ACCA P5 Interim Assessment

Topics: Costs, Variable cost, Public sector Pages: 20 (5862 words) Published: October 9, 2014
Paper P5
Advanced Performance Management
December 2011

Interim Assessment – Answers
To gain maximum benefit, do not refer to these
answers until you have completed the revision
mock questions and submitted them for marking.


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Setting corporate objectives can help a company in various ways. •

Corporate objectives provide a framework within which plans can be made and decisions can be taken. Managers can formulate plans and make decisions on the basis of whether they will contribute towards the achievement of those objectives.

In a larger organisation, formally announced objectives provide a method of communicating the intentions of senior management to others in the organisation, so that everyone knows what the organisation is trying to achieve.

Honestly stated objectives can also act as an incentive to staff. Employees often like to have the reassurance that the organisation they work for has worthwhile objective and that they can help to contribute towards achieving them.

In a large organisation, formally announced objectives provide a basis on which different departments and groups can co-ordinate their activities. It is more likely that different parts of the organisation will all 'pull in the same direction'.

Corporate objectives, formally announced, provide a benchmark by which management can monitor and assess actual performance and shareholders can assess the performance of management. Rewards for top executives often include a bonus for achieving results in line with or in excess of company targets.

Setting corporate objectives can, however, be obstructive and prevent the satisfaction of shareholder demands. It is assumed that shareholders seek to maximise their wealth, or to maximise returns on their investment consistent with the risks undertaken by the company. In the IT industry, the market is changing continuously and the industry is dynamic. Already in the case of ICS, its initial business of providing computer software to local firms has grown rapidly, but the rate of growth has now declined. Similarly, the diversification into emergency computer data retrieval services has provided some growth, which is now declining. For the company to continue to grow, or possibly even to survive, it will possibly have to continue diversifying. Its decisions about what to do, as in the case of the contract under review, might have to be opportunistic. In other words, the company might need to take opportunities as they arise, without regard to formally established objectives. If the company's objectives are too restrictive, the company might forgo opportunities to develop because they are inconsistent with objectives that might no longer be appropriate for the company.

The company should therefore be advised that corporate objectives can be beneficial, but should not be allowed to become restrictive...
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