F5 Performance Management Accounting: Application And Analysis

Business cannot exist without accountancy. Effective performance management accounting, is not at all the domain of the stereotypical bean counter, but allows management to make good decisions and is the lifeblood of all sound business operations.

The ACCA is the top, professional accountancy body, worldwide. Its qualification aims to give the student not only all the essential knowledge that underpins the function of management accountancy but also the skills with which to put this learning into practice. There are fourteen examinations in the qualification, nine “fundamental” papers which are compulsory and five professional papers. As well, the course has a mandatory module on professional ethics. Examinations take place twice, June and December. However, this is not a grey, academic course of learning but a platform from which to make a serious contribution to business and the profession.

Sometime in the 1950s, an educational psychologist highlighted six areas of cognition relating to learning. In ascending order of cognitive difficulty, these were knowledge, comprehension, application, analysis, synthesis and evaluation. The syllabus brings these together in three levels. Level 1 represents knowledge and comprehension. The abilities of application and analysis are represented by Level 2, requiring the student to demonstrate the capacity to make inferences and arrive at conclusions, recognise and interpret subtle data and use analysis to solve problems. The concepts of synthesis and evaluation are captured under Level 3.

This rationale is well illustrated by looking at the F5 paper dealing with performance management accounting. Level 2 capabilities are demanded as this is a “skills” based topic. For example, Part A looks at lifecycle costing. This states that in order to determine whether a profit will be made, total revenues should be set against total costs, whenever these are incurred. The course requirement to understand how to calculate lifecycle unit cost, and analyse and apply the results, gives the practical ability to control rather than just measure, business performance.  

The requirement to be able to apply the learning and skills acquired on the course is strengthened by the three year, practical element of the course, which is compulsory. Students must meet thirteen performance objectives within this timeframe. Performance management provides three objectives based on budgeting. If chosen, students must not only understand methods of quantitative and behavioural budgeting but utilise these to contribute to the planning and production of the budget, its control and monitoring. Of itself, a theoretical understanding will not be sufficient if you want to be a successful ACCA student or professional accountant.