APM*** P5 December 2012 Exam *** Instant Poll and comments***

I think the paper is fair, we should be able to cross the marginal score....50% will do the magic. There is no wrong or right answer, remember. I wish you all the best.

05008967 - I did the same as you - I think this is correct it makes sense. The government are ssetting a level they think is an acceptable return for the company - if they go over they're fined. Therefore no incentive to improve performance/efficincy as this would improve profitability and therefore ROCE.

msamelia - I think I sort of went down that route saying just using financial perf indicators doesn't capture the whole picture so important to widen the range of indicators - didn't actually say BSC, but I think what you've done sounds good

We nid not flex our muscles over d paper.apart frm d time constraint I think the paper is fair.I see it as a test of our reasoning ability in the absence of models we already familiar with.I expect a pass by faith.

Q3 Stillwater Services was based on a really, really old Paper 3.3 Dec 2000 question written by Shane Johnson, so it shows that Alex Watt really loves digging up fossils and adapting it to current times by putting in value-based management using EVA.

Q5 was based on Burns and Scapens work on the changing role of management accountants, which was also pretty surprising given that it is quite a small scope in the syllabus (hence was completely omitted by any tips :p) But this question looks to be the easiest subjective 'shotgun in the blind' type of question and looks much more attemptable than the Q5 in my last previous June 2012 sitting where I couldn't figure out what the requirement is asking for.

I hit the nail on the head when I predicted Argenti's corporate failure model (fortunately, Altman was still put to slumber). Hope the explanation I gave on Argenti's model in the OpenTuition forum helped you forummers in the previous weeks. :)

@ angryhamtaro,

BPP ACCA Exam Surgery actually did make some good predictions and the Quality Management aspect of Q5 was included. But there was an article on the changing role of management accountants in Student Accountant also.

Did anyone utilize Six Sigma principles to answer Q5? I was really shooting in the dark.

@Simmox, thanks for the highlight. Being open minded, it's quite an interesting perspective using Six Sigma on the HS case, as Six Sigma relates to defining a problem and work towards solving and preventing it.

When I read the question requirement asking for measures on 'internal business processes' and 'customers', the Balanced Scorecard model comes to mind, and how each SBU can be responsible for each seperate measure like the customer service department, and quality inspection in the manufacturing side.

In Q1 I made reference to the Building Blocks model as it was a service company and then I started to recommend NFPI-s as well. But not for each the division, but for the Company as a whole. Because I couldn't see what is the difference between the divisions. Besides that one of them had a very long receivables collectibility period. But otherwise... I couldn't draw any conclusions. It was a nightmare.

I recommend building block model in q1 too as the same I was thinking the company is providing service. But run out of time for conclusion... Still managed attempt all four questions although Eva let myself down as I knew what to add but not due to time again!! Should have answered the q4 first but left the last when time is so limited &felt my handwriting was flying in the end!! Hope the marker can understand &have patient with reading my flying handwriting! Overall fair paper but very time pressure! Only a pass mark is all I need.

@wl.obu, they used computers for marking, so there is a magnifying tool that's always available. :D

calc eva

operating profit 68
tax(68*.25) (17)
provision 2
research and dev 12
amortization12/5 (2.4)
non cash exp 7
depriciation 59
economic dep (83)
tax 0.5
NOPAT 46.1



capitl employed: 637
non cash exp 6
provision 2.5
C.E = 645.5

wacc =8.65

EVA 46.1-(8.65*645.5)=(9.7)

calculated wrong roce on the basis of overall operating profit of 68 which breached the limit 8.7% and then commented on this e.g fines would be imposed .........how much marks would be deducted.....
impact of such constraints:unethical practices
reduction in quality
up side is that they will reduce cost using value anlaysis and bpr ....... plz comment on the suitability of the answer angry hamtaro

what measures were to suggest in q1 b

h

@sheharyar123 said:
what measures were to suggest in q1 b

@sheharyar123 said:
what measures were to suggest in q1 b

Hi
in refernce to ROCE i got 8.7% as i added back finance charge.

Is finance charge same as interest?

Question 1 B i suggested measures such as customer service , quality, industry average, competitors information.

i got a positive EVA.

Hi @sheharyar, I must apologize because I didn't look at the question in detail yet. If you have been applying value analysis and business process re-engineering closely to the case, then you should get worthy credit. Your point on unethical implications do hit the nail on its head.

It's quite ironic as when the ROCE measure is used in the context of public-service companies, the ROCE measure must be kept low. When we look at the ROCE components in particular, it's either reducing the mark-up on the water charge, or increase acquisition of assets or subsidiaries through a vertical integration in order to make operations more efficient to reduce the ROCE. (My thought is also to mention the 3E's measurement model to link with improving public service).

Alas, it ties in with part(a) EVA requirement, which states that as you invest in assets to bring the value up of the company, it will improve EVA and impress the shareholders, who can't use ROCE to value the worth of a utility company. The EVA management creates a more holistic and ethical public service value-based management behaviour. You can see ROCE is bringing the current management to the wrong direction, and this is clearly not the shareholders would have wanted!

I can see that this can potentially be a very difficult question if one does not keep abreast with read up on news relating to the regulation of the water utility industry. It's quite interesting that Alex Watt seems to release questions based on a trend of current issues - Ofwat, the water regulator in UK has been hot on the news since 2011. A similar situation exists in my country where the state water company was under immense pressure to reduce price of water despite increasing operational costs, and the inefficiencies of assets employed eventually led to a nearly acute water shortage.

Otherwise it's safe enough to attempt this question beautifully if you understand EVA and the dysfunctional management behavior of using ROCE.

(ps: Alex Watt still loves cracking our soft heads!)

i think the exam was fair, the only problem was time pressure. i really think Alex wanted us to pass this time, so i hope i get that 50%.

@wl.obu,@elliem,@msamelia and others who use NFPM non financial performance measures like those in building block model for Q1,b I used the same recomendation too by saying these should be used in conjuction with other financial measures so that over all company to have very good perfomance encompacing major objectives and stakeholders need.So cheers! we will surely get some marks for that.In General it is very difficult to write without thinking what exactly the requirements are and what the examiner is looking for are usually in between the lines and deep in the widely /large scenario so the very challenging thing remains time pressure ....

I didnt write about NFPI at all :(.. thats worrying me

I didnt write about NFPI at all :(.. thats worrying me

@angryhamtoro but the company has turned into a private ownership why use 3E as its only government regulations involved not thier funding .......its purely a commercial organization now

@angryhamtoro but the company has turned into a private ownership why use 3E as its only government regulations involved not thier funding .......its purely a commercial organization now

could u plz guide us about the Q1b ....i disscussed conrolabillity principle,ROI which includes conrollable profits and investments,and EVA which will make inter divisional comparisons easiers by adjustments and foster long tem behaviour in their management and is more alligned to shareholder wealth maximization.....no non financial disscussed

@sheharyar, I suppose the co is still being monitored under the water regulator, so just saying 3E should be useful, but I won't go further into it anyway. :)

I did really well in the papers. In question no 1 i suggested that In place of Net income we can use Fitzeberg and moon dimensions like innovation, creativity, resource utilization etc to measure the performance as the company was providing services (marketing). Its better then ROCE RI and netincome. I also mentioned other financial measures too. Overall paper was ok except q2 lets hope for the best.

@tabi21, yeah got the feeling P5 passing rate will significantly improve this sitting. :)

Thank you angryhamtaro. Good to know they can use magnify tool. :)

i am worried that the exam time allocation is too small as compared to the requirements especially Q1 and 2. I could not do the whole 20marks and i fear that the horrible performance for the questions will not earn me pass. This is my fourth sitting to this paper i hope the examiner will recognise my effort. Ofcourse i did a lot of writing in section A.

me, too! This is my fourth sitting to this paper- the greatest No. of sitting which i have even sit for 1 ACCA paper, so, do hope that examiners will be generous this time and give us a pass mark.

@fabakary said:
i am worried that the exam time allocation is too small as compared to the requirements especially Q1 and 2. I could not do the whole 20marks and i fear that the horrible performance for the questions will not earn me pass. This is my fourth sitting to this paper i hope the examiner will recognise my effort. Ofcourse i did a lot of writing in section A.

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