The article considers how to carefully understand the question requirement with use of selected examples from the past Advanced Performance Management exams
The aim of this article is to try to provide an insight into some common problems and misconceptions surrounding the Advanced Performance Management (APM) exam to improve your chances of success. These comments are probably going to be most relevant when you are attempting past exam questions during revision.
The main activity that this article will consider is how to read the question requirement. The points made here will be illustrated with examples from previous APM exam sessions. In order to keep the article to a sensible length, only the actual requirements will be reproduced here; it will be useful to read this article in conjunction with the past exams that are referred to and which are available on the ACCA website (see ‘Related links’).
The question requirement usually gets a great deal of attention from the examiner who first writes it and the team of reviewers who perform more than five layers of review before the exam is finalised. It is written carefully and should also be read carefully. So my first recommendation is take time to read the requirement because every word and phrase will have significance.
Key aspects of requirements to note
The verb used: APM mainly focuses on the higher level verbs in Bloom’s taxonomy – eg evaluate, assess, advise…
To illustrate the importance of the verb let us look at evaluate. To ‘evaluate’ means to judge or determine the value, worth or quality of an object. If that object is the performance of a company, then the answer can be expected to be descriptive but based on numerical measures (such as profit, present value or EVA). But if that object is a performance system, or a costing method, or a remuneration package, or a performance management model, then a candidate is expected to weigh up the advantages and disadvantages of that method – possibly in comparison to other appropriate ways of doing things. It should also be noted that weighing up the advantages and disadvantages means more than simply listing them – it requires a final application of judgment as to what is appropriate in the given scenario. NOTE: (When the verb ‘assess’ is used, it is a very similar exercise in most circumstances).
Application to the scenario:
Another point about APM is that management accounting is always context based. Therefore if a requirement is asking for application to the company named in the scenario or asking for illustrative examples from the scenario, then you should be aware that referring the scenario and providing relevant examples will hold the bulk of the marks in the question. Answers that focus mainly on describing theory and technical terms will not score highly.
If an opinion/recommendation is sought:
Any offer of opinion or recommendation should be justified in the context of the scenario. Support your recommendation/advice with key information and try not to sit of the fence.
Use of model, method, system, data:
If a requirement asks you to use a certain model, method, system or source of data then your answer should reflect that. Following the instruction will give you the approach you should take to your answer. Marks are available for appropriate use of the model, method etc.
Example:(1) March/June 2018 Sample Questions, Question 4
(a) Using Argenti’s A Score model, evaluate whether LP is at risk of corporate failure.
(b) Advise LP what performance management systems are needed in order to improve performance in respect of each of the mistakes and symptoms you have identified in part (a).
(c) Evaluate the usefulness of using qualitative models such as the Argenti A Score in predicting corporate failure.
Part (a) asks for an evaluation of whether LP is at risk of corporate failure using a specific model; the Argenti A Score. Note the requirement did not ask for a list of problems which the company was experiencing; the requirement expected the issues to be structured within the context of the model. The A Score model was even provided in the question to indicate to candidates that this should be the approach to use to structure answers. Check that you can see how the requirement was guiding you to approach your answer. The nature of the requirement would also expect an overall conclusion to be drawn based on your use of the model.
Part (b) asks what performance management systems are needed to improve performance in respect of the mistakes and symptoms identified in part (a). This also indicates the importance of using the model in part (a) as mistakes and symptoms are two of the headings in the Argenti A Score model. Note the requirement does not ask about performance management systems to deal with defects and this was an important distinction. Discussing methods to deal with defects was not answering the requirement and wasted valuable exam time. The requirement also wanted a clear relationship to be drawn between the performance management system and the mistake or symptom it was trying to address. A list of general performance management systems with no relation made to the issues at hand in the scenario would score very little.
Part (c) asks you evaluate the usefulness of using qualitative models such as the Argenti A Score in predicting corporate failure. Evaluating a model means considering their advantages and disadvantages in particular. It is also an opportunity to further illustrate your points by using other models to support them i.e. the use of quantitative models versus qualitative models. The requirement is not asking for a description of the model.
(2) September/December 2016 Sample Questions Q1(i) Assess the problems of using a balanced scorecard at Monza.
This requirement is not asking for a description of the balanced scorecard or its benefits. It is very specifically asking for the problems of using this method at the company in the scenario. This means that any discussion of the limitations of the balanced scorecard model should be made in the context of the company. Generic comments about problems of this model would not score highly; the examining team want you to explain why these problems are relevant in this scenario.
(3) September/December 2017 Sample Questions Q3(b) Justify one performance measure for each of the components of the value for money framework used at TRH and, using that measure evaluate whether TRH is delivering value for money.
Here candidates were expected to use the 3E’s framework to structure their answer (the framework was given in the scenario). Under each heading in the framework the examining team expected to see a justification for the performance measure chosen for the ‘E’, then a calculation of the said measure (there was limited numerical information available in an appendix in the question) and then an assessment of the result of that measure as to whether it indicated whether TRH was delivering value for money. A discussion of value for money and how it is measured generally would not have scored highly here. In addition, not using the framework would have limited the marks available as the requirement clearly asked for it.
(4) March/June 2017 Sample Questions Q4(b) Recommend, using appropriate calculations, whether the manager of Export division should receive her bonus for the year.
This is a good example of requirement which asked candidates to make a recommendation and as you can see asked for supporting facts through the use of appropriate calculations.
Finally, I want to mention two other small points:
While I would encourage you to demonstrate a professional approach to presentation, you only need to do report headings where there are professional marks and a report has been specifically requested. The exam is time-limited, as are the professional marks, and you cannot be awarded professional marks that are not noted in the original question requirement. Please note however, this does not mean that a logical, structured answer is not required.
There is a common misconception – evident from thousands of candidate answers – that financial performance indicators are always being manipulated and non-financial performance indicators are less open to manipulation. Stop and think about what this implies: (a) that the people that prepare financial reports are generally unethical; and (b) that the controls over financial information systems are less severe than non-financial information systems. Your studies so far of professional ethics and the controls surrounding financial reporting systems should immediately indicate that these implications are false. However, you would be correct to state that there is a danger of manipulation and that this is exacerbated by inappropriate reward systems (a ‘bonus culture’).
I hope that these comments will be helpful to you in your preparation for the APM exam.