Summary ACCA Performance Management, ISBN: 9781509716579 ACCA

PM - Performance Measurement &
Control
Contents
External Considerations and Behavioural Aspects................................................................. 3
EXTERNAL CONSIDERATIONS: ............................................................................................ 3
BEHAVIOURAL ASPECTS:..................................................................................................... 4
Building Block Model .............................................................................................................. 5
Divisional Performance Measures ......................................................................................... 7
KEY MEASURES AND CHARACTERISTICS: ............................................................................ 7
RETURN ON INVESTMENT (ROI): ........................................................................................ 7
RESIDUAL INCOME (RI): ...................................................................................................... 8
DIFFERENCES BETWEEN ROI AND RI: ................................................................................. 8
Transfer pricing ...................................................................................................................... 9
DEFINITION: ........................................................................................................................ 9
OBJECTIVES OF TRANSFER PRICING: .................................................................................. 9
VARIABLE COST OR FULL COST? ....................................................................................... 11
STANDARD OR ACTUAL COST? ......................................................................................... 12
NON-FINANCIAL CONSIDERATIONS:................................................................................. 12
Divisional Performance Measures ....................................................................................... 13
KEY MEASURES AND CHARACTERISTICS: .......................................................................... 13
RETURN ON INVESTMENT (ROI): ...................................................................................... 13
RESIDUAL INCOME (RI): .................................................................................................... 14
DIFFERENCES BETWEEN ROI AND RI: ............................................................................... 14
Transfer pricing .................................................................................................................... 15
DEFINITION: ...................................................................................................................... 15
OBJECTIVES OF TRANSFER PRICING: ................................................................................ 15
VARIABLE COST OR FULL COST? ....................................................................................... 17
STANDARD OR ACTUAL COST? ......................................................................................... 18



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, NON-FINANCIAL CONSIDERATIONS:................................................................................. 18
PM – Revision ....................................................................................................................... 19
MCQ trial - Divisional Performance Assessment .............................................................. 19




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, External Considerations and Behavioural Aspects
EXTERNAL CONSIDERATIONS:

Performance management needs to allow for external considerations. This will include:

1) Stakeholders. A stakeholder is any individual, group of individuals, or a business,
that has a legitimate interest in the activities of an organisation. Typically this will
include:

 Customers and suppliers;

 Employees;

 Shareholders;

 Banks;

 The general community.

Stakeholders can be further categorised into:

a) Internal. This category will include anybody internal to the business (e.g., employees
and management). They will be interested in the organisation’s continued growth
and profitability. In addition, they will have personal interests such as salary,
bonuses, or promotion aspects;

b) Connected. This category will include any individual or organisation that is
connected in some way to the organisation (e.g., customers and suppliers,
shareholders, and lenders). They will be interested in the following:

Shareholders Lenders Customers and suppliers

Reward in terms of dividend Adherence to agreements, Timely delivery of goods
payments and long-term ability to meet interest and prompt payment.
share value growth. payments on time.

c) External. They are not directly connected to the business in any way but do have a
legitimate interest (e.g., government, local authorities, professional bodies, pressure
groups). External stakeholders, in particular, induce both social and ethical
obligations.




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