Note: From September 2022, all requirements in the APM exam will be embedded requirements. Refer to the article 'Changes to APM question requirements' for more information on this. However, the advice on how to respond to question requirements in this article applies, whether a requirement is embedded or not.
The aim of this article is to provide an insight into some of the common problems and misconceptions surrounding the APM exam in order to improve your chances of success. These comments are going to be most relevant when you are attempting past exam questions during your revision.
The main activity that this article will consider is how to read the question requirement. The points made here will be illustrated with examples from previous APM exam sessions. In order to keep the article to a sensible length, only the actual requirements will be reproduced here; it will therefore be useful to read this article in conjunction with the past exams that are referred to in it; which are available on the ACCA website and Practice Platform.
The question requirement gets a great deal of attention from the examining team who perform more than five layers of review before the exam is finalised. It is written carefully and should also be read carefully. So, the first recommendation is for you to take time to read the requirement because every word and phrase will have significance.
Key aspects of requirements to note
- The verb used: APM mainly focuses on the higher-level verbs in Bloom’s taxonomy –eg evaluate, assess, advise…
To illustrate the importance of the verb let us look at evaluate. To ‘evaluate’ means to judge or determine the value, worth or quality of an object. If that object is a performance system or report, or a costing method, or a remuneration package, or a performance management model, then you are expected to weigh up the advantages and disadvantages of that object – possibly in comparison to other appropriate ways of doing things. It should also be noted that weighing up the advantages and disadvantages means more than simply listing them – it requires a final application of judgement as to what is appropriate in the given scenario.
Note: (When the verb ‘assess’ is used, it is a very similar exercise in most circumstances).
- Application to the scenario:
Management accounting is always context based. Therefore if a requirement is asking for application to the company named in the scenario or asking for illustrative examples from the scenario, then you should be aware that referring the scenario and providing relevant examples will hold the bulk of the marks in the question. Answers that focus mainly on describing theory and technical terms will not score highly. Even where requirements do not overtly state that application has to be to the scenario you should be aware that this is usually what is required.
- If an opinion/recommendation is sought:
Any offer of an opinion or recommendation should be justified, again, in the context of the scenario. Support your recommendation/advice with key information and try not to sit of the fence. An example of this would be if you were asked to recommend whether a new reward scheme should be introduced. You would need to look at the pros and cons and come to an overall conclusion. Where the requirement includes the need for a recommendation you must provide it. Answers that fail to provide a clear recommendation or simply state that more information is needed, will not score well.
It should also be noted that when performing calculations, for example, economic value added (EVATM), the relevance of the final figure should be explained.
- Use of model, method, system, data:
If a requirement asks you to use a specific model, framework, method, system or source of data then your answer should reflect that. Following the instruction will give you not only the approach you should take to your answer and the focus to use but will provide you with the structure that your answer could take. You should not spend much time, if any, describing any model/framework in general or theoretical terms. Marks are available for appropriate use of the model, framework method etc, with application to the specific scenario.
(1). March 2020, sample questions Q1
(i) Current performance reporting. (An evaluation of the performance reporting was asked for along with some more general ideas about best practice in reporting).
(ii) Other proposed performance indicators. (Candidates were asked to assess some new indicators that were provided and to calculate them).
Part (i) asks for an evaluation of performance reporting, note that it is not asking for an evaluation of the performance of the company. The mission is provided, as well as the objectives in this scenario, and the expectation here is that your answer will begin by using the mission and objectives as the answer structure. The best approach is to split out the mission and objectives and use this as the priority order in which to write the first part of the answer. This requirement also states that no new measures need to be suggested, so there will be no marks for this, so don’t suggest any. The ‘best practice’ element, although more general, should still show an awareness of the scenario and not suggest any ideas that would not help the company despite being common practice.
Part (ii) an assessment of the proposed new indicators and their calculation, where possible, is now required. The indicators are given and so is the data needed to calculate some of them. You must be able to calculate the most common measures used for performance and perform simple ratio analysis to answer this. The scenario even helps further by adding that the links to mission and objectives are also required as part of this assessment, but this is an ‘also’ so clearly here the measures need to be assessed for their general suitability for the company first.
(2). September/December 2019, sample questions Q2
(b) Advise the board as requested of the problems of implementing and using the balanced scorecard approach at Veyatie.
This requirement is not asking for a description of the balanced scorecard or its benefits. It is very specifically asking for the problems of using this method at the company in the scenario. This means that any discussion of the limitations of the balanced scorecard model should be made in the context of the company. Generic comments about problems of this model would not score highly; the examining team want you to explain why these problems are relevant in this scenario.
(3). March/June 2021, sample questions Q3
(b) Complete the analysis and evaluate the operational performance indicators at Harray, using the headings and data in Appendix 1.
Here you were expected to use the performance pyramid to structure the answer (this was given in the scenario); however, your answer needs to cover the operational level ONLY, not the whole model. Under each of the four required headings at the operational level the examining team expected to see a calculation of a performance indicator and a commentary about what that indicator shows about the performance of Harray.
The answers should not simply stop here either, as the requirement also asks you to evaluate the indicators, and this means what are the pros and cons of these indicators in relation to them being useful for monitoring Harray’s performance. Given that there is a limited amount of data available it may be that indicators that can be calculated are not the best or are the only ones to use here, so you would need to consider other measures. A simple discussion of the model or comments on the tactical and strategic elements would not have scored highly here.
(4). September/December 2020, sample questions Q3
(b) For each of the three stakeholder groups, recommend and justify an appropriate performance measure which could be used by Roan.
This is a good example of requirement which asks you to make a recommendation and as you can see, asked for justifications, so this would need to be in the context of the organisation in the scenario and related to the stakeholders given. General performance measures or just a list of measures even if it does relate to the stakeholders will not score well if with no justification is given.
There is a common misconception – evident from thousands of candidate answers – that financial performance indicators are always being manipulated and non-financial performance indicators are less open to manipulation. Stop and think about what this implies:
(a) that the people that prepare financial reports are generally unethical, and
(b) that the controls over financial information systems are less severe than non-financial information systems.
Your studies so far of professional ethics and the controls surrounding financial reporting systems should immediately indicate that these implications are false. However, you would be correct to state that there is a danger of manipulation and that this is exacerbated by inappropriate reward systems (a ‘bonus culture’).
Written by members of the APM examining team