local government housing department 79 308 Jun 10(A) 51 Film Productions Co (FP) 80 311 Dec 10(A) 52 Tench Cars 81 314 Dec 11(A) 53 Thebe Telecom 82 318 Jun 12(A) 54 Lincoln & Lincoln Advertising 83 321 Dec 12(A) 55 Landual Lamps 87 325 Jun 13 46 47 v ii i Dec 14 KA PL AN P U BLI SH IN G IN DE X TO Q UE S T ION S A N D A N S WE R S PERFORMANCE EVALUATION AND CORPORATE FAILURE Page number Question Answer Past exam – 56 Royal Botanical Gardens 89 330 57 BLA Ltd 89 333 Dec 03(A) 58 Culam 91 338 Dec 14 59 Specialist Clothing Company 92 341 Jun 06(A) 60 Performance pyramid 94 343 Jun 06(A) 61 BPC 96 347 Dec 07(A) 62 The Success Education Centre (SEC) 97 350 Pilot 07(A) 63 The Health and Fitness Group (HFG) 98 353 Jun 08(A) 64 100 357 65 The Sentinel Company (TSC) The Spare for Ships Company (SFS) 102 361 Dec 08(A) Jun 10(A) 66 The Superior Business Consultancy (SBC) 104 364 67 LOL Co 105 368 Jun 10(A) Dec 10(A) 68 RM Batteries Co 107 372 Dec 10 69 APX Accountancy 108 375 Jun 11(A) 70 ENT Entertainment Co 110 377 Jun 11(A) 71 Cod Electrical Motors 111 381 Dec 11(A) 72 Callisto 113 385 Jun 12(A) 73 Amal Airlines 114 388 Jun 12(A) 74 Coal Creek Nursing Homes 115 391 Dec 12(A) 75 Graviton Clothing 117 395 Dec 13 CURRENT DEVELOPMENTS AND EMERGING ISSUES IN MANAGEMENT ACCOUNTING AND PERFORMANCE MANAGEMENT 76 Maxwell 119 398 Dec 14 77 Integrated Reporting 121 401 – 78 Public services 122 403 – 79 Shareholder value analysis 122 405 – 80 Sports complex 123 409 – 81 BIOTEC 124 411 – 82 Bennett plc 126 414 Dec 03 83 The Better Electricals Group (BEG) 127 417 Jun 10(A) 84 Herman Swan & Co 129 420 Dec 12(A) 85 Essland Police Force 130 423 Dec 13 KA PL AN P U BLI SH IN G ix P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T x KA PL AN P U BLI SH IN G THE KAPLAN PAPER P5 REVISION PLAN Stage 1: Assess areas of strengths and weaknesses Review the topic listings in the revision table plan below Determine whether or not the area is one with which you are comfortable Comfortable with the technical content Not comfortable with the technical content Read the relevant chapter(s) in Kaplan’s Complete Text Attempt the Test your understanding examples if unsure of an area Attempt appropriate Online Fixed Tests Review the pocket notes on this area Stage 2: Practice questions Follow the order of revision of topics as recommended in the revision table plan below and attempt the questions in the order suggested Try to avoid referring to text books and notes and the model answer until you have completed your attempt Try to answer the question in the allotted time Review your attempt with the model answer and assess how much of the answer you achieved in the allocated exam time KA PL AN P U BLI SH IN G xx i P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T Fill in the self-assessment box below and decide on your best course of action Comfortable with question attempt Only revisit when comfortable with questions on all topic areas Not comfortable with question attempts Focus on these areas by: • Reworking test your understanding examples in Kaplan’s Complete Text • Revisiting the technical content from Kaplan’s pocket notes • Working any remaining questions on that area in the exam kit • Reattempting an exam standard question in that area, on a timed, closed book basis Note that: The “signpost questions” offer online question assistance to help you to attempt your question confidently and know what is expected of you The “clock questions” have an online debrief where a tutor talks you through the exam technique and approach to that question and works the question in full Stage 3: Final pre-exam revision We recommend that you attempt at least one three hour mock examination containing a set of previously unseen exam standard questions It is important that you get a feel for the breadth of coverage of a real exam without advanced knowledge of the topic areas covered – just as you will expect to see on the real exam day Ideally this mock should be sat in timed, closed book, real exam conditions and could be: • a mock examination offered by your tuition provider, and/or • the pilot paper in the back of this exam kit, and/or • the last real examination paper (available shortly afterwards on MyKaplan with “enhanced walk through answers” and a full “tutor debrief”) xx i i KA PL AN P U BLI SH IN G KAPLAN'S DETAILED REVISION PLAN Topic Complete Pocket Text note Chapter Chapter Introduction to strategic management accounting 1 − Benchmarking Questions to attempt Tutor guidance Q4, Q32, Q36 This is a relatively straightforward technique but it is still important to practice at least one question to ensure you have the required knowledge − KPIs and CSFs 1 Q10, Q29, Q51, Q73 A core area that is commonly examined It is important to complete a range of questions here − Mission 1 Q45 Q50 This may not be tested in isolation but, for example, you may need to consider the impact of a change in the mission statement on the KPIs of the organisation − BCG 1 Q59, Q70 A business could use the BCG matrix in order to classify its subsidiary companies in terms of their rate of market growth and relative market share − Role of management accountant 1 Q77, Q84 It’s important to consider the changes in the role of the management accountant and the role of the management accountant in integrated reporting 2 Q25 Much of this is brought forward knowledge from F5 but notice the change in emphasis of the questions – the calculations will be used to underpin your discussion rather than accounting for the majority of the marks Environmental influences − Risk KA PL AN P U BLI SH IN G Date attempted Self assessment xx i i i P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T Topic Complete Text Chapter Pocket note Chapter − Stakeholders − PEST 2 Q10 Consider PEST in the context of performance management − Porter’s forces 2 Q31 Consider Porter’s forces in the context of performance management Approaches to budgets − Budgeting 3 Q17, Q20, Q21, Q35, Q65 Do not overlook this area Knowledge of the written areas of budgeting can help you to score relatively easy marks in the exam In addition, make sure that you can the ABC calculations Q13, Q19 It is important to understand what BPR is and to consider its impact on systems development and performance improvement Business structure and performance management 4 − BPR xx i v Questions Tutor guidance to attempt Q4 May not be tested in isolation but could be examined, say, alongside the Performance Prism − Services 4 Q9, Q50 A straightforward area but be ready to distinguish service and manufacturing organisations − McKinsey’s 7s model 4 Q14 A relatively minor area but complete one question on this − Complex structures 4 Q72 The organisations in the exam are often more complex in nature – these complex structures will present their own problems Date attempted Self assessment KA PL AN P U BLI SH IN G KA PL AN ’S DE T AILE D RE V ISI ON P LA N Topic Complete Text Chapter The impact of information technology − Information systems Performance reports for management − Performance reports − Qualitative factors Pocket note Chapter Questions to attempt Tutor guidance Q7, Q36, Q37 Think about the link between performance management and information systems In particular, what information needs does the organisation have and what information systems should they implement as a result of these needs? Q5, Q8, Q9, Q32 A commonly examined area Complete a number of questions to understand how it can be examined in a variety of contexts It is important to be able to evaluate a performance report Q47 Qualitative factors are subjective in nature and are therefore often overlooked It is important to stress the importance in your answer of considering these factors and you need to be ready to discuss how they can be best assessed Human resource aspects of performance management 7 Q40 − Appraisal 7 Q41, Q54 − Reward KA PL AN P U BLI SH IN G Date attempted Self assessment HR aspects can be overlooked but consider the impact of a number of HR issues on performance management It is vital that managers are motivated to achieve the goals and KPIs of the organisation xx v P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T Topic Complete Pocket Questions Tutor guidance Text note to Chapter Chapter attempt Financial performance measures in the private sector 8 Q8, Q54, Don’t get too bogged down in the calculations − Assessing financial Q67 performance You need to be ready to assess financial performance in the context of the scenario given rather than simply calculating every single measure that you know Divisional performance appraisal and transfer pricing 9 Q5, Q30, − Divisional Q46, Q67 performance − Transfer pricing 9 Q7, Q55 Performance management in not for-profit organisations 10 10 Q47, Q50 − VFM − xx v i League tables 10 10 Q81, Q85 Date attempted Self assessment A commonly examined area Be ready to calculate and evaluate RI, ROI and EVA and to discuss VBM The transfer price negotiated between the divisions, or imposed by head office, can have a profound, but perhaps arbitrary, effect on the reported performance and subsequent decisions made Think about the problems and diversity of objectives and the different approaches to performance measurement in NFPs A very topical issue Be prepared to evaluate the use of league tables (benchmarking) and targets in the public sector KA PL AN P U BLI SH IN G KA PL AN ’S DE T AILE D RE V ISI ON P LA N Topic Complete Text Chapter Non-financial performance indicators 11 − Balanced scorecard 11 − Building block 11 − Performance pyramid − Performance Prism Corporate failure − Corporate failure Pocket note Chapter Questions to attempt Tutor guidance 11 11 11 Q9, Q56 Q9, Q57 Q45, Q60, Q64, Q71, Q75 A number of tools are available for measuring financial and non-financial performance A core area – practise a number of questions so that you understand how these models can be examined in a range of contexts 11 11 Q4, Q73 A performance management tool that considers all stakeholders rather than just shareholders Know the step by step approach and be ready to apply it to a scenario 12 12 The role of quality in performance management 13 13 − JIT 13 13 − Lean Q3, Q58 Be ready to discuss corporate failure, assess the likelihood of failure and discuss and evaluate models such as the Z score and Argenti Q4, Q52 Q37 There are a number of quality practices It is a good idea to complete a range of questions on these − Quality costs 13 13 Q52 Ensure you understand the different definitions of quality and cost classification − Kaizen 13 13 Q52 There are a number of quality practices It is a good idea to complete a range of questions on these − Six Sigma 13 13 Q53 An important aspect of quality Know the step by step approach KA PL AN P U BLI SH IN G Date attempted Self assessment xx v i i P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T Topic Complete Pocket Text note Chapter Chapter Environmental management accounting (EMA) 14 14 − EMA Questions to attempt Tutor guidance Q76, Q80 A reasonably straightforward but very topical area Be prepared to discuss the reasons for the implementation of EMA and to explain the techniques that can be used Date attempted Self assessment Note that not all of the questions in the kit are referred to in the programme above We have recommended a large number of exam standard questions and successful completion of these should reassure you that you have a good grounding of most of the key topics and are well prepared for the exam The remaining questions are available in the kit for extra practice for those who require more questions on some areas xx v i ii KA PL AN P U BLI SH IN G FORMULAE AND MATHEMATICAL TABLES FORMULAE Learning curve Y = axb Where y = average cost per batch a = cost of first batch x = total number of batches produced b = learning factor (log LR/log 2) LR = the learning rate as a decimal Demand curve P = a − bQ b= Change in price Change in quantity a = price when Q = KA PL AN P U BLI SH IN G xx i x P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T MATHEMATICAL TABLES PRESENT VALUE TABLE Present value of i.e (1 + r )− n where r = discount rate, n = number of periods until payment Periods (n) Discount rate (r) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0.990 0.980 0.971 0.961 0.951 0.980 0.961 0.942 0.924 0.906 0.971 0.943 0.915 0.888 0.863 0.962 0.925 0.889 0.855 0.822 0.952 0.907 0.864 0.823 0.784 0.943 0.890 0.840 0.792 0.747 0.935 0.873 0.816 0.763 0.713 0.926 0.857 0.794 0.735 0.681 0.917 0.842 0.772 0.708 0.650 0.909 0.826 0.751 0.683 0.621 10 0.942 0.933 0.923 0.914 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.711 0.677 0.645 0.614 0.705 0.665 0.627 0.592 0.558 0.666 0.623 0.582 0.544 0.508 0.630 0.583 0.540 0.500 0.463 0.596 0.547 0.502 0.460 0.422 0.564 0.513 0.467 0.424 0.386 10 11 12 13 14 15 0.896 0.887 0.879 0.870 0.861 0.804 0.788 0.773 0.758 0.743 0.722 0.701 0.681 0.661 0.642 0.650 0.625 0.601 0.577 0.555 0.585 0.557 0.530 0.505 0.481 0.527 0.497 0.469 0.442 0.417 0.475 0.444 0.415 0.388 0.362 0.429 0.397 0.368 0.340 0.315 0.388 0.356 0.326 0.299 0.275 0.350 0.319 0.290 0.263 0.239 11 12 13 14 15 (n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.901 0.812 0.731 0.659 0.593 0.893 0.797 0.712 0.636 0.567 0.885 0.783 0.693 0.613 0.543 0.877 0.769 0.675 0.592 0.519 0.870 0.756 0.658 0.572 0.497 0.862 0.743 0.641 0.552 0.476 0.855 0.731 0.624 0.534 0.456 0.847 0.718 0.609 0.516 0.437 0.840 0.706 0.593 0.499 0.419 0.833 0.694 0.579 0.482 0.402 10 0.535 0.482 0.434 0.391 0.352 0.507 0.452 0.404 0.361 0.322 0.480 0.425 0.376 0.333 0.295 0.456 0.400 0.351 0.308 0.270 0.432 0.376 0.327 0.284 0.247 0.410 0.354 0.305 0.263 0.227 0.390 0.333 0.285 0.243 0.208 0.370 0.314 0.266 0.225 0.191 0.352 0.296 0.249 0.209 0.176 0.335 0.279 0.233 0.194 0.162 10 11 12 13 14 15 0.317 0.286 0.258 0.232 0.209 0.287 0.257 0.229 0.205 0.183 0.261 0.231 0.204 0.181 0.160 0.237 0.208 0.182 0.160 0.140 0.215 0.187 0.163 0.141 0.123 0.195 0.168 0.145 0.125 0.108 0.178 0.152 0.130 0.111 0.095 0.162 0.137 0.116 0.099 0.084 0.148 0.124 0.104 0.088 0.074 0.135 0.112 0.093 0.078 0.065 11 12 13 14 15 xx x KA PL AN P U BLI SH IN G FO RM UL AE AN D M A TH E MA TI C AL T AB LE S ANNUITY TABLE Present value of an annuity of i.e − (1 + r )− n r Periods where r = discount rate, n = number of periods Discount rate (r) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0.990 1.970 2.941 3.902 4.853 0.980 1.942 2.884 3.808 4.713 0.971 1.913 20829 3.717 4.580 0.962 1.886 2.775 3.630 4.452 0.952 1.859 2.723 3.546 4.329 0.943 1.833 2.673 3.465 4.212 0.935 1.808 2.624 3.387 4.100 0.926 1.783 2.577 3.312 3.993 0.917 1.759 2.531 3.240 3.890 0.909 1.736 2.487 3.170 3.791 10 5.795 6.728 7.652 8.566 9.471 5.601 6.472 7.325 8.162 8.983 5.417 6.230 7.020 7.786 8.530 5.242 6.002 6.733 7.435 8.111 5.076 5.786 6.463 7.108 7.722 4.917 5.582 6.210 6.802 7.360 4.767 5.389 5.971 6.515 7.024 4.623 5.206 5.747 6.247 6.710 4.486 5.033 5.535 5.995 6.418 4.355 4.868 5.335 5.759 6.145 10 11 12 13 14 15 10.37 11.26 12.13 13.00 13.87 9.787 10.58 11.35 12.11 12.85 9.253 9.954 10.63 11.30 11.94 8.760 9.385 9.986 10.56 11.12 8.306 8.863 9.394 9.899 10.38 7.887 8.384 8.853 9.295 9.712 7.499 7.943 8.358 8.745 9.108 7.139 7.536 7.904 8.244 8.559 6.805 7.161 7.487 7.786 8.061 6.495 6.814 7.103 7.367 7.606 11 12 13 14 15 (n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.901 1.713 2.444 3.102 3.696 0.893 1.690 2.402 3.037 3.605 0.885 1.668 2.361 2.974 3.517 0.877 1.647 2.322 2.914 3.433 0.870 1.626 2.283 2.855 3.352 0.862 1.605 2.246 2.798 3.274 0.855 1.585 2.210 2.743 3.199 0.847 1.566 2.174 2.690 3.127 0.840 1.547 2.140 2.639 3.058 0.833 1.528 2.106 2.589 2.991 10 4.231 4.712 5.146 5.537 5.889 4.111 4.564 4.968 5.328 5.650 3.998 4.423 4.799 5.132 5.426 3.889 4.288 4.639 4.946 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.589 3.922 4.207 4.451 4.659 3.498 3.812 4.078 4.303 4.494 3.410 3.706 3.954 4.163 4.339 3.326 3.605 3.837 4.031 4.192 10 11 12 13 14 15 6.207 6.492 6.750 6.982 7.191 5.938 6.194 6.424 6.628 6.811 5.687 5.918 6.122 6.302 6.462 5.453 5.660 5.842 6.002 6.142 5.234 5.421 5.583 5.724 5.847 5.029 5.197 5.342 5.468 5.575 4.836 4.988 5.118 5.229 5.324 4.656 4.793 4.910 5.008 5.092 4.486 4.611 4.715 4.802 4.876 4.327 4.439 4.533 4.611 4.675 11 12 13 14 15 (n) KA PL AN P U BLI SH IN G xx x i P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T xx x ii KA PL AN P U BLI SH IN G Section PRACTICE QUESTIONS – SECTION A BSN Introduction BSN is a public service radio and television broadcasting organisation Its Board of Directors stated in its latest annual report that the main objectives of the organisation are to: • • • remain a public service broadcaster provide a comprehensive range of distinctive programmes and give excellence in providing a public broadcasting service make and broadcast television and radio programmes which inform, educate and entertain BSN is mainly funded through television licence fees, which are paid by the residents of the country in which it is based The television signal is currently broadcast through transmitters located on land rather than via satellite The Board of Directors is held responsible by the government for ensuring that best value is obtained by the licence-fee payer Competition The main competition for BSN comes from commercial broadcasters who are funded through advertising revenue Some of these broadcasters use earth-bound transmission media for both television and radio programmes, and others transmit via satellite BSN has achieved an improvement in its market share of the viewing the viewing and listening audience in recent years despite this competition One of the most distinguished services provided by BSN is its world radio service, which is renowned for its unbiased and uncensored news broadcasts relating to national and international events None of its competitors is able to provide a parallel service of the same quality and reputation Accountability and editorial policy BSN is accountable through its Board of Directors to the licence-fee payers and to the government It regularly consults with representatives of its audiences for both television and radio programmes and has established independent panels of viewers and listeners to review and advise on programmes In terms of editorial policy the Board of Directors tries to ensure that there is as little interference as possible on the creativity of programme makers Nevertheless, the Board aims to ensure that programmes are fair, accurate and impartial, and meet the highest standards of good taste and decency KA PL AN P U BLI SH IN G P AP ER P : A D VAN CE D P E RF OR MA N CE M AN A GE ME N T New developments Recently, BSN has introduced a 24-hour television news service In addition, the organisation has entered a joint venture with a television subscription channel provider which allows the subscriber to access television programmes at any time to suit themselves rather than when they are broadcast The additional income earned through subscriptions to this facility is re-invested by BSN in its main public service Another potential development is the connection of the television to the telecommunications network which would allow greater efficiency in the delivery of programmes Financial efficiency The Board of Directors has entered a four-year licence-fee agreement with the government The terms of this are that the licence fee will increase at a compound rate of 2% per annum both this year and next year The licence fee will then remain at this level for the remaining two years of the agreement The total licence fee income received in the last financial year was $2,147 million The Board of Directors expects the number of licences sold to remain at the same level as last year for the full four-year period The Board of Directors is proud that BSN exceeded the efficiency savings target set by the government by 2% in each of the last three years Over this period, BSN has out-sourced its financial processing functions and sold its transmission service to an independent company, which has guaranteed the maintenance of a high-quality service at a reduced cost The Board of Directors has placed much emphasis on the elimination of duplication of effort and reduction in waste from surplus capacity or over-staffing An internal market has been introduced into BSN with programme-makers given the freedom to buy from producers who may be employed by the organisation or who may be external and completely independent of it The savings achieved have been re-invested in programmes and services Despite these efficiency measures, BSN has experienced a steady average compound rate of growth of 3.7% in its expenditure over the last five years, and this is expected to continue at the same level over the next four-year period The following estimated levels of income and expenditure for the four-year period of the licence fee agreement are as follows: Year Year Year Year Income $ million 2,190 2,234 2,234 2,234 Expenditure $ million 2,114 2,192 2,273 2,357 Future targets and developments The government has congratulated the Board of Directors on its record of achieving efficiency savings and has set a Return on Capital Employed (ROCE) target of 6% per annum Its current ROCE is 9%, which has been calculated as follows: Excess of income over expenditure × 100 Average capital employed with average capital employed here equalling = $108 million $1,195 million $1,250m + $1,140m KA PL AN P U BLI SH IN G PR AC T ICE Q UE S T ION S – SE C T ION A : S EC TI ON It is assumed that the value of capital employed by BSN will change only by adjustments in its operating reserve There has been continuing debate on the funding mechanism used for BSN through the licence fee Some members of the government have questioned the fairness of this They argue that commercial broadcasters cannot rely on a regular and guaranteed source of income and that the licence itself is a form of tax giving no discretion to the fee payer One suggestion being considered by the government to reduce BSN’s dependence on the licence fee is to separate the radio and television services The radio services may then be financed by advertising revenue but would remain within the overall group alongside the television service The rationale for this is that the licence fee is charged only on television receivers and therefore BSN does not obtain any direct income to support its radio services Financial extracts Extracts from BSN’s accounts reveal an increase in the overall surplus transferred to the operating reserve in the last financial year Comparative extracts from the accounts over the last two years are as follows: Last year $ million Income and expenditure account Excess of income over expenditure Statement of financial position Total assets less current liabilities Long-term creditors and provisions Represented by: Capital reserve Operating reserve Previous year $ million 108 –––––– 82 –––––– 1,355 105 –––––– 1,250 –––––– 1,240 100 –––––– 1,140 –––––– 700 550 –––––– 1,250 –––––– 698 442 –––––– 1,140 –––––– BSN’s total expenditure in the last financial year was $2,039 million, compared with $1,700 million five years ago The breakdown of these costs in the last financial year was as follows: Broadcast expenditure: Television services Radio services Non-broadcast expenditure KA PL AN P U BLI SH IN G Last year $ million 1,265 423 351 –––––– 2,039 –––––– ... previous papers will be drawn on at times PASS MARK The pass mark for all ACCA Qualification examination papers is 50% READING AND PLANNING TIME Remember that all three hour paper based examinations... systems Performance reports for management − Performance reports − Qualitative factors Pocket note Chapter Questions to attempt Tutor guidance Q7, Q36, Q37 Think about the link between performance management. .. systems Qualitative factors Evaluation of a performance report Wrong signals Human resource management Financial performance evaluation Divisional performance measurement Transfer pricing Value