Examiner's approach to Paper F5

The aim of Paper F5, Performance Management is to develop knowledge and particularly skills in the application of management accounting techniques to quantitative and qualitative information for planning, decision making, performance evaluation, and control.


Relationship between Paper F2, F5 and P5
The syllabus for Paper F5, Performance Management, builds on the knowledge gained in Paper F2, Management Accounting. It also prepares students for the more specialist capabilities covered in Paper P5, Advanced Performance Management. This mid position is always a challenge for an examiner because such papers must represent a step up from the lower paper but a step down from the more advanced paper. Stepping up from Paper F2, it is important to note that this is not simply a costing paper. Costing is obviously a key part of the syllabus but it sits amongst many other equally important key areas. While the format of the paper from December 2014 is changing, the rationale and relational position of Paper F5 with Papers F2 and P5 remains the same.

Assumed knowledge
Where an area of the Paper F5 syllabus covers a topic already covered in Paper F2 as well, such as performance measurement, for example, there is twice as much reason to assume that candidates will be able to tackle such a question.

Previous articles and presentations at conferences have referred to the metaphorical toolbox that is required for Paper F5. This is the set of management accounting techniques that should have been learnt and practised for the exam. Many of these were first introduced in Paper F2, Management Accounting, so anyone that was exempt from this exam needs to make sure that they do in fact have the assumed knowledge that gained the exemption in the first place.

Everyone must go into the exam with these metaphorical tools in their bags. A builder wouldn’t turn up to a job with only some of the tools he needs. He doesn’t empty out his toolbox after one job on the basis that he doesn’t need those tools anymore. He knows that he could require a particular tool at any time on a job, depending on what he is doing, and he must be fully prepared at all times. Accountancy is no different, particularly management accounting.

As mentioned at the beginning of this article, Paper F2 topics that arise again in Paper F5 may be examined in a more challenging way in Paper F5 in order to reflect the difference between the two papers. Also, by the time a candidate reaches Paper F5, they may sometimes be expected to work out which tool they need to take out of their toolbox in order to answer a question, rather than always being told which technique they will need to use. This is another step towards the skills required for Paper P5 and for the workplace itself, where accountants must act as advisors in many situations. Please remember that Paper F5 is a skills module paper whereas Paper F2 is only a knowledge module paper, although the Paper F5 exam would usually be expected to contain a small proportion of pure knowledge marks too.

Format of the paper
Paper F5 contains two sections: Section A and Section B. 

  • Section A
    Section A is comprised of 20 objective test questions which will require candidates to select the correct answer from a choice of four possible answers. Each question will be worth two marks and questions may be either narrative or calculative in nature. This mix of questions and the nature of objective test questions per se mean that some questions will take longer to answer than others. Given that Section A is worth 40 marks in total, candidates should allocate 72 minutes to it as a whole, rather than trying to allocate time to each individual question, which would be the recommended way to approach Section B.

    Section A will include questions from the whole F5 syllabus. This means that, more than ever, it is important that candidates make sure that they cover the whole syllabus when preparing for the F5 exam. The practice of ‘question spotting’ – ie trying to predict what will come up in the exam – has always been a dangerous one and the inclusion of a this new Section A in the new exam format should put a stop to this for good. This means that candidates who have passed Paper F5 exam should demonstrate the good core knowledge that one would expect from a part-qualified accountant. Also, these core skills will help candidates when they come on to the Professional level papers, where this core knowledge is always assumed and sometimes re-examined.

    As always, it is important that, in Section A, candidates do not spend too much time on any one question that they may be struggling with. It is important to remember that each question is only worth two marks.

  • Section B
    This second section of the exam is comprised of three questions worth 10 marks each and two questions worth 15 marks each. The 10-mark questions can come from any area of the syllabus but the 15-mark questions will come from Sections B, C and D only. 

    Since the 15-mark questions are obviously worth more marks than the 10-mark questions, these will lend themselves to a larger written element that the 10-mark questions. However, this is not to say that the 10-mark questions will always be purely calculative as this is not the case.

The proportion of numbers to words will vary slightly from exam to exam. It is not possible to make it exactly 50:50 in every exam, nor is it deemed necessary to do this. The mix will change slightly depending on the topics being examined, among other things.

A formula sheet is provided with every Paper F5 exam. However, the extent to which you may need to use this will vary from exam to exam depending on what is being examined

The Syllabus and Study Guide for exams from December 2014 onwards
Although the format of the exam is different in December 2014 compared to previous exam sittings, the Syllabus and Study Guide remains largely the same.  Previously, the various areas of the syllabus were split out into five sections labelled A to E, now there are only four. This is simply because Sections C and D on budgeting and standard costing have now been merged into one Section C and renamed ‘budgeting and control.’

The syllabus also includes four minor clarifications of requirements, each of which is mentioned in the relevant syllabus section below. 

Syllabus area A
The syllabus begins by introducing more specialised management accounting topics. There is some knowledge assumed from Paper F2, primarily overhead treatments. The objective here is to ensure students have a broader background in management accounting techniques. Again, the emphasis is on the implications of the calculations, not just the calculations themselves. The theory of constraints is examinable within throughput accounting as now explicitly stated in requirement A4a.

Syllabus area B
The syllabus then considers decision making. Students need to appreciate the problems surrounding scarce resources, pricing, and make-or-buy decisions, and how these problems relate to the assessment of performance. Risk and uncertainty are a factor of real-life decision making; students need to understand risk and must be able to apply some basic methods to help resolve the risks inherent in decision making.

Students should never forget that management accounting provides information partly so that decisions can be made. This area of the syllabus is important and will be a rich source of future questions.

Syllabus area C
Budgeting is an important aspect of many accountants’ lives. The syllabus explores different budgeting techniques and the problems inherent in them. The behavioural aspects of budgeting are important for accountants to understand, and the syllabus includes consideration of the way individuals might react to a budget. Abuse of the budgeting environment is common and damages businesses more than is often realised. Candidates need to appreciate the problems inherent in budgeting and must be able to suggest how these problems can be overcome. Section C3b now excplicitly states that, within the area of quantitative analysis in budgeting, candidates may be required to estimate the learning rate and learning effect.

Standard costing and variances are now also included in Section C. All of the variances previously examined in Paper F2 are assumed knowledge here and, while these basic variances would not be expected to be the basis of a complete question in Section B, their inclusion in either part of a Section B question or as a Section A question would be reasonable.

New Paper F5 topics are mix and yield variances, and planning and operational variances. Again, the link is made to performance management. It is important for accountants to be able to interpret the numbers that they calculate, and to ask what they mean in the context of performance. It will often be the case here that the requirement asks for some kind of interpretation on the numbers that have been calculated in an earlier part of the question. If a new set of data was to be given every time some kind of interpretation was required, questions in this area would be very lengthy, making it impossible to read the whole paper in the allotted reading time.

Candidates should rest assured that full follow-on marks are given for discussion that follows a candidate’s own numbers. If a candidate has been unable to do the calculations, they will still usually find that they can make some valid observations simply from the data given in the question anyway.

The kind of interpretation that may be required has now been explicitly stated in sections C8a and b of the syllabus. It includes both an analysis of past performance and an assessment of how this analysis can help improve future performance.

Syllabus area D
The syllabus concludes with management information systems and performance measurement and control. This is the core of the syllabus. Accountants need to understand how a business should be managed and controlled and how information systems can support this. They should appreciate the importance of both financial and non-financial performance measures in management. Hence, the syllabus now explicitly states in D4c that candidates may be required to ‘analyse past performance and suggest ways for improving financial and non-financial performance’, although this skill was assumed previously in Paper F5 anyway.

The requirements in subsection 5 of Section D reflect that accountants should also appreciate the difficulty of assessing performance in a divisionalised business, and the problems caused by failing to consider external influences on performance. This section therefore leads very directly to Paper P5.

It can be concluded that Section D is potentially the most important section of the Paper F5 syllabus. As the relational diagram illustrates (see the Syllabus on the ACCA website), all other aspects of the syllabus lead to this area. The point is that this is a performance management paper and not a pure management accounting paper. Students must understand this and prepare accordingly.


This is not an exclusive list, but it gives an indication of some of the examining team’s motivations:

  • Organisations seem obsessed with financial performance measures, but the future is determined equally by non-financial performance. Both are important. Candidates should be prepared to answer questions on financial performance measures and non-financial performance measures, in both divisionalised and non-divisionalised business contexts; in both private sector and public sector/not for profit sector contexts; and in both manufacturing and service sector industries.

  • The ability to perform management accounting calculations is important, and being able to determine the implications of those calculations is also essential for an accountant. It is worrying to see  so many candidates sitting the Paper F5 exam while seemingly having forgotten the basic skills that were tested at Paper F2 (or the equivalent paper giving rise to an exemption.) Topics that are in the Paper F5 syllabus as well as the Paper F2 one will continue to be examined, albeit it in a more challenging context.

  • The world around us has changed and is changing. Management accounting is unlike some subjects such as tax and financial reporting, which change from year to year. However, because the world around us is changing, the context of management accounting questions must change too and our knowledge has to adapt accordingly. Techniques such as target costing are used in service industries so you should not be surprised to see them examined in this way. The days of management accounting papers containing questions solely about companies manufacturing widgets are gone. Paper F5 questions will aim to reflect the real world, albeit it in a simpler way than you would expect to see such questions at advanced level papers. Without this, the step up to advanced level exams and the workplace itself is unacceptably great.


You need to prepare thoroughly for this exam, as follows:

  • Read the Syllabus and Study Guide. These give a good indication of the style and content of future exams. Any exam paper is bound by its Study Guide, as it represents what the examiner is allowed to cover.

  • Study thoroughly – this paper is a significant step up from Paper F2. Application and implication will be examined.

  • Practise as many past exam questions as possible.

  • Read all the articles that are relevant to Paper F5 in Student Accountant. They are a very useful study resource. Never think, however, that just because an article has been published in the run-up to the exam, it is indicative of what will be examined in the next paper. It is the ACCA’s policy that this is absolutely not the case. However, bear in mind that when writing a question about a topic covered in a previous article, it is assumed that you have read that article, whether the article is six-months’ old or three-years’ old and whether it has been written by a member of Paper F5 examining team or somebody else. It is only a few hours’ work to go back through all the articles written in the last few years, print them out and read them.

  • Develop business awareness. Many business problems – and Paper F5 questions – can be solved using common sense. Actively seek out experiences involving the assessment of performance as these will be invaluable in the exam room.

Written by a member of the Paper F5 examining team