CIMA Chartered Management Accounting Qualification 2010 Student Support Guide Paper P3 Performance Strategy

Introduction This guide outlines matters to be considered by those wishing to sit the examination for Paper P3 Performance of the CIMA 2010 qualification. The first part compares the syllabus of Paper P3 to that of the equivalent Paper P3 in the 2005 qualification and looks at issues relating to transition from the 2005 to the 2010 qualification. It should be noted that in the new 2010 syllabus learning outcomes are shown as overarching lead outcomes, with several component outcomes resulting from that lead. The syllabus comparison displays the learning outcomes from the previous syllabus with the component learning outcomes from the new syllabus. The remainder of the guide looks at issues that are likely to be relevant to all students planning to sit this examination and ends with a series of frequently asked questions.

Syllabus changes overview Paper P3 has undergone relatively few changes in terms of syllabus material content. However, study weightings have changed, particularly in section D from 25% to 35%. This reflects a higher skills requirement in that section. There have been other changes of weighting in sections A, B and E, which clearly alter the balance of this paper. The strengthening of the management of financial risk reflects current financial conditions and the need for students to have a full understanding of this area. It is vital that finance professionals acquire a greater appreciation of the financial products, markets and operations to ensure business viability.

Syllabus comparison Old syllabus Paper P3 P3 A - Management Control Systems - 15% New syllabus Paper P3 P3 A. Management Control Systems - 10% Comments The study weighting has been reduced by 5% There are no significant changes in learning outcomes and skill levels remain the same.

(i) evaluate and recommend appropriate control systems for the management of organisations; (ii) evaluate the control of activities and resources within the organisation; (iii) recommend ways in which the problems associated with control systems can be avoided or solved; (iv) evaluate the appropriateness of an organisations management accounting control systems and make recommendations for improvements. P3 B - Risk and Internal Control - 20%

1 (a) evaluate appropriate control systems for the management of an organisation; 1 (b) evaluate the appropriateness of an organisations management accounting control systems; 1 (c) evaluate the control of activities and resources within an organisation; 1 (d) recommend ways in which identified weaknesses or problems associated with control systems can be avoided or solved.

P3 B. Risk and Internal Control - 25%

The study weighting has been increased by 5% There is a new learning outcome 3(b) relating to ethical issues as a source of risk. Changes in skill levels include: 1 (a) requires a discussion of ways of identifying, measuring and assessing types of risk, whereas (i) and (ii) asked for the ability to define, identify and explain these types of risk. 1 (b) asks for an evaluation of risks facing an organisation.

(i) define and identify risks facing an organisation; (ii) explain ways of measuring and assessing risks facing an organisation, including the organisations ability to bear such risks; (iii) discuss the purposes and importance of internal control and risk management for an organisation; (iv) evaluate risk

1 (a) discuss ways of identifying, measuring and assessing the types of risk facing an organisation, including the organisations ability to bear such risks; 1 (b) evaluate risks facing an organisation. 2 (a) discuss the purposes and importance of internal control and risk management for an organisation; 2 (b) evaluate risk management strategies;
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Old syllabus Paper P3 management strategies; (v) evaluate the essential features of internal control systems for identifying, assessing and managing risks; (vi) evaluate the costs and benefits of a particular internal control system; (vii) discuss the principles of good corporate governance for listed companies, particularly as regards the need for internal controls.

New syllabus Paper P3

Comments

2 (c) evaluate the essential features of internal control systems for identifying, assessing and managing risks; 2 (d) evaluate the costs and benefits of a particular internal control system. 3 (a) discuss the principles of good corporate governance, particularly as regards the need for internal controls; 3 (b) evaluate ethical issues as a source of risk to the organisation and control mechanisms for their detection and resolution. C - Review and Audit of Control Systems - 15% 1 (a) discuss the importance of management review of controls. 2 (a) evaluate the process of internal audit and its relationship to other forms of audit; 2 (b) produce a plan for the audit of various organisational activities including management, accounting and information systems; 2 (c) recommend action to avoid or solve problems associated with the audit of activities and systems; 2 (d) recommend action to improve the efficiency, effectiveness and control of activities;
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C - Review and Audit of Control Systems - 15%

The study weighting remains the same at 15%. The learning outcomes generally remain the same except for 2 (e) which refers to the relationship between internal and external audit work. Changes in skill levels include: 1 (a) asks for a discussion on the importance of management review of controls, but (i) required an explanation.

(i) explain the importance of management review of controls; (ii) evaluate the process of internal audit; (iii) produce a plan for the audit of various organisational activities including management, accounting and information systems; (iv) analyse problems associated with the audit of activities and systems, and recommend action to avoid or solve those problems; (v) recommend action to improve the efficiency, effectiveness and control of activities;

Old syllabus Paper P3

New syllabus Paper P3 2 (e) discuss the relationship between internal and external audit work. 3 (a) discuss the principles of good corporate governance for listed companies, for conducting reviews of internal controls and reporting on compliance; 3 (b) discuss the importance of exercising ethical principles in conducting and reporting on internal reviews. P3 D. Management of Financial Risk - 35%

Comments

(vi) discuss the principles of good corporate governance for listed companies, for conducting reviews of internal controls and reporting on compliance; (vii) discuss the importance of exercising ethical principles in conducting and reporting on internal reviews.

P3 D - Management of Financial Risk - 30%

The study weighting has been increased by 5%. Learning outcomes generally remain the same. Changes in skill levels include: 2 (c) asks for a discussion of exchange rate theory and the impact of differential inflation rates, while (iv) and (v) require a calculation of differential rates and an explanation of theory.

(i) identify and evaluate financial risks facing an organisation; (ii) identify and evaluate appropriate methods for managing financial risks; (iii) evaluate the effects of alternative methods of risk management and make recommendations accordingly; (iv) calculate the impact of differential inflation rates on forecast exchange rates; (v) explain exchange rate theory; (vi) recommend currency risk management strategies. P3 E - Risk and Control in Information Systems - 20%

1 (a) evaluate financial risks facing an organisation. 2 (a) evaluate appropriate methods for managing financial risks; 2 (b) evaluate the effects of alternative methods of risk management; 2 (c) discuss exchange rate theory and the impact of differential inflation rates on forecast exchange rates; 2 (d) recommend risk management strategies and discuss their accounting implications.

P3 E. Risk and Control in Information Systems - 15%

The study weighting has been reduced by 5%.

(i) evaluate and advise

1 (a) advise managers on the There are no changes in

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Old syllabus Paper P3 managers on the development of IM, IS and IT strategies that support management and internal control requirements; (ii) identify and evaluate IS/IT systems appropriate to an organisations needs for operational and control information; (iii) evaluate benefits and risks in the structuring and organisation of the IS/IT function and its integration with the rest of the business; (iv) evaluate and recommend improvements to the control of information systems; (v) evaluate specific problems and opportunities associated with the audit and control of systems which use information technology.

New syllabus Paper P3 development of information management (IM), information systems (IS) and information technology (IT) strategies that support management and internal control requirements; 1 (b) evaluate IS/IT systems appropriate to an organisations needs for operational and control information; 1 (c) evaluate benefits and risks in the structuring and organisation of the IS/IT function and its integration with the rest of the business; 1 (d) recommend improvements to the control of IS; 1 (e) evaluate specific problems and opportunities associated with the audit and control of systems which use IT.

Comments learning outcomes or in skill levels.

Knowledge gaps If you have successfully completed Paper P2 on the 2005 syllabus and now have to sit Strategic level Paper P3 on the 2010 syllabus, there is no significant knowledge gap that you need to fill from the previous management accounting pillar papers. Assessment methodology There will be a written examination paper of three hours, plus 20 minutes of pre-examination question paper reading time. The examination paper will have the following sections: Section A 50 marks A maximum of four compulsory questions, totalling fifty marks, all relating to a preseen case study and further new un-seen case material provided within the examination. (Note: The pre-seen case study is common to all three of the strategic level papers at each examination sitting i.e. Paper E3, P3 and F3).
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Section B 50 marks Two questions, from a choice of three, each worth twenty five marks. Short scenarios will be given, to which some or all questions relate. The Performance Strategy examination will primarily test the higher skills of application, analysis and evaluation, using verbs from levels 3 - 5 of the CIMA verb hierarchy. You will be expected to use all of your knowledge and skills, gained from your study of the Performance Strategy syllabus and earlier parts of the CIMA Professional qualification, to analyse complex situations and provide insight and advice. The scenarios used in this examination are based on real life, and also prepare you for the T4 Part B (Test of Professional Competence in Management Accounting) examination. Preparing for the exam At the Strategic Level, textbook learning is not sufficient. In order to develop the required skills of application, analysis and evaluation you need to use your knowledge to solve unstructured problems. This can best be done by means of simulations and case studies, and by practising examination-standard questions. You should also read articles in the business press, to become familiar with how the models and theories studied at the Strategic level can (or cannot) be applied in the real world. FAQs Question I have passed the old Managerial level of the 2005 CIMA syllabus, and this is my first attempt at Paper P3. Have I missed anything that I need to catch up on? I have failed old Paper P3. Where should I concentrate my efforts before doing my resit? Answer No

In three areas: 1. You need to concentrate on the new learning outcomes relating to the evaluation of risks, ethical risks, and the relationship between internal and external audit 2. You need to look through the detail of the syllabus content, concentrating on those topics which are new (such as ethical risks) 3. The assessment methodology for the Strategic level has changed. There is now an extended case study, with pre-seen and unseen material. The pre-seen element of this case is common to the three Strategic level examinations. You should look at (and attempt) the specimen paper for this examination (see below).

Where can I find the detailed syllabus

On the CIMA website under the 2010 syllabus.

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Question for this paper? Will there be a specimen examination paper? What knowledge is assumed prior to studying this syllabus?

Answer

Yes it will be available on the CIMA website at the end of October. It is assumed that you have passed (or been exempted from) all of the Operational and Management level papers. You should read the support guides for those subjects. You should look at the specimen examination paper for guidance (see above).

What will be the balance between calculations and discussions on this exam?

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Ver1 Aug09