p3 Conf Pres 2013

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The global body for professional accountants

Examiner

Presentation

- Paper P3

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Structure of presentation

Introduction

Changes to the Syllabus Performance in the last four sittings

Example answers (good and bad) Looking forwards

Questions

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Changes to the syllabusBe aware of addition to section G3. New subsection G3e

Evaluate the role and limitations of cost accounting in strategy developmentand implementation, specifically relating to:[2]

Direct and indirect costs in multi-product contexts

Overhead apportionment in full costing

Activity based costing in planning and control

This is at the intellectual level of Atrill and McLaney Accounting and Finance chapter eight (full costing) and ensures that P3 includes an approach tocosting that considers all costs, not just the variable ones. Again, it is theprinciples and implications that should be understood, not the detailedarithmetic of (for example), recharging overheads.

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Past performance Dec 2011

December 2011

1a: Internal and external strategic position - good 1b: Analysis of proposed strategy - average 1c: CSFs and KPIs - average 2a: Cultural analysis - average

2b; Approach to high level processes - good 3a: Different types of reviews good 3b: Project lesson learnt average 3c: Project benefits average

4a: Determining product price poor 4b: Statistical analysis, least squares regression - poor

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Past performance June 2012

June 2012

1a: Financial analysis of published data - good 1a: Investment appraisal poor lack of recognition 1b: Strategic options poor the issue of frameworks 1c: Mission, values and objectives - average

2a: Disadvantages of software package approach poor read thequestion

2b: A process for software procurement - average 3a: Project management: problems in the definition stage - average

3b: Types of benefits poor the importance of benefitsmanagement 4a: Value chain analysis - good 4b: Improving the supply chain through technology - good

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Past performance Dec 2012

December 2012

1a: portfolio analysis of four firms good 1b: four contextual factors in strategic change poor 1c: Benchmarking poor/average 2a: Strategic position (stakeholders, external environment,

capabilities) poor 2b: Website enhancement good 3a: Franchising average 3b: Strategic alliances poor/average 3c: Internal finance sources poor 4a: Decision tree average 4b: Other factors in software selection poor 4c: Risk (business failure, travel accident) - average

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A project management question

Question 3a: June 2012

Analyse how a formal terms of reference (project initiation document)

would have helped address problems encountered in the project toconstruct the community centre and lead to improved projectmanagement in future projects.

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A typical answerThe project initiation document, also known as the project charter or terms of reference, is a

very important document in a project. It should be produced at the start, or near the start ofthe project. It will be used to communicate to stakeholders the reason why the project hasbeen commissioned, who the project manager is and who will be working on the project.

The project initiation document will also state the budget of the project and the delivery date.

These are very important pieces of information and they must be known for the communitycentre in Tillo. A cost-benefit analysis must also be produced to assess the feasibility of theproject.

The project initiation document will also include the following information

Objectives: as I have said before, all stakeholders need to know why the project is taking place.

How will it contribute to the public of Tillo?Scope: what is being produced, in this case the construction of a new community centre in

Tillo.

Risks: what the risks are in undertaking the Tillo community centre project. Risks may beaccepted, avoided, transferred or, if none of these is feasible, a mitigation action will be

suggested for what to do if the risk occurs. For example; disabled people not being able touse the new centre. R can also stand for resources; who will be project manager andsponsor. The change of sponsor at Tillo cause problems.

The project initiation document must be signed off by all concerned before starting the project.

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How it might be structuredWhat are the problems that can be identified in the scenario?Firstly, the project did not adhere to restrictions concerning the use of sub-contract labour or

timber from sustainable forests. These should have been written into the constraints of theproject . This is a standard part of a project initiation document (PID). Lessons learnt; infuture all constraints of the public/private investment initiative should be explicitly defined in

the PID.Secondly, there was an issue about the quality of the paintwork. The required quality should

have again been defined in the PID, perhaps under the section concerning thedeliverables. What quality finish is expected? Lessons learnt: make sure that the quality ofdeliverables is well defined in the PID.

Thirdly, the local authority staff were not available to discuss disability access. As it happens,no problem emerged, but it could have done and so (lessons learnt) the local authorityshould ensure that appropriate resources should be allocated to a project in the future.

Finally, the new project sponsor was negative and unsupportive. Proper succession planningwas required so that the sponsor knew what her role was and she should have been

familiar with the history of the project. Lessons learnt; people acting as sponsors shouldknow what their role is and should be removed if they do not fill it properly. The sponsorhas to be aware that it is not the responsibility of a project manager to deliver the businessbenefits of the community centre.

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A question on culture

Question 2a: December 2011

Analyse the culture of iCompute, and assess the implications of your

analysis for the companys future performance.

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Structuring the answerAgain, many candidates accurately identified aspects of the cultural web and so gained

some credit. However, many answers failed to refer to the context of iCompute or toassess the implications for the companys future performance. What will be the effecton the company if the culture remains unchanged?

Highlighting issues in the case study environment would have been an effective

approach. For example; the scenario is rich in stories and the language of the storiesis illuminating.

Managers describe the end users of customers as incompetent and too lazy to read user

guides. Is it acceptable to describe your customers in this way? What are the likelylong-term effects of a culture where managers have this perception of customers?

One of the managers states that he is still one of the boys, a developer praises thegood social scene, working long hours we socialise together, often playing computergames well into the early hours of the morning. Could this be a reason why one third

of the staff leave within twelve months, and 50% of female staff leave within thatperiod? What are the implications the wasted cost of recruitment and training, thehealth and productivity of developers. The acceptability of a culture which is now outof step with the needs of the company and, perhaps, society as a whole.

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A question with numbers

Question 1a: June 2012

Analyse the financial position of Hammond Shoes and evaluate the

proposed investment of $37.5 million in upgrading its productionfacilities.

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Some elements of an answer2011 2009 2007

ROCE 3.5% 12.5% 28.2%

The Return on Capital Employed (ROCE) has worsened form 28.2% to 3.5% over the four year period provided in thescenario. This is a huge decline and must be concern to the company and particularly to shareholders.

2011 2009 2007

Revenue 700 750 850Cost of Sales575 600 650

During the period under consideration revenue has declined by 18%, but cost of sales has only declined by 12%. Thisprobably reflects the ethics of a company with a moral commitment to retaining its work force, based in a countrywith extensive employment legislation and generous redundancy rights which suggests that it is difficult and costly

to shed staff.

2011 2009 2007

Trade receivables 63 days 43 days 28 days

Trade payables 37 days 39 days 39 days

The company fails to pay its creditors within 30 days (a company aim) and payment is getting slower. However, incontrast, trade payables have been kept under control, showing good credit control within the company. It seemslikely that the company has a worsening cash flow problem and the discrepancy between payables andreceivables seems to suggest that suppliers are increasingly being used as a free source of credit.

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Looking forwards

Strategic management (position choices action). Continuing inmuch the same vein. Questions need to be carefully read.Sometimes it might be to develop a SWOT, other times to developoptions based on the SWOT. Not necessarily found in section A of

the examination. More quantitative questions from this part of thesyllabus reflecting insertion of (for example) objective A2e.

Business process change. This area of the syllabus has notchanged since its inception; so questions will be similar in content

and format.

Information technology. Again continuing in much the same veinwith potential questions on value chain, CRM, upstream and

downstream supply chain, e-marketing. Again the relatively recentinsertion of an objective specifically in pricing provides anopportunity for a more quantitative assessment.

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Looking forwards

Project management This area was significantly extended in the lastmajor revision and this will be reflected in the future. The business caseis likely to appear more often, particularly as it gives the opportunity totest investment appraisal. Benefits management is an importantcontemporary trend and elements of risk management can be

expected. Project management may be the basis of a section Ascenario.

Financial analysisAgain, candidates might expect to meet more

quantitative data that can be used to support a strategic analysis ordevelop or critique proposed strategic options. Specific questions maybe asked about such areas as decision trees and budgeting.

People Questions will remain in the same vein. It is this area where

brought forward knowledge from F1.

Overall, questions will not shift significantly. However, there is a gradualevolution towards examinations where appropriately handling quantitativedata will be assessed and rewarded.

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Questions?

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Thank You

Documents

p3 Conf Pres 2013