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Goal Congruenct decision

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Goal Congruenct decision

  • This topic has 2 replies, 3 voices, and was last updated 1 year ago by John Moffat.
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  • October 3, 2021 at 4:05 pm #636920
    Imran.Sajjad
    Member
    • Topics: 24
    • Replies: 7
    • ☆

    I have two questions relating to Chapter 17 Divisonal Performance

    (1)
    ROI is defined as Controllable Profit / Controllable Investment expressed as a percentage

    Controllable Profit is by taking the Revenue and less by all controllable costs by the divisional manager

    Controllable Investment is also called Net Assets or Capital Employed which is simply Equity plus Non-current Liability of a company

    (2)
    What is Goal Congruence?

    Is it correct that if the manager’s decision about investing capital into new investment comes out to be profitable then he has made a Goal Congruent decision because the manager’s decision will be profitable for the company as a whole so it is goal congruent decision?

    October 3, 2021 at 4:12 pm #636924
    kaspas
    Member
    • Topics: 0
    • Replies: 1
    • ☆

    What are work references for IAS 19 and IAS 23

    October 3, 2021 at 4:18 pm #636926
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    (1) The controllable profit is as you have defined it. As far as controllable assets are concerned they are the net assets. that are controlled by the manager. Divisions do not have equity.

    (2) Goal congruent means same aim, and the job of the manager is not simply to make a profit but is to make the level of profit that the company as a whole requires. So if the manager is being measured on ROI then their job is to make sure that they invest in assets that will increase the ROI of their division.

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