Advanced Performance Management (APM) is an advanced performance management exam. It looks at different types of performance management systems which can be employed by organisations. By performance management systems, we include techniques such as budgeting, variance analysis, balanced scorecards and other such techniques used by organisations to manage their performance so they can plan and control their activities better. It also covers areas such as remuneration schemes for management and employees, which attempt to motivate them to work towards the objectives of the organisation.
While performance management systems are covered in Performance Management (PM), at APM additional models of performance management are included such as value-based models, and other strategic performance models like the performance pyramid. In addition, candidates must be able to advise on what type of systems are relevant to a particular organisation. Different organisations have different needs, and candidates must be able to understand these, and be aware of the factors that determine what type of management accounting information is needed and subsequently what information systems may be required.
Finally, in APM, there is more detailed discussion of qualitative factors surrounding performance management.
Candidates need to have much more depth of knowledge than at PM. So rather than just knowing the rationale of the Balanced Scorecard and being able to recommend goals and measures under the perspectives; in APM, candidates might be asked to evaluate the use of a balanced scorecard in the context of a specific scenario.
What do I need to know?
Since APM builds on PM and PM builds on Management Accounting (MA), the examining team could assume you know all of the MA and PM topics. In practice, the examining team is unlikely to examine PM topics in a lot of detail unless they are also specifically included within the syllabus for APM too. It is advisable however to have a good knowledge of the PM syllabus before starting to study APM.
PM introduces the ideas of information, systems and technologies which are required by modern organisations, and all of this is relevant for APM. However, APM has a whole section of the syllabus (Section B) which is focused on this area and so should be covered comprehensively in your APM materials.
Activity-based costing, which is in Section A3 of the PM syllabus, feeds into activity-based management in the APM syllabus (Section D). Some activity‑based management questions in APM exams have required candidates to perform calculations using activity‑based costing principles, so it is important to have a good knowledge of this area.
The other specialist cost and management accounting techniques included in the PM syllabus which are also relevant to APM are target costing, lifecycle costing and environmental management accounting. However, as these are specifically included within the APM syllabus, candidates should be able to refresh and increase their knowledge of these from their APM materials.
Budgeting and variance analysis are important areas. In APM, the focus is on whether budgets are a useful tool or not, and which types of budgets are useful in specific situations. It is useful, therefore, to be familiar with the following budgeting sections from PM syllabus:
- D1 – Budgetary systems and types of budgets
- D2 – Quantitative techniques
- D6 – Planning and operating variances
- D7 – Performance analysis
Standard costing and variance analysis (Sections D3-D6) are core management accounting tools, so you do need to be aware of them, and be able to discuss whether they are useful techniques in a specific scenario and whether they provide useful information to management. Candidates may also be required to calculate variances at APM, so it is important to understand how to do these – particularly those variances with strategic implications.
Decision making is an area which sometimes gets examined in APM. Candidates may be asked to evaluate a decision, so some calculation may be required in such questions. It is important, therefore, to be familiar with relevant costing principles, which are in Section C1 of the PM syllabus. An awareness of CVP analysis (Section C2) is also useful, especially the ability to calculate a break-even point, although it is extremely unlikely that you would be required to draw any of the charts in APM. In addition, a practical understanding of cost structures and cost behaviour (fixed and variable) will often be useful in analysing and giving advice in a scenario.
Knowledge of limiting factors (Section C3) is required, not just for decision making, but also because it feeds into transfer pricing. You should know how to solve basic limited factor decisions. It would not be necessary to go into solving linear programming problems for APM.
Pricing (Section C4) is not specifically in the syllabus for APM, but the examining team has indicated that they would expect candidates to be able to calculate a simple cost-plus price. Pricing is also relevant in the context of transfer pricing. An awareness of practical pricing strategies employed by companies would also be useful.
Risk and uncertainly is an important factor in control of an organisation so the PM topics on risk and uncertainty should also be known. Particularly important areas are expected values, maximax, maximin, minimax regret and the use of sensitivity analysis, and these have all been examined in APM. You will not be asked to perform calculations, but you should have an understanding of the decision methods and how they apply to an organisations’ risk appetite.
Performance measurement and control (Sections E1-E4) is introduced at PM and is a core topic at APM. However, many of the relevant learning outcomes from PM are also included within the APM syllabus too, so you should be able to pick up the required knowledge of this area from your APM study material rather than needing to go back and review your PM notes. The performance measurement topics are developed further at APM with the introduction of new techniques such as value-based management, economic value added (EVA™) and the performance pyramid.
Skills required for APM
APM is a Strategic Professional exam, and the examining team expect candidates to demonstrate the skills that they would need when working in a professional environment as an advisor or consultant. This is more than is required at PM.
In PM, you are required to be able to apply given techniques to the shorter scenarios in the exam. For example, a question may ask you to calculate materials mix and yield variances for the last month. You are also required to be able to interpret numbers at PM, for example, using pre-calculated variances to assess the performance of the sales manager.
In APM questions, particularly in Section A, you will need to be able to deal with much longer scenarios. The examiner is seeing if you can apply your knowledge to practical and realistic situations. This tests your ability to deal with a larger amount of information and identify the most important issues.
An APM question may well focus on several different parts of the syllabus, so at this level you can’t just view each topic as being in a separate box, you have to appreciate how they are all linked. This is much more like real life.
The inclusion of 20 professional skills marks into APM reinforces the importance of addressing the technical requirements, ensuring your answers demonstrate appropriate depth of knowledge and are applied to the scenario given. Thorough evaluations and advice on key matters is required, as well justifications supplied for any recommendations or conclusions drawn. Developing this approach as you move from Applied Skills to Strategic Professional is essential.
The APM syllabus builds on the knowledge covered in PM, and there are certain PM topics that you should know well before embarking on APM. Much higher skills are required at APM, and there is much greater application of your knowledge to realistic scenarios. In order to improve your chance of success, it is good to read around the subject, practise past exam questions and develop your professional skills.
Updated by the APM examining team