technical student accountANT

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examiner’s approach
to paper f5,
performance
management
RELEVANT TO ACCA QUALIFICATION PAPER F5
The aim of Paper F5, Performance Management is to develop knowledge and skills in the application
of management accounting techniques to quantitative and qualitative information for planning,
decision making, performance evaluation, and control.

It is important to remember that this paper is reflects the fact that students will, in many cases, of the product. The calculations themselves are
more than a management accounting paper. be relatively new to management accounting unlikely to be sufficient to gain a pass.
Management accounting is certainly important, techniques. A formula sheet is provided with every
but it is the interpretation of the information it Paper F5 exam. Syllabus area B
provides that is useful to a manager of a business. The syllabus then considers decision making.
The aim is that students should have knowledge Syllabus area A Students need to appreciate the problems
of management accounting techniques and should The syllabus begins by introducing more surrounding scarce resources, pricing, and
be able to apply this knowledge to a performance specialised management accounting topics. There make-or-buy decisions, and how these problems
management problem. is some knowledge assumed from Paper F2, relate to the assessment of performance. Risk
primarily overhead treatments. The objective here and uncertainty are a factor of real-life decision
SYLLABUS STRUCTURE, RATIONALE, AND is to ensure students have a broader background making; students need to understand risk and
RELATIONAL DIAGRAM in management accounting techniques. Again, must be able to apply some basic methods to help
The syllabus for Paper F5, Performance the emphasis is on the implications of the resolve the risks inherent in decision making.
Management, builds on the knowledge gained calculations, not just the calculations themselves. Students should never forget that management
in Paper F2, Management Accounting. It The ABC question in the Pilot Paper is an excellent accounting provides information partly so
also prepares students for the more specialist example: here, candidates are required to perform that decisions can be made. This area of the
capabilities covered in Paper P5, Advanced some ABC‑based calculations and then comment syllabus is important and will be a rich source of
Performance Management. on the implications for the pricing and profitability future questions.
As such, Paper F5 sits between two other
management accounting-based papers. This is Syllabus area C
always a challenge for an examiner as such papers Budgeting is an important aspect of many
must represent a step up from the lower paper, accountants’ lives. The syllabus explores different
in this case Paper F2, but not get too close to the budgeting techniques and the problems inherent
more advanced paper (Paper P5). Paper F5 covers in them. The behavioural aspects of budgeting
the fundamentals of performance management, are important for accountants to understand, and
and covers those topics essential to a the syllabus includes consideration of the way
management accountant in business. It has individuals might react to a budget. Abuse of the
a much stronger emphasis on interpretation budgeting environment is common and damages
than Paper F2, but does not contain the businesses more than is often realised. Students
more complex scenarios that can feature in need to appreciate the problems inherent in
Paper P5. Paper F5 contains scenario‑based budgeting and must be able to suggest how
questions, but the choice of scenarios these problems can be overcome.
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Syllabus area D excellent indicators of the general style of my

Standard costing and variances are then built future exams (subject to the change of rubric
on – all the variances examined in Paper F2 to five 20-mark questions). The examiner’s
are examinable here. New topics are mix and reports for both these papers are essential
yield variances, and planning and operational reading for students and tutors.
variances. Again, the link is made to performance
management. It is important for accountants to be EXAMINER’S INFLUENCES
able to interpret the numbers that they calculate, There are many things that make up an
and to ask what they mean in the context examiner’s mind set, and as I am still a fairly new
of performance. examiner it is only fair that I provide some insight
into the style of exam students might expect.
Syllabus area E This is not an inclusive list, but it does give an
The syllabus concludes with performance indication of some of my motivations:
measurement and control. This is the Ethics and integrity are essential; an
core of the syllabus. Accountants need accountant must be capable of managing
to understand how a business should the performance of a business with honesty.
be managed and controlled. They should Manipulation of performance figures is a
appreciate the importance of both financial short‑term and potentially damaging strategy
and non-financial performance measures in and, in my view, unethical.
management. representing, where Organisations seem obsessed with financial
Accountants should also appreciate possible, all five syllabus performance measures, but the future
the difficulty in assessing performance in a sections. Returning to the Pilot Paper, two is determined more by non-financial
divisionalised business, and the problems questions are new questions written specifically performance. Both are important.
caused by failing to consider external influences for this paper (Questions 2 and 4). The other two The ability to perform management accounting
on performance. This section leads directly to are past exam questions that were significantly calculations is important, but being able
Paper P5. re‑formed to reflect the intended style of to determine the implications of those
This last section of the syllabus is perhaps the future exams. calculations is essential for an accountant.
most important. As the relational diagram illustrates Question 1, in the Pilot Paper, is an ABC Performance management methods should be
(see the Syllabus on the ACCA website), all other question where a comparison between traditional fair and reasonable. There are many influences
aspects of the syllabus lead to this area. The point cost per unit and ABC costs is needed. The and interested parties, and a balance is
is that this is a performance management paper and question asks candidates to explain why the costs needed if the best is to be achieved from
not a pure management accounting paper. Students are different, and then to discuss the implications the business.
must understand this and prepare accordingly. of a switch to ABC on pricing and profitability. The
point to emphasise here is that the calculations SUMMARY
FORMAT OF THE PAPER are not really enough on their own. Why are the You need to prepare thoroughly for this exam,
The format of the paper changed after the numbers different? What does this mean to prices? as follows:
December 2008 exam. Five questions are What effect will all this have on profit? The mark Read the Syllabus, Study Guide, and Pilot
now set, all worth 20 marks each. The need split allows differentiation between good and Paper. These give a good indication of
for longer questions was apparent early in weak candidates. the style and content of future exams. In
the development of this exam, and 20 marks Question 2 is a mix and yield question, where particular, it should be remembered that I
is now deemed enough to enable focused candidates can demonstrate their understanding also wrote the Study Guide and that this
performance-orientated questions to be set. of the numbers before having to do any indicates the way I think about the syllabus.
The implications of calculations, as well as the calculations. It also highlights the problem that Any new paper is bound by its Study Guide,
calculations themselves, are examined. There are some favourable variances can indicate a far from as it represents what the examiner is allowed
computational and discursive elements, broadly in good performance. to cover.
line with the Pilot Paper. Question 3 is a learning curve question. I feel Study thoroughly – this paper is a significant
Wherever possible, I try to separate discussion that the mathematical ability of candidates needs step up from Paper F2. Application and
from calculations. In other words, it should be improving, and the programming of powerful implication will be examined.
possible for students to comment without the modern spreadsheets certainly demands this. Practise questions produced by tutors as well
need to do the calculations. The ‘Simply Soup’ Again, some comment is needed but the correct as those included in the Pilot Paper and all
question in the Pilot Paper is a good example calculation of results is not required in order to past papers written by me.
of this, and students with good exam technique comment properly. Read every issue of student accountant
should benefit from this approach. Note – this may Question 4 involves non-financial and financial magazine. I write articles for this magazine
not always be possible (particularly with the new control. Candidates must understand that a regularly and they are useful preparation for
20-mark questions), and if so, the marking team balance is needed between these two forms of this paper.
will be briefed to give credit for candidates’ own control. Too much emphasis on one or the other Develop business awareness. Many business
calculations and figures. can result in problems. In this case, a seemingly problems – and my questions – can be
reasonable financial result belied much deeper solved using common sense. Actively seek
Pilot Paper problems which, if unchecked, could have brought out experiences involving the assessment of
The Pilot Paper comprises questions from four of financial disaster. performance as these will be invaluable in the
the five syllabus areas. Now, Paper F5 will draw The exams held in December 2007 and June exam room.
on as many syllabus areas as possible. From and December 2008 were in line with my previous
June 2009 onwards, five questions will be set statements and with the Pilot Paper. They are both Geoff Cordwell is examiner for Paper F5