2019 CIMA Professional Qualification Syllabus CIMA... · 3 2 Foreword 3 Contents 4 The CIMA...

Reinventing finance in a digital world

2019 CIMA Professional Qualification Syllabus

3

2 Foreword

3 Contents

4 TheCIMAProfessionalQualification

5 TheCIMAQualificationFramework

6 TheCGMACompetencyFramework

8 StructureoftheCIMASyllabus

10 LearningoutcomesandExamblueprints

12 CIMAassessmentstrategy

12 Suggestedorderofexams

14 Thesyllabusinthecontextofthefinancefunction

15 Summaryofthe2019Syllabus

16 TheOperationalLevel

20 E1:ManagingFinanceinaDigitalWorld

32 P1:ManagementAccounting

42 F1:FinancialReporting

52 TheManagementLevel

56 E2:ManagingPerformance

64 P2:AdvancedManagementAccounting

74 F2:AdvancedFinancialReporting

86 TheStrategicLevel

90 E3:StrategicManagement

104 P3:RiskManagement

114 F3:FinancialStrategy

124 Examinformationandtimetable

Contents

Challenges Performance Mindset and competencies

Learning systems

Realisethechallengesorganisationsfacewhichthreatentheir success

Comprehendtheperformanceneededfromthefinance teamtoaddressthosechallenges

Understand the competenciesandmindsetneededtoperformattherequiredlevel

Use learning to continuallyupdatetheircompetenciesandmaintainaflexiblemindsetfornewchallenges

Increasingly,therequiredskillsoffinanceprofessionalsaremovingintothe expert,

problem-solving arenaandtheymustadoptcompetenciesinvolvedininfluencingand

changemanagement. Thefinanceprofessionalneedsa mindset thatenablesthemtoadapt

through continuous learning.

They must …

Iampleasedtointroducethe2019CIMAProfessionalQualificationSyllabus,whichfurtherstrengthensourcommitmenttotheemployabilityneedsofbothbusinessandpeople,andunderpinstheCGMAdesignation.

Inanincreasinglydigitalworld,rapidchangesintechnologyarecreatingchallengesforthebusinessmodelsoforganisations.Itisalsomakingitdifficultforbusinessleadersandemployeestocreateandpreservesustainablevalue.Againstthisdigitalbackdrop,itisimperativethatfinanceprofessionalspossessrelevanttechnicalskills,asoundunderstandingoftheirorganisation,aswellastheabilitytoinfluenceandleadpeople.Thiswillmakethemcapableofprovidingtheinsighttheirorganisationsneedtocraftandsuccessfullyexecutetheirstrategies.

The2019syllabuscontinuestobridgetheskillsgapofnewlyqualifiedfinanceprofessionalsworldwide,meetingtheemployabilityneedsofbothbusinessandpeople.Indesigningthesyllabus,wesetouttoenhancetherelevanceofthesyllabustoemployers;ensuretherigouroftherelatedexaminationsandalignthelearningexperienceofcandidatestotherealworld.

Thechangesinthesyllabusarebasedonourthree-stageresearchapproachofemployerinterviews,roundtablesandaglobalsurveytoarangeofstakeholders.Wecontactedover6,500financeprofessionals,fromover2,000organisations,inover150countries.Wehaveusedthesameresearchmethodologyastheprevioussyllabus updatebutonalargerscaleandwithwiderparticipation.Thisresearchhasallowedustocapturethelatestviews offinanceprofessionalssothatwecanincorporatetheseintothesyllabus.

Importantly,theupdatedsyllabusincludeshowthedigitalworldaffectsfinance;thiscanbeseenthroughtheintroductionofdigitalcostinganddigitalstrategy.Topicssuchascybersecurityandbusinessmodelshavealsobeenincorporated.Existingareas,suchasintegratedreporting,havebeenexpandedtoreflecttheirgrowingprominence.Ultimately,thesetopicssupportCIMA’sdesiretoproducecompetentandconfidentmanagementaccountingprofessionalswhocanguideandleadtheirorganisationstosustainablesuccess.

IstronglyrecommendtheCIMAProfessionalQualificationtoemployersandtothosewishingtopursueasuccessfulandrewardingcareerinbusiness.

NoelTagoe,Ph.D.,FCMA,CGMA ExecutiveVicePresident—MAResearchandCurricula

Foreword

“Digitalisationistransformingallindustries.Thisiswhydigitalskillsshouldbeconveyedatalllevelsandinallformsofeducation.”JoeKaeser,PresidentandCEOSiemensAG


4 CIMA Professional Qualification Syllabus 5

The CIMA Professional Qualification CIMA’sobjectiveindesigningthesyllabusistoenhancetheemployabilityofstudentsandmembers.Itintendstocreatealearningsystemthatenableslearnerstoacquireskills,competenciesandmindsetsthatareinhighdemandbyemployers.Thishasneverbeenmoreimportantwiththepaceofchangeincreasingandtraditionalrolesbeingredefinedbytechnologyand digitaladvances.

TheProfessionalQualificationcomprisesthreepillarsofdomainknowledgedividedintothreelevelsofachievement.ThepillarsareEnterprise,PerformanceandFinancial.ThelevelsareOperational,ManagementandStrategic.Whencombinedwiththerequiredpracticalexperience,CIMAqualifiedmemberswillbecapableofsupportingandleadingtheirorganisationsthroughthechallengingenvironmentofconstantchange.Thesyllabus,assessmentsandpracticalexperience

requirementsensuremembersarecompetentintheessentialaccounting,financeandbusiness-relatedskills.Italsoprovidesthemwiththeskillsrequiredtoleadthefinancefunctioninadigitalage.

TocompletetheCIMAqualification,andbeabletousetheCharteredGlobalManagementAccountant® (CGMA®)designation,studentsneedto:

• Meettheentryrequirementsoftheprofessional levelqualification.

• Studyforandcompletetherelevantprofessional levelassessments,culminatingintheStrategic CaseStudyExam.

• Completethreeyearsofrelevantpracticalexperience,whichcanbegainedbefore, duringand/orafterstudies.

The CIMA Qualification FrameworkThediagrambelowshowstheCIMAQualificationFramework.ThisincludestheCertificateinBusinessAccounting; theProfessionalQualification;AssessmentofPracticalExperience;andContinuingProfessionalDevelopment(CPD) intheformoflifelonglearning.

AWARD: CIMA Advanced Diploma in Management Accounting (CIMA Adv Dip MA)

AWARD: CIMA Diploma in Management Accounting (CIMA Dip MA)

AWARD: CIMA Certificate in Business Accounting (CIMA Cert BA)

Prac

tical

exp

erie

nce

/ life

long

lear

ning

Enterprise pillar

BA1Fundamentals of Business Economics

E1Managing Finance in a Digital World

E2Managing Performance

E3Strategic Management

BA2Fundamentals of Management Accounting

P1Management Accounting

P2Advanced Management Accounting

P3Risk Management

BA3Fundamentals of Financial Accounting

F1Financial Reporting

F2Advanced Financial Reporting

F3Financial Strategy

Management Level

Strategic Level

Operational Level

Certificate Level

Performance pillar Financial pillar

Assessment of practical experience requirements (PER)

Strategic Case Study Exam

Management Case Study Exam

Operational Case Study Exam

AWARD: Membership of the Chartered Institute of Management Accountants (ACMA/FCMA) and the CGMA® designation

BA4 Fundamentals of Ethics, Corporate Governance and Business Law


The CGMA Competency Framework TheCGMACompetencyFrameworkwasfirstintroducedwiththe2015syllabus.Itsetouttheskillsandcompetenciesthatemployersidentifiedasessentialfortheirfinancestaffacrossarangeofindustries,organisationsizesandrolelevelswithinanorganisation.Toupdateboththesyllabusandcompetencyframework,weonceagainundertookglobalresearchtobetterunderstandwhatischangingforboththefinancefunctionwithintheorganisationandthefinanceprofessional,againstthebackdropofanever-increasingdigitalworld.

Ourthree-stageresearchapproachofemployerinterviews,roundtablesandaglobalsurveytoa rangeofstakeholders,meantthatwereachedout toover6,500financeprofessionals,fromover 2,000organisations,inover150countries,to answerthefollowingquestions;

• Howwillthefuturebedifferentforyourorganisation?

• Whatarethedriversofchangeforyourorganisation?

• Whataretheimplicationsforfinance?

• Howshouldfinanceprepareforthechanges?

Thedigitalworld,inwhichorganisationsnowoperate,ischangingrapidlyandinunpredictableways.Ourresearchshowsthattechnologyisseenasthekeydriverofchangeforbothorganisationsandtheirfinancefunctions.Technologyistransformingwhatfinanceprofessionalsdo,andrevolutionisinghowthefinancefunctionisbeingdeployed.

Thecompetencyframeworkreflectsourfindingsonhowfinanceprofessionalsareexpectedtoapplyaccountingandfinanceskillswithinthecontextofthebusiness/organisationsinwhichtheyoperate.Italsoreflectsforthefirsttimehowtechnologyandadigitalmindsetwillberequiredtoaffectandinfluencetheirowndecisions,actionsandbehavioursandthoseoftheircolleagueswithinthewiderorganisation.Tobeabletodothis, fivesetsofskillshavebeenidentified—technicalaccountingandfinanceskills;businessskills;peopleskills;leadershipskillsanddigitalskills—andadigitalmindsetunderpinningthecategories.

Theknowledge,skillsandbehaviourswithineachareaoftheCGMACompetencyFrameworkknowledgeareasare:

Technical skillsFinancialaccountingandreporting;costaccountingandmanagement;businessplanning;managementreportingandanalysis;corporatefinanceandtreasurymanagement;riskmanagementandinternalcontrol;accountinginformationsystems;andtaxstrategy,planningandcompliance.

Business skillsStrategy;businessmodels;marketandregulatoryenvironment;processmanagement;business relations;businessecosystemsmanagement; projectmanagement;andmacroeconomicanalysis.

People skillsInfluence;negotiationanddecision-making,communication;andcollaborationandpartnering.

Leadership skillsTeambuilding;coachingandmentoring;drivingperformance;changemanagement;andability tomotivateandinspire.

Digital skillsInformationanddigitalliteracy;digitalcontent creation;problem-solving;datastrategyand planning;dataanalytics;anddatavisualisation.

Theseremainunderpinnedbyethics, integrity and professionalism.

Basedonthesurveyresponses,thegraphbelowshowstheactivitiesinwhichrespondentscurrentlyspendtheirtime,dependingontheirrolewithintheorganisation.Itisanticipatedthatthesewillalterastechnologyanddigitalisationcontinuetoaffecttheroleofthefinanceprofessional.

Digital skills

Technical skills

Business skills

Leadership skills

People skills

50

45

40

35

30

25

20

15

10

5

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Points(0

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ineac

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Position held within the organisation

Manager Seniormanager CFO

Technicalaccounting Business People Leadership


Structure of the CIMA SyllabusTheCIMASyllabuscomprisesninesubjectsthatareorganisedinthreepillarsandthreelevels.

The pillarsThethreepillarsrepresentspecificareasofknowledge.

Thecontentofeachpillardevelopsasstudentsmoveupthequalification.Thethreepillarsareinterlinkedtoprovideacoherentbodyofknowledgethatwillequipsuccessfulstudentswiththecompetenciestheyrequire.

The Enterprise Pillarfocusesontheroleofthefinancefunctionandhowitinteractswiththeorganisationusingdataandtechnology.Itlooksatbusinessmodelsandthemanagementofpeopleandprojectstoachieveorganisationalgoals.Itdealswiththeformulationandtheeffectiveimplementationofstrategy.

The Performance Pillarusesthetoolsandtechniquesofmanagementaccountingandriskmanagementtoensurethatstrategyisrealisticandtomonitoritsimplementation.Itshowsstudentshowtousetheirunderstandingofcoststoconstructbudgets,makedecisionsaboutpricesandcapitalexpenditure,managecostsandmanageperformance.Digitalcostingisintroducedalongsidetraditionalcostingtechniquesandcostmanagementisexpandedtoreflectitsgrowingimportanceinanincreasinglycompetitiveenvironment

fororganisations.Itdevelopstheabilityofstudentstoprogressivelyidentify,classifyandevaluatevariousriskstoanorganisation,includingenterpriserisk,strategicriskandcyberriskandmanagetheseriskspredominantlythroughinternalcontrols.

The Financial Pillarfocusisthefinancialaccountingandreportingobligationsoftheorganisation.Thisincludesanunderstandingoftheregulatoryframeworkandexternalreportingrequirements,includingintegratedreporting.Theabilitytoconstructandevaluatecomplexfinancialstatements,includingthoserelatingtogroupaccountstoshowthefinancialpositionandperformanceofanorganisationisessential.Theprinciplesoftaxationandthetaximplicationsoffinancingdecisionsarecovered.Italsolooksatformulatingfinancialstrategy,whichislinkedtotheformulationoforganisationalstrategyintheEnterprisePillarandassessingriskinthePerformancePillar.

Thesubjectsineachlearningpillararedesignedtobesequential,fromOperationaltoStrategicLevel,encouragingtheprogressivedevelopment ofknowledge,techniquesandskills.

The levelsThesyllabusisalsodividedintothreelevelsofachievement.StudentsprogressfromtheOperationalLeveltotheManagementLevelandfinallytotheStrategicLevel.Ateachlevelstudentsstudysubjectsacrossthethreepillars.

The Operational Levelfocusesontheshorttermandtheimplementationofdecisions.Studentswillbeabletoworkwithothersintheorganisationanduseappropriatedataandtechnologytotranslatemedium-termdecisionsintoshort-termactionableplans.

The Management Levelfocusesontranslating long-termdecisionsintomedium-termplans.Candidateswillbeabletousedataandrelevanttechnologyto

manageorganisationalandindividualperformance,allocateresourcestoimplementdecisions;monitorandreportimplementationofdecisions;aswellasprepareandinterpretfinancialstatementstoshowperformance.

The Strategic Levelfocusesonlong-termstrategicdecision-making.Candidateswillbeabletosupportorganisationalleaderstocraftstrategy;evaluateandmanagerisksthatmightpreventorganisationsfromsuccessfullyimplementingstrategy;valueorganisations;andsourcefinancialresourcesrequiredtoimplement thestrategy.

E3: Strategic ManagementA.ThestrategyprocessB.Analysingthe

organisational ecosystem

C.Generatingstrategic options

D.Makingstrategic choices

E.StrategiccontrolF.Digitalstrategy

P3: Risk ManagementA.EnterpriseriskB.StrategicriskC.InternalcontrolsD.Cyberrisks

F3: Financial StrategyA.FinancialpolicydecisionsB.Sourcesoflong-term

fundsC.FinancialrisksD.Businessvaluation

E2: Managing PerformanceA.Businessmodelsand

valuecreationB.Managingpeople

performanceC.Managingprojects

P2: Advanced Management Accounting

A.Managingthecostsof creatingvalue

B.Capitalinvestment decision-making

C.Managingandcontrolling theperformanceof organisational units

D.Riskandcontrol

F2: Advanced Financial Reporting

A.FinancingcapitalprojectsB.Financialreporting

standardsC.GroupaccountsD.IntegratedreportingE.Analysingfinancial

statements

E1: Managing Finance in a Digital World

A.Roleofthefinance function

B.Technologyinadigitalworld

C.Dataandinformationin a digital world

D.Shapeandstructure ofthefinancefunction

E.Financeinteractingwiththe organisation

P1: Management AccountingA.Costaccountingfor

decisionandcontrolB.Budgetingandbudgetary

controlC.Short-termcommercial

decision-makingD.Riskanduncertaintyin

theshortterm

F1: Financial ReportingA.Regulatoryenvironment

offinancialreportingB.FinancialstatementsC.PrinciplesoftaxationD.Managingcashand

workingcapital

Enterprise Pillar

Articulateavisionin adigitalworld.

Howdowearticulatetheroleofthefinancefunctioninadigitalworld?

Howdowemanageperformancethroughpeopleandprojects?

Howdowedevelop andmanagestrategy?

Performance Pillar

Makethevisionareality

Howdoweusecostingandbudgetingforshort-termdecision-making?

Howdowemonitorandcontrolactivitytoensureperformance?

Howdoweidentify,mitigateagainstandmanageriskstotheorganisation?

Financial Pillar

Communicateandreport onthevisionthroughafinanciallens.

Howdoweprepare financialstatements?

Howdoweinterpret financialstatements andusethemtosupportstrategy?

Howdoesfinancialstrategydrivetheambitionsoftheorganisation?

Operational (Implement)

• Implementation ofdecisions.

• Translatemedium-termdecisionsintoshort-termactionableplans;thenreportonperformance.

Strategic (Decide)

• Makestrategicdecisions.

• Formulateandcreatestrategywhilstmanagingtheassociatedrisks.

Management (Monitor)

• Monitor implementation ofdecisions.

• Monitor,manageandanalyseperformance.

The CIMA Syllabus


Learning outcomes Eachsyllabussectioncontainsoneormoreleadlearningoutcomes,relatedcomponentlearningoutcomes,topicstobecoveredandexplanatorynotesthathelpprovidethecontextforthattopicarea.

Eachleadlearningoutcomedefinestheskillorabilitythatawell-preparedstudentshouldbeabletodemonstrateattheendoftheperiodoflearning.

Theleadlearningoutcomesarepartofahierarchyoflearningobjectives.Theverbsusedatthebeginningofeachlearningoutcomerelatetoaspecificlearningobjective.

Eg,‘Analysethefeaturesofinternalcontrolsystems’.Theverb‘analyse’indicatesahigh-levellearningobject(level4).Becauselearningobjectivesarehierarchical,itisexpectedthatatthislevel,studentswillbeabletoexamineandcommunicatetherole,featuresandpurposeofinternalcontrolsinmanagingorganisationalrisks.

Thefollowingtableliststhelearningobjectivesandtheverbsthatappearinthesyllabuslearningoutcomes.

Examination blueprints Forthefirsttime,from2019examinationsonwards,CIMAwillpublishexaminationblueprintsbasedonthesyllabus.Itwillsetoutindetailwhatisexaminableineachoftheobjectivetestsandcasestudyexaminationsforagivenperiodandwillprovideinformationabouttheformat,structureandweightingsoftheassessments.Itisintendedthatblueprintswillbeupdatedandpublishedannually.

Formoreinformation,gotocimaglobal.com/examblueprints.

Levels Learning objective Verbs used Definition

EvaluationHowyouareexpected touseyourlearning toevaluate,make decisionsor recommendations

AdviseAssessEvaluateRecommendReview

Counsel,informornotifyEvaluateorestimatethenature,abilityorqualityofAppraiseorassessthevalueofProposeacourseofactionAssessandevaluateinorder,tochangeifnecessary

AnalysisHowyouare expectedtoanalyse the detail of what youhavelearned

AlignAnalyseCommunicateCompareandcontrastDevelopDiscussExamineInterpretMonitorPrioritiseProduce

ArrangeinanorderlywayExamineindetailthestructureofShareorexchangeinformationShowthesimilaritiesand/ordifferencesbetweenGrowandexpandaconceptExamineindetailbyargumentInspectthoroughlyTranslateintointelligibleorfamiliartermsObserveandchecktheprogressofPlaceinorderofpriorityorsequenceforactionCreateorbringintoexistence

ApplicationHowyouare expectedtoapply yourknowledge.

ApplyCalculateConductDemonstratePrepareReconcile

PuttopracticaluseAscertainorreckonmathematicallyOrganiseandcarryoutProvewithcertaintyorexhibitbypracticalmeansMakeorgetreadyforuseMakeorproveconsistent/compatible

ComprehensionWhatyouare expected tounderstand.

DescribeDistinguishExplainIdentifyIllustrate

CommunicatethekeyfeaturesofHighlightthedifferencesbetweenMakeclearorintelligible/statethemeaningorpurposeofRecognise,establishorselectafterconsiderationUseanexampletodescribeorexplainsomething

KnowledgeWhatyouare expectedtoknow.

ListStateDefineOutline

MakealistofExpress,fullyorclearly,thedetails/factsofGivetheexactmeaningofGiveasummaryof

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2

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CIMA assessment strategyEachleveloftheCIMAProfessionalQualificationculminatesinacasestudyexamination,whichintegratestheknowledge,skillsandtechniquesfromacrossthethreepillarsintoonesynopticcapstoneexamination.

Thecasestudyexaminationisarolesimulation,requiringcandidatestorespondtoauthenticwork-basedactivitiespresentedduringtheexamination,drawingtogetherlearningfromeachofthethreesubjectstoprovidesolutionstotheissuesandchallengespresented.

Casestudymaterialsareprovidedinadvanceoftheexaminationtoallowcandidatestimetoimmersethemselvesinthefictionalorganisationandindustrywithinwhichthesimulationwilloccurandtoundertakeanalysisoftheorganisation’scurrentpositionpriortotheexamination.

Thecasestudyexaminationateachlevelsimulatesthejobrolelinkedtothelevelandfocusesonthecoreactivitieswhichemployersexpectcompetentindividualsinthoserolestoroutinelyperform.

Objectivetestsforeachoftheindividualsubjects ensuretheacquisitionofthebreadthofknowledge, skillsandtechniqueswhichprovidethefoundation forapproachingthecasestudyexamination.

Moredetailsofbothtypesofassessmentcan befoundintheexaminationblueprintsat cimaglobal.com/examblueprints.

AllassessmentsarecomputerisedandCIMAworksinpartnershipwithPearsonVUE,whohaveover20yearsofexperienceinofferingelectronictesting.Therearecurrentlyover5,000PearsonVUEtestcentresin 180countries.LocationsofPearsonVUEtestcentrescanbefoundviatheCIMAwebsite.

Suggested order of examinationsThecasestudyexaminationcanonlybeattempted afterallobjectivetestsforthelevelhavebeen completedsuccessfully.

Withineachlevel,studentsarefreetostudyandtakeobjectivetestsinanyordertheywish.CIMA’ssuggestedorderofstudyistobeginwiththeEnterprisePillarsubject,thenmovetothePerformancePillarsubjectandthentotheFinancialPillarsubject.Thesyllabushasbeendesignedsothat,ateachlevel,theEnterprisePillargivesthebroadcontextinwhichtheFinanceand

PerformancePillarsoperate.ThePerformance Pillarprovidesthecontextofwhatmanagementaccountantsdowithinanorganisation,andthe FinancePillarconsidersthereportingandtheimplicationsofthisactivity.Itisforthesereasons thatthisorderissuggested.

Forexample,CIMAwouldrecommendstudentsstudyingtheOperationalLeveltostartwithE1,thenmoveto P1andthentoF1beforesittingtheOperationalCaseStudyexamination.

AWARD: CIMA Advanced Diploma in Management Accounting (CIMA Adv Dip MA)

AWARD: CIMA Diploma in Management Accounting (CIMA Dip MA)

Enterprise pillar

E1Managing Finance in a Digital World

E2Managing Performance

E3Strategic Management

P1Management Accounting

P2Advanced Management Accounting

P3Risk Management

F1Financial Reporting

F2Advanced Financial Reporting

F3Financial Strategy

Management Level

Strategic Level

Operational Level

Performance pillar Financial pillar

Assessment of practical experience requirements (PER)

Strategic Case Study Exam

Management Case Study Exam

Operational Case Study Exam

AWARD: Membership of the Chartered Institute of Management Accountants (ACMA/FCMA) and the CGMA® designation

Enterprise Pillar Performance Pillar Financial Pillar


Syllabusinthecontextofthestructure andshapeofthefinancefunction

Management Level

Operational Level

Beyond the scope of the syllabus; covered by CPD

Strategic Level and covered by Continued Professional Development (CPD)

Strategic leadership of the finance team

to achieve desired impact

Technical specialists generate insights about value creation and preservation in

their respective areas

Managing processes and applying accounting rules to assemble and extract data to

provide information and insight

Strategic partnership through interaction with internal and external stakeholders to influence and shape how the organisation creates and preserves value

Summary of 2019 Syllabus

The syllabus in context

E3: Strategic Management

A.TheStrategyprocess

B.Analysingtheorganisational ecosystem

C.Generatingstrategicoptions

D.Makingstrategicchoices

E.Strategiccontrol

F.Digitalstrategy

P3: Risk Management

A.Enterpriserisk

B.Strategicrisk

C.Internalcontrols

D.Cyberrisks

F3: Financial Strategy

A.Financialpolicydecisions

B.Sourcesoflong-termfunds

C.Financialrisks

D.Businessvaluation

E2: Managing Performance

A.Businessmodelsandvalue creation

B.Managingpeopleperformance

C.Managingprojects


A.Managingthecostsof creatingvalue



D.Riskandcontrol


A.Financingcapitalprojects

B.Financialreportingstandards

C.Groupaccounts

D.Integratedreporting

E.Analysingfinancial statements


A.Roleofthefinancefunction



D.Shapeandstructureofthe financefunction

E.Financeinteractingwiththe organisation

P1: Management Accounting

A.Costaccountingfordecision andcontrol

B.Budgetingandbudgetary control

C.Short-termcommercial decision-making

D.Riskanduncertaintyin theshortterm

F1: Financial Reporting

A.Regulatoryenvironment offinancialreporting

B.Financialstatements

C.Principlesoftaxation

D.Managingcashand workingcapital


The Operational Level

17

Operational Level summary Oncompletioncandidatesshouldbeableto:workwithothersintheorganisationanduseappropriatedataandtechnology:translatemedium-termdecisionsintoshort-termactionableplans;analysenewsituationsthatariseintheshorttermtosupportdecisionsthatcreatefurthervaluefortheorganisation;evaluateandmanagerisksassociatedwiththeshortterm;andreportontheperformance,positionandprospectsoforganisations.

Narrowscope

Financialbutsomequantitativenon-financialinformation

Pastandpresent

Shortterm

Implementationofdecisionsandanalysis ofshort-termdecisions

Internal orientation

Focusondetailsratherthanthebigpicture

Informationandsomeinsight

E1 Managing Finance in a Digital World

Howthefinancefunction is organised

F1 Financial Reporting

Whatthefinancefunction does and its implications

P1 Management Accounting

Whatthefinance functiondoes


Summary of the Operational Level Syllabus


A.Roleofthefinancefunction



D.Shapeandstructureofthe financefunction

E.Financeinteractingwith the organisation


A.Costaccountingfordecision andcontrol

B.Budgetingandbudgetary control

C.Short-termcommercial decision-making

D.Riskanduncertaintyin theshortterm


A.Regulatoryenvironment offinancialreporting

B.Financialstatements

C.Principlesoftaxation

D.Managingcashand workingcapital


E1: Managing Finance in a Digital World A.Roleofthefinancefunction


C.Dataandinformationinadigitalworld

D.Shapeandstructureofthefinancefunction

E.Financeinteractingwiththeorganisation

The technologylandscapeand itsimpactonorganisations andthefinancefunction

Data usagebythefinancefunction

Structure and shape ofthefinance functionlinkedtotheroles

Howthefinancefunctioninteracts withtheorganisationtocreate

andpreservevalue

E1: Structure and outline

Role of finance in the organisation andtheactivitiesitperforms

tofulfilitsrole


E1A: Role of the finance functionThissectionexaminestherolesthatfinanceplaysinorganisationsandwhy.Itdescribesindetailtheactivitiesthatfinanceprofessionalsperformtofulfiltheseroles.Consequently,itisthefoundationofthewholequalificationandanswersthequestion:whatdofinanceprofessionalsdoandwhy?Itprovideslinkswithothertopicswithinthesubject andwhatiscoveredinotherareasoftheOperationalLevel.

Lead outcome Component outcome

1.Explaintherolesofthefinancefunction inorganisations.

Explainhowthefinancefunction:

a.Enablesorganisationstocreateandpreservevalue

b.Shapeshoworganisationscreateandpreservevalue

c.Narrateshoworganisationscreateand preservevalue

2.Describetheactivitiesthatfinanceprofessionals performtofulfiltheroles.

Describehowthefinancefunction:

a.Collatesdatatoprepareinformationaboutorganisations

b.Providesinsighttousersbyanalysing information

c.Communicatesinsighttoinfluenceusers

d.Supportstheimplementationofdecisionstoachievethedesiredimpact

e.Connectsthedifferentactivitiesconnecttoeachother

Topics to be covered Explanatory notes

• Thefast-changingandunpredictablecontextsinwhichorganisationsoperate

• Enablingvaluecreationthroughplanning,forecastingandresourceallocation

• Shapingvaluecreationthroughperformancemanagementandcontrol

• Narratingthevaluecreationstorythroughcorporatereporting

• Theroleofethicsintheroleofthefinancefunction

Describetheincreasinglydisruptivecontextsinwhichorganisationsandtheirfinanceteamsoperateandhowthesecontextsshapetheroleoffinance.Takeeachroleandshowhowfinanceperformsitinatypicalorganisationalsetting.Thecoverageshouldbeintroductoryandbrief.ItismeanttosetthesceneforsubsequentsectionsanddrawalinkbetweentherolesandthetopicsthatwillbecoveredinotherareasoftheOperationalLevel.

• Howdataiscollected,cleanedandconnectedbyfinance

• Typesofanalysistoproduceinsights

• Howfinancecommunicatestoinfluence keystakeholders(audiences,frequency,format,etc.)

• Howfinanceusesresourceallocationandperformancemanagementtoenableorganisationstoachievetheirobjectives

• Potentialimpactoftechnology

Use“informationtoimpact”frameworktodescribetheprimaryactivitiesfinanceprofessionalsperform.Relateittohowdataisgenerated,transformedandused.Linkittohowtechnologycouldbeusedtoimprovetheproductivityoffinanceprofessionalsintheseareasandthethreat ofautomation.



E1B: Technology in a digital worldThissectionfocusesonthetechnologiesthatdefineanddrivethedigitalworldinwhichfinanceoperates.Itprovidesawarenessofthetechnologiesusedinorganisationsanddeepensunderstandingoftheimpactofthetechnologiesonwhatfinancedoes.Itdrawsontheissuesraisedintheprevioussectionabouttheroleoffinanceandtheactivitiesfinanceperformstofulfiltheseroles.Giventhatthedigitalworldisunderpinnedbytechnologyandtheuseofdata,thissectionprovidesafoundationtothenextsectionondata.


1.Outlineandexplainthetechnologiesthataffect businessandfinance.

a.Outlinethekeyfeaturesofthefourthindustrial revolution.

b.Outlineandexplainthekeytechnologiesthatdefineanddrivethedigitalworld.

2.Examinehowthefinancefunctionusesdigital technologiestofulfilitsroles.

Examinehowfinanceusesthefollowingtoguidehowitperformsitsroles:

a.Digitaltechnology

b.Digitalmindsets

c.Automationandthefutureofwork

d.Ethicsoftechnologyusage



• Characteristicsanddynamicsofthefourthindustrialrevolution

• Cloudcomputing

• Bigdataanalytics

• Processautomation

• Artificialintelligence

• Datavisualisation

• Blockchain

• Internet of things

• Mobile

• 3-Dprinting

Theaimistocreateawarenessofthetechnologiesthatdrivethedigitalworldandhowtheyinteractwitheachother.ThetechnologiesoutlinedbythemajoradvisoryfirmsandtheWorldEconomicForumdigitaltransformationinitiativeprovidethematerialonwhichlearningandrelatedactivitiescanbebased.

• Howfinanceusestechnologieslistedabove

• Areasoffinancesusceptibletoautomation andwhy

• Newareasforfinancetofocuson

• Digitalmindsetsforfinance

• Ethicsoftheuseoftechnology

Examinehowfinanceprofessionalsusetherelevanttechnologiestofulfiltheirroles.Explainhowthetechnologiesaffectvariousactivitiesfinanceprofessionalsperforminthe“informationtoimpact”framework.Theintentionistomovefromcreatingawareness to generating understanding of how financecanusethesetechnologiestoincreaseitsvalueandrelevancetoorganisations.


E1C: Data and information in a digital worldThissectiondrawsoutoneofthemajorimplicationsofusingtechnologyinorganisationsandthefinancefunction—namelythecollectionandprocessingofinformationcanbedonemoreeffectivelybymachinesratherthanbypeople. Itassertsthattheroleoffinanceprofessionalsshouldbetousedatatocreateandpreservevaluefororganisations. Fivewaysofusingdataareexamined.Thekeycompetenciesrequiredtousedatainthesewaysarealsohighlighted.Theprimaryobjectiveistohelpfinanceprofessionalsunderstandwhattheycandowithdataandhowtobuildthe skillsneededtousedata.


1.Describethewaysinwhichdataisusedbythefinancefunction.

Identifythewaysinwhichthefinancefunction usesdata:

a.In a general sense

b.Specificallyineachoftheprimaryactivities offinance

2.Explainthecompetenciesrequiredto usedatatocreateandpreservevalue fororganisations.

Explainthecompetenciesthatfinanceprofessionalsneedin:

a.Datastrategyandplanning

b.Dataengineering,extractionandmining

c.Datamodelling,manipulationandanalysis

d.Dataandinsightcommunication

.


Usingdatafor:

• Decision-making

• Understandingthecustomer

• Developingcustomervalueproposition

• Enhancingoperationalefficiency

• Monetising data

• Ethicsofdatausage

Buildontheprevioussectionontechnologytoexplainwhy,inthedigitalworld,financeprofessionalsmustplacemorefocusonusinginformationthanoncollectingand/orprocessinginformation.Outlineanddescribethevarioususesofinformation.LinkthemtotheprimaryactivitiesthatthefinancefunctionperformsandtothetopicstobecoveredinothermodulesoftheOperationalLevel.

• Assessmentofdataneeds

• Extraction,transformationandloading (ETL)systems

• BusinessIntelligence(BI)systems



Highlightandexplainthedatacompetenciesrequiredinthedigitalworld.Locatewherefinancehasacompetitiveadvantageandwherefinancewillneed toworkwithdatascientists.

.



E1D: Shape and structure of the finance function

Thissectionbringstogethertheimplicationsoftheprevioussections.Itrevealshowthefinancefunctionisstructuredandshaped.Thisstructureandshapeenablesfinancetoperformitsroleintheorganisationandwithotherinternalandexternalstakeholders.Inthissense,itpreparescandidatesforthenextsection,whichlooksathowfinanceinteractswithkeyinternalstakeholdersinoperations,marketingandhumanresources.


1.Describethestructureandshapeofthefinancefunction.

Describethe:

a.Evolutionoftheshapeofthefinancefunction

b.Shapeofthefinancefunctioninthedigitalera

2.Explainwhateachlevelofthefinance functiondoes.

Explaintheactivitiesof:

a.Financeoperations

b.Specialistareasincludingfinancialreporting andfinancialplanningandanalysis(FP&A)

c.Strategicpartneringforvalue

d.Strategicleadershipofthefinanceteam



• Structureofthefinancefunctionfromtherolesthatgenerateinformationtotherolesthatturninformationintoinsightandcommunicateinsighttodecision-makers

• Hierarchicalshapeoffinancefunction

• Sharedservicesandoutsourcingoffinanceoperations

• Retainedfinance

• Automationanddiamondshapeof financefunction

Introducecandidatestothestructureofthefinancefunctionandoutlinethebroadareasoffinancesuchasfinanceoperations,externalreporting,financialplanningandanalysis(FP&A),decisionsupportetc.Describetheevolvingshapeofthefinancefunctionfromthetriangletothediamondshape.Linkthedescriptiontotheimpactofdigitaltechnologyandautomationonthefinancefunction.

• Financeoperationstogenerateinformationandpreliminaryinsight

• FP&A,taxation,corporatereporting,decisionsupporttoproduceinsight

• Businesspartneringtoinfluenceorganisationtomakeappropriatedecisions

• Leadingthefinanceteamtocreatetherequiredimpactfortheorganisation

Thefocusisthediamondshapeandthefourlevelswithinthisshape.Explainwhateachleveldoes,therelationshipbetweenthelevels,andthelinkbetweenthelevelsandthebasicfinanceactivitiescoveredundertheroleoffinance.


E1E: Finance interacting with the organisation

Thefinancefunctionisnottheonlyareaofactivityinorganisations.Financejoinswithotherstocreateandpreservevaluefortheirorganisations.Thissectionbringstogetherwhathasbeenlearnedintheprevioussectiontodescribehowfinancecaninteractwithotherpartsoftheorganisationtoachievetheobjectivesoffinance,thoseotherareasandcruciallytheobjectivesofthewholeorganisation.Theaimistoshowhowfinancecanworkcollaborativelyinaconnected(andjoined-up)organisationandnotinisolation.


1.Describehowthefinancefunctioninteracts withoperations.

Describe:

a.Mainroleofoperations

b.Areasofinterfacewithfinance

c.Keyperformanceindicators

2.Describehowthefinancefunctioninteracts withsalesandmarketing.

Describe:

a.Mainroleofsalesandmarketing



3. Describehowthefinancefunctioninteracts withhumanresources.

Describe:

a.Mainroleofhumanresources



4. Describehowthefinancefunctioninteracts withIT.

Describe:

a.Main role of IT





• Processmanagement

• Productandservicemanagement

• Supplychainmanagement

Describehowfinanceplaysitsrolebyinteractingwiththerestoftheorganisation.Bringtogethertheissuesraisedintheprevioussectionsandlinkthemtowhattheotherareasoftheorganisationsdo.Forexample,addresshowfinanceandmarketinginteractusingdataandcollaborativetechnologytoachieveorganisationalgoalsandtheindividualfunctionalgoalsofbothfinanceandmarketing.DescribehowtheuseofKPIsinfluencetheseinteractionsandhowtheKPIsoffinanceandtheseareascanbealignedtoensuretheyworktogethereffectively.

• Marketsegmentation

• Bigdataanalyticsinmarketing

• Channelmanagement

• Salesforecastingandmanagement

• Staffacquisition

• Staffdevelopment

• Performancemanagement

• Motivationandrewardsystems

• ITinfrastructure

• ITsystemssupport

• CostsandbenefitsofITsystems

33

P1: Management Accounting A.Costaccountingfordecisionandcontrol

B.Budgetingandbudgetarycontrol

C.Short-termcommercialdecision-making

D.Riskanduncertaintyintheshortterm

32

P1: Structure and outline

Primary topics

Costing requiredtosupportthe budgetsanddecision-making

Use understanding of risk and uncertainty in the short termtoimprovethequality ofbudgetsandshort-termdecisions.

Short-term decisions toexploit newopportunitiestocreate

orpreservevalue

Budgets to translate medium-termdecisionsinto actionableshort-termplans


P1A: Cost accounting for decision and control

Thissectionisaboutunderstandingwhycostingisdoneandwhatitisusedfor.Itintroducescandidatestothe basicbuildingblocksofcostingandhowtoapplytheminthecostingmethodsandtechniquesorganisationsuse. Inafast-changingdigitalworldthisunderstandingiscriticalandcanenablecandidatestodeveloptheirownwaysofcalculatingcostswhenexistingmethodsarenolongerappropriate.Digitalcostingisintroducedinthissection.


1.Distinguishbetweenthedifferentrationales forcosting.

a.Definecosting

b.Distinguishbetweentherationalesforcosting

2.Applythemaincostingconceptstoorganisationsandcostobjects.

a.Explainthemaincostingconcepts

b.Applycostingconceptstodifferentorganisationsandcostobjects

3.Applycostingmethodstodeterminethecosts fordifferentpurposes.

Applythefollowing:

a.Costaccumulation,allocation,apportionmentandabsorption

b.Standardcosting

c.Varianceanalysis(withoutmixandyieldvariance)

d.Activitybasedcosting

e.Digitalcosting


• Inventoryvaluation

• Profitreporting

• Costmanagementandtransformation

• Decision-making

Thisseekstoaddressthefollowingpertinentquestions:Whatarereasonsforcalculatingcosts? Whattypesofcostsareappropriateforaparticularpurposeandwhy?

• Costelements

• Costsstructure

• Costbehaviour

• Costdrivers

• Costingappliedtodifferenttypesoforganisations

• Costingappliedtodigitalcostobjects

Examinethebasicbuildingblocksofcostingandhowtheyapplytodifferenttypesoforganisationsandoperatingcontexts(e.g.,manufacturingandservicesectors).Howhasthedigitalworldaffectedthenatureofthesebuildingblocksofcosting?

• Trace,classifyandallocatecosts

• Marginalcosting

• Absorptioncosting

• Priceandratevariances

• Usageandefficiencyvariances

• Interpretationofvariances

• ProductandservicecostingusingABC

• AdvantagesofABCoverothercostingsystems

• Featuresofdigitalcosting

Investigatehowcostsaretraced,classified,accumulated,allocated,apportionedandabsorbedtoarriveatthecostsofaproduct,serviceorothercostobject.Calculatethecostsofproductsorservicesusingvariouscostingmethods.Determinewhichcostingmethodsareappropriateandwhy?



P1B: Budgeting and budgetary controlTakentogether,budgetingandbudgetarycontrolisonewaythefinancefunctionenablesandshapeshoworganisationscreateandpreservevalue.Thissectionexaminesthevariousreasonsorganisationsprepareandusebudgets,how thebudgetsareprepared,thetypesandsourcesofdata,thetechnologiesusedtoimprovethequalityofbudgets, howbudgetsareimplementedandtheimpactonthepeoplewhoworkwiththeorganisation.


1.Distinguishbetweenthedifferentrationales forbudgeting.

a.Explaintheroleofbudgets.

b.Distinguishbetweenthedifferentrationales forbudgeting.

2.Preparebudgets. a.Explainforecastinganditsrelationship withbudgeting.

b.Preparemasterbudgets.

c.Conductwhat-ifanalysisinbudgeting.

d.Describethetechnologiesavailablefor improvingbudgeting.

3.Discussbudgetarycontrol. Discuss:

a.Theconceptofbudgetarycontrol

b.Humandimensionsofbudgeting



• Planning

• Communication

• Coordination

• Motivation

• Control

Whydoorganisationspreparebudgets?Inwhatwaysarethedifferentrationalesforpreparingbudgetscompatiblewitheachother?Howdoorganisationsgetthemostoutthebudgetingprocess?

• Timeseriesandtrendanalysistoforecast salesvolumes

• Componentsofmasterbudgetsandtheirinteractionwitheachother

• Limitingfactors

• Stresstestingbudgets

• Bigdataanalyticsandbudgets

• Alternativeapproachestobudgeting

Whatistheprocessbywhichbudgetsareprepared?Whattypesofbudgetsarerequiredbyorganisations?Whatdatadotheyuseandwheredotheygetthedatafrom?Howarethosebudgetspreparedandpresented?Whattechnologiesareavailableforimprovingthequalityofthebudgets?

• Feedbackandfeedforwardcontrol

• Flexedbudgets

• Targetsettingandmotivation

• Controllableanduncontrollableoutcomes

• Dysfunctionalbehavioursinbudgeting

• Ethicalconsiderationsinbudgeting

Whatisbudgetarycontrol?Describeanddiscusshowandwhythebudgetarycontrolsystemprovidesfeedbackandfeedforwardtotheorganisation.Whatarethebehaviouralimpactsofbudgetarycontrolandhowaretheymanaged?


P1C: Short-term commercial decision-makingOrganisationscannotforeseeeveryopportunitythatmightariseduringtheiroperations,sotheyneedmechanismsbywhichtoidentifyandtakeadvantageoftheseopportunitiesastheyarise.Theprimaryobjectiveofthissectionistoguidecandidatesinhowtodothisintheshorttermthrougheffectivedecision-making.Thefinancefunctionsupportssuchdecisions(e.g.,pricingandproductchoice)usingtechniquessuchasrelevantrevenueandcostanalysisandbreak-evenanalysis.Candidatesareintroducedtothesetechniquesandtheconceptsthatunderpinthetechniques.Theyareexpectedtobeabletoapplythetechniquestosupportshort-termdecision-making.


1.Describethemaintypesofshort-termdecisionsmadebyorganisations.

a.Describepricingandrevenuemaximising decisions.

b.Describeproductdecisions.

2.Explaintheunderlyingconceptsusedfor short-termdecision-making.

a.Explaintheobjectivesofdecision-making.

b.Explaintheunderlyingconceptsofshort-termdecision-making.

3.Applyappropriatetechniquestosupport short-termdecisions.

Applythefollowingtosupportshort-term decision-making:

a.Relevantcostanalysis

b.Break-evenanalysis

c.Productmixdecisionswithconstraints

d.Dataandtechnology



• Marginalandfullcostrecoveryforpricingdecisions

• Differencesinpricingandrevenuemaximisationfortheshorttermandlongterm

• Productmix

Describethetypesofshort-termdecisionsorganisationsmakeandthecircumstancesthat giverisetothem.Whatdotheseshort-termdecisionsseektoachieve?Howimportantaretheytoperformanceoforganisations?Theemphasisisonbothrevenueandcosts.

• Implicationsofcommercialdecision-making intheshortterm

• Relevantrevenues

• Relevantcosts

• Differencewithprofitreporting

Whataretheobjectivesandunderlyingconceptsthatareusedtoguideshort-termdecision-makingandwhy?Distinguishbetweenthoseconceptsofrevenue,costsandinformationfromotherconcepts.

• Makeorbuydecisions

• Discontinuationdecisions

• Multi-productbreak-evenanalysis

• Useofdataandtechnologytoanalyse productmixdecisions

• Ethicalconsiderationsinshort-term decision-making

Usedata(financialandnon-financial)andtheappropriateconceptsandtechniquestosupportdecision-makingtoachieveorganisationalobjectivesofvaluecreationandpreservation.


P1D: Risk and uncertainty in the short termBudgetsanddecisionsfocusonthefuture.Thisintroducesuncertaintiesandrisksthatneedtobeidentified,assessedandmanaged.Theaimofthissectionistohelpcandidatesidentify,assessandmanagetherisksanduncertaintiesassociatedwiththeshortterm.


1.Applybasicriskmanagementtoolsinthe shortterm.

a.Explainnatureofriskanduncertaintyin shortterm.

b.Applybasicsensitivityanalysistobudgeting andshort-termdecision-making.



• Stresstesting

• Sensitivityandwhat-ifanalysis

• Probabilitydistributions

• Decisiontrees

Whattypesofrisksanduncertaintiesdoorganisationsfacewhenpreparingandimplementingbudgetsandwhenmakingshort-termdecisions?Howarethoserisksanduncertaintiesidentified,assessedandmanaged?

43

F1: Financial Reporting A. Regulatoryenvironmentoffinancialreporting

B. Financialstatements

C. Principlesoftaxation

D. Managingcashandworkingcapital

42

Implications

F1: Structure and outline

Regulatory issues thatprovidethebasis forpreparingfinancialstatements

Preparebasicfinancial statements forexternalstakeholders.

Usefinancialstatementstogain understanding of short-term

financing toimprovetheability oftheorganisationtocreate

andpreservevalue.

Calculatetaxation andexplainits affectsandhowitisaffectedbythe

organisation’sperformance.


F1A: Regulatory environment of financial reporting

Thepreparationoffinancialstatementsisregulatedbylaws,standards,generallyacceptedaccountingprinciplesandbycodes.Theregulationsensurethatfinancialstatementsofdifferententitiesarecomparableandthattheypresentareasonablyaccuratepictureoftheperformance,positionandprospectsoftheorganisationtotheirusers.Thissectioncoverswhotheregulatorsare,whattheydoandwhyandhowtheregulationsareapplied.Theobjectiveistoprovidecandidateswithastrongfoundationforpreparingandinterpretingfinancialstatements.


1.Identifyregulatorsanddescribetheirrole. a.Identifythemajorregulators.

b.Describewhattheydo.

c.Explainwhytheyregulatefinancialreporting.

2.Applycorporategovernanceprinciples tofinancialreporting.

a.Describetheroleoftheboardincorporate governance.

b.Applycorporategovernanceandfinancial stewardshipprinciplestofinancialreporting.


• National regulators

• IFRSfoundation

• IASB

• InternationalOrganisationforSecuritiesCommissions(IOSCO)

• Standardsettingprocess

• Differencesbetweenrules-basedand principles-basedregulations

• OtherssuchasInternationalIntegratedReportingCouncil(IIRC)

Whoaretheregulatorswhodeterminehowfinancialstatementsareprepared?Whatdotheydo?Whatvaluedotheycontributetotheproductionoffinancialstatements?Coveragewillincludenationalandinternationalregulators,stockexchangeregulatorsandvariousaccountingandfinancialreportingstandardsboardsandmajorinfluentialbodiesliketheIIRC.

• Needandscopeforcorporategovernanceregulations

• Differentapproachestocorporategovernanceregulations

Boardshaveoverallresponsibilityforensuringthatexecutivesoforganisationscreatevaluefortheirstakeholdersandsafeguardtheirassets.Theroleofboardsisincorporatedinvariouscorporategovernancecodes.Whatarethemainprinciplesastheyapplytofinancialreportingandtheoversightofboards?



F1B: Financial statementsOneoftherolesoffinanceistonarratehoworganisationscreateandpreservevalue.Thefinancialstatementsarethemeansbywhichnarrationisdonetoparticularaudiences.Thissectionenablescandidatestopreparebasicfinancialstatementsusingfinancialreportingstandards.Itcoversthemainelementsofthefinancialstatements,whatthey intendtoconvey,thekeyfinancialreportingstandardsandhowtheyareappliedtopreparefinancialstatements.


1.Identifythemainelementsoffinancial statements.

a.Identifythemainelementsoffinancial statementscontainedintheIFRSconceptualframework.

2.Explainspecificfinancialreportingstandards. Explainthespecificfinancialreportingstandardsrelatedto:

a.Non-currentassets

b.Leases

c.Impairment

d.Inventory

e.Eventsaftertheperiod

3.Applyfinancialreportingstandardstopreparebasicfinancialstatements.

Applyfinancialreportingstandardstoprepare:

a.Statementoffinancialposition

b.Statementofcomprehensiveincome

c.Statementofchangesinequity

d.Statementofcashflows



• Objectivesandoverallpurposeoffinancialreporting

• Qualitativecharacteristicsoffinancialinformation

• Reportingentityanditsboundaries

• Recognition(andderecognition)

• Measurementbases

• Presentationanddisclosure

• Conceptofcapitalmaintenance

Thissetsthemainprinciplesthatunderpinthepreparationoffinancialstatements.Thefocusisonthemainprinciples.Nodetailedtreatmentsareexpected.

• IAS16—Property,Plant&Equipment

• IFRS5—Non-currentAssetsHeldforSale orDiscontinuedOperations

• IFRS16—Leases

• IAS36—ImpairmentofAssets

• IAS2—Inventories

• IAS10—EventsAftertheReportingPeriod

Examinetherequirementsforhowmajoritemsofthefinancialstatementsaretoberecognised,measuredanddisclosed.Thiscoversthemainareasandnotspecialisttopics.

• IAS1—PresentationofFinancialStatements

• IAS7—StatementofCashFlows

Givehands-onexperienceofpreparingbasicfinancialstatementsbybringinginalltheelements.


F1C: Principles of taxationOneoftheimplicationsofvaluecreationishowthatvalueisdistributedtodifferentstakeholders.Taxationispartofthisdistribution.Thissectionhelpscandidatesdistinguishbetweentypesoftaxesandtocalculatecorporatetaxes.Inadigitalworldwhererevenueisearnedthroughonlinetradingthatspansnationalboundaries,candidatesareintroducedtotheissuesrelatingtotaxationacrossinternationalbordersandtheethicsoftaxation.


1.Distinguishbetweendifferenttypesoftaxes. Distinguishbetween

a.Directversusindirect

b.Corporateversuspersonal

2.Calculatetaxforcorporates. a.Explainthebasisoftaxation

b.Explainthedifferencebetweenaccountingprofit andtaxableprofit

c.Calculatecorporatetax

3.Explainsomerelevantissuesthataffect taxation.

Explain:

a.Taxationacrossinternationalborders

b.Ethicsoftaxation



• Featuresofdirectandindirecttaxes

• Featuresofcorporateandpersonaltaxes

Givesabroadoverviewofthedifferenttypesoftaxes,whotheyaffectandwhytheyareused.

• Exemptincome

• Incometaxedunderdifferentrules

• Allowableexpenditure

• Capitalallowances

• Reliefs

• Taxonsaleofasset

Thefocusshiftsheretocorporatetaxation.Themainareacoveredisthedifferencebetweenaccountingprofitandprofitfortaxationpurposes.Nonationallawisappliedhere.Themainthinghereiscoverageandapplicationofprinciples.

• Corporateresidence

• Typesofoverseasoperations(e.g.,subsidiary orbranch)

• Doubletaxation

• Transferpricing

• Taxavoidance

• Taxevasion

Giventheincreaseofcross-bordertradingandrevenuegenerationinthedigitalworldwhatarethekeyissuesaffectinginternationaltaxation?Whataretheethicalissuesthatariseinthecomputationandpaymentoftaxes?


F1D: Managing cash and working capitalCashisthelifebloodofanyorganisation.Theabilitytoprovidecash,attheappropriatecostwhenitisneededisoneofthekeycontributionsthatfinancemakestoorganisations.Itfulfilsfinance’sroleofenablingorganisationstocreateandpreservevalue.Thissectionprovidescandidateswiththetoolstoensurethattheorganisationhasenoughcashtoensureitscontinuingoperations.


1.Distinguishbetweenthetypesandsourcesofshort-termfinance.

Distinguishbetween

a.Typesofshort-termfinance

b.Financialinstitutions

2.Explainandcalculateoperatingandcashcycles. Explainandcalculate

a.Operatingcycle

b.Cashflowcycle

3.Applydifferenttechniquesusedtomanage workingcapital.

a.Applypoliciesrelatingtoelementsofoperatingand cashcycle

b.Prepareforecasts

c.Explainrisksrelatingtoworkingcapital



• Tradepayables

• Overdrafts

• Short-termloans

• Debtfactoring

• Tradeterms

• Tradepartners

• Banks

Whatarethemaintypesoffundsneededfortheshortterm?Wherecanthosefundsbeaccessed?Howdoesonedeterminewhichtypeorsourceoffinanceisappropriate?

• Inventorydays

• Tradereceivabledays

• Tradepayabledays

Theoperatingandcashcycleisoneofthemainmeansofputtingtogethervariouselementsofcashandnear-cashitemsinacoherentmannertoexplainthecashneedsoftheorganisation.Whataretheseelements?Howdotheyaffecttheavailabilityandadequacyofcashforshort-termoperations?

• Receivablesmanagement

• Payablesmanagement

• Inventorymanagement

• Riskofovertrading

• Short-termcashflowforecasting

• Investingshort-termcash

Whatarethepoliciesthatorganisationsshouldputinplacetomanageworkingcapital?Howistheappropriateleveldetermined,forecastedandaccessed?Whataretherisksassociatedwithaccessingsuchfunds?

53

The Management Level


Management Level summary Oncompletion,candidatesshouldbeabletousedataandrelevanttechnologyto:manageorganisationalandindividualperformance; translatelong-termdecisionsintomedium-termplans;allocateresourcestoimplementdecisions;monitorandreportimplementationofdecisions;providefeedbackupanddowntheorganisation; andprepareandinterpretfinancialstatements toshowtheperformance,positionandprospects oftheirorganisations.

Widerscope

Integratedwithinlimits

Financialandquantitativenon-financial

Linkpresenttopastandfuture

Mediumterm

Monitorimplementationofdecisions

Internal (whole organisation)

Lesserdetailbutbroaderpicture

Insight

E2Managing

Performance

Mechanismsto implementdecisions andmanagepeople

performance

F2Advanced

Financial Reporting

Analysingand communicatinginsights abouttheperformance

of the organisation

P2 Advanced

Management Accounting

Makingmedium-term decisionsand

managingcostsand performance


Summary of the Management Level Syllabus

E2: Managing performance

A.Businessmodelsand valuecreation

B.Managingpeopleperformance

C.Managingprojects

P2: Advanced management accounting

A.Managingthecosts ofcreatingvalue



D.Riskandcontrol

F2: Advanced financial reporting

A.Financingcapitalprojects

B.Financialreportingstandards

C.Groupaccounts

D.Integratedreporting

E.Analysingfinancialstatements

57

E2: Managing PerformanceA. Businessmodelsandvaluecreation

B. Managingpeopleperformance

C. Managingprojects

56

E2: Structure and outline

The business model asaframework tounderstandandmanage

howtocreatevalue.

Implementingorganisationalgoals through project management

Managing people performance to implementorganisationalgoals


E2A: Business models and value creationThedigitalworldischaracterisedbydisruptionstobusinessmodelsbynewentrantsandincumbentswhoseeksuperiorperformanceandcompetitiveadvantage.Thissectioncoversthefundamentalsofbusinessmodelsandhownewbusinessandoperatingmodelscanbedevelopedtoimprovetheperformanceoforganisations.


1.Explaintheecosystemsoforganisations. Explain:

a.Marketsandcompetition

b.Societyandregulation

2.Explaintheelementsofbusinessmodels. Explainthefollowing

a.Conceptofvalueandthebusinessmodel

b.Definingvalue

c.Creatingvalue

d.Deliveringvalue

e.Capturingandsharingvalue

3.Analysenewbusinessmodelsindigital ecosystems.

a.Analysedigitalbusinessmodelsandtheirrelated operatingmodels



• Definitionofecosystems

• Participantsandroles

• Interactionsanddynamics

• Rulesandgovernance

• Technology

• Risksandopportunities

Whatisthenatureoftheecosystem?Whatareitscriticalelementsandhowdotheyinteractwitheachother?Howdotheyimpacttheorganisation?

• Stakeholdersandrelevantvalue

• Stakeholderanalysis

• Resources,process,activitiesandpeople increatingvalue

• Products,services,customersegments,channelsandplatformstodelivervalue

• Distributionofvaluetokeystakeholders

Thissectioncoverstheconceptofvaluefromdifferentstakeholderperspectives.Itexaminesthevariouselementsofthebusinessmodel,theirinteractionwitheachotherandtheirimplicationforcostsandrevenue.Thesectionalsocoverstheconnectivityandalignmentbetweentheecosystemandtheelementsofthebusinessmodel.

• Disruption

• Waystobuilddisruptiveandresilient businessmodels

• Creatingdigitaloperatingmodels

• Typesofdigitaloperatingmodels

Newbusinessmodelshaveevolvedtodisruptindustriesandtheirecosystems.Whatarethey? Howhavetheyredefinedtheirindustries?


E2B: Managing people performanceHumancapitalisoneofthekeyintangibleassetsoforganisationsinanagewhereintangibleassetsarethedominantmeansbywhichorganisationscreateandpreservevalue.Leadershipisacrucialmeansformanagingindividualperformanceandtherelationshipsbetweenpeople.Thissectionexamineshowdifferentstylesofleadershipcanbeusedtoimprovetheperformanceofindividualssotheycanachieveorganisationalgoals.


1.Compareandcontrastdifferenttypesof leadershipandmanagementstyles.

Compareandcontrast:

a.Differentleadershipconcepts

b.Typesofleadership

c.Leadershipindifferentcontexts

2.Analyseindividualandteamperformance. Analysethefollowing:

a.Employeeperformanceobjectivesetting

b.Employeeappraisals

c.Coachingandmentoring

d.Managingworkplaceenvironment

3.Explainhowtomanagerelationships. Explainthefollowinginthecontextofmanagingrelationships:

a.Buildingandleadingteams

b.Communications

c.Negotiations

d.Managingconflicts



• Power,authority,delegationandempowerment

• Contingentandsituationalleadership

• Transactionalandtransformationalleadership

• Leadershipofvirtualteams

• Leadershipandethics

Leadershipiskeytoperformancemanagement.Inadigitalworlditisanareathatisleastsusceptibletoautomation.Whatconstitutesleadership?Whatarethedifferenttypesofleadership?Howdoesonechooseastyleofleadershipthatisappropriatefortheparticularcontext?

• Targetsettingandemployeealignment

• Employeeempowermentandengagement

• Performancereportingandreview

• Rewardsandsanctionsinmanagingperformance

• Differentapproachestocoachingandmentoringtoimproveperformance

• Diversityandequitypractices

• Healthandsafety

• Organisationalculture

Individualperformanceisachievedthroughstructuredprocessesandapproaches.Theseincludeobjectivesettingandregularreviewofperformanceagainstobjectives.Howshouldtheseprocessesbedevelopedtoensureemployeeengagement,empowermentandalignment?Howshouldtheworkenvironmentbeconfiguredtoenhanceperformance?Whatistheroleoftheleaderincoachingandmentoringforhighperformance?

• Characteristicsofhigh-performingteams

• Motivatingteammembers

• Communicationprocess

• Digitaltoolsforcommunication

• Negotiationprocess

• Strategiesfornegotiation

• Sourcesandtypesofconflicts

• Strategiesformanagingconflicts

• Leadershipandethics

Individualsworkinteamsandtheirperformancecontributestotheteamperformance.Howshouldteamsbebuiltandledtoimproveperformance?Howiscollaborationenhancedusingtechnology?Howcanconflictsbemanaged?


E2C: Managing projectsProjectshavebecomepervasivemeansbywhichorganisationsexecutetheirstrategies.Thissectionshowscandidateshowtouseprojectmanagementconceptsandtechniquestoimplementstrategieseffectivelyandefficiently.Itislinkedtocapitalinvestmentdecision-makingthatiscoveredinotherareasoftheManagementLevel.


1.Describetheconceptsandphasesofprojects. Describethefollowing:

a.Projectobjectives

b.Keystagesoftheprojectlifecycle

c.Projectcontrol

2.Applytoolsandtechniquestomanageprojects. Applythefollowingtomanageprojects:

a.Projectmanagementtoolsandtechniques

b.Projectriskmanagementtools

3.Explaintheconceptsofprojectleadership. Explain

a.Projectstructure

b.Rolesofkeyprojectpersonnel

c.Howtomanageprojectstakeholders



• Overallprojectobjectives

• Objectivesrelatingtotime,costandquality

• Purposeandactivitiesassociatedwithkeystagesoftheprojectlifecycle

Projectsaretheprimarymeansbywhichmanyorganisationsimplementstrategicdecisions.Itisalsohoworganisationsensurecross-functionalcollaboration.Thissectioncoversthekeyelementsofprojectmanagement.Itseekstoprovidebothawarenessandunderstandingoftheprojectmanagementprocessandtheabilitytoapplytoolsandtechniquestoparticipateinprojectsandtoidentify,evaluateandmanageprojectrisks.Theobjectiveisnottotrainprojectmanagersbuttoequipfinancepeopletoworkwithinprojectsandtoleadsomepartsofprojects.

• Workstreams

• Workbreakdownschedule,Ganttcharts,networkanalysis

• PERTcharts

• Sourcesandtypesofprojectrisks

• Scenarioplanning

• Managingprojectrisks

• Projectmanagementsoftware

• Projectstructuresandtheirimpactonprojectperformance

• Roleofprojectmanager

• Roleofkeymembers ofprojectteam

• Lifecycleofprojectteams

• Managingkeystakeholdersofprojects

• Leadingandmotivatingprojectteam


P2: Advanced Management AccountingA. Managingthecostsofcreatingvalue

B. Capitalinvestmentdecision-making

C. Managingandcontrollingtheperformance of organisational units

D. Riskandcontrol

64


Managing costs usingcosting andcostdriveranalysis

Capital investment decisions toacquire thecapacitytocreatevalue

Managing and controlling the performance of organisational units

Risk and control in themediumterm


P2A: Managing the costs of creating valueCostmanagementandtransformationareprioritiesfororganisationsfacingintensecompetition.Thissectionexamineshowtousecostmanagement,qualityandprocessmanagement,andvaluemanagementtotransformthecoststructuresanddriverstoprovideorganisationswithcostadvantage.


1.Applycostmanagementandcost transformationmethodologytomanage costsandimproveprofitability.

Applythefollowingtomanagecostsandimproveprofitability:

a.Activitybasedmanagement(ABM)methodology

b.Costtransformationtechniques

2.Compareandcontrastqualitymanagementmethodologies.

Compareandcontrast:

a.Just-in-time(JIT)

b.Qualitymanagement

c.Kaizen

d.Processre-engineering

3.Applyvaluemanagementtechniquestomanagecostsandimprovevaluecreation.

Applythefollowingtomanagecostsandvaluecreation:

a.Targetcosting

b.Valuechainanalysis

c.Lifecyclecosting


• Engenderingacost-consciousculture

• LogicofABCasthefoundationormanagingcosts

• ABMtotransformefficiencyofrepetitiveoverheadactivities

• ABMtoanalyseandimprovecustomerprofitability

• ABMtoanalyseandimprovechannelperformance

Oneofthereasonsforcalculatingcostsistoenableorganisationstomanageandpossiblytransformtheircosts.ABMisakeytechniquethatisusedtoachievethisobjectivebecauseofitslinktoABC.ThisrevolvesaroundthelogicofABCthatlinkscoststoresourceconsumptionandlevelsofactivityandisrelatedtothebusinessmodelframework.Customerandchannelanalysishavebecomeveryimportantinthedigitalworld—particularlyascustomersshiftfromproductsandservicestoexperience.Howprofitablearethesegmentsandchannelstheyuse?

• ImpactofJITandqualitymanagementonefficiency,inventoryandcosts

• BenefitsofJITandTQM

• Kaizen,continuousimprovementandcost ofqualityreporting

• Eliminationofnon-valueaddingactivitiesandthereductionofcostsusingprocessre-engineering

Qualitymanagementisanimportantpartofmanagingandtransformingcosts.Whatarethekeymethodologies?Howdotheyaffectthecostsofproducts,servicesandthechannelsthatareusedtodeliverthem?

• Determinationoftargetcostsfromtargetprices

• Componentsofthevaluechain

• Profitabilityalongthevaluechain

• Lifecyclecostinganditsimplicationfor marketstrategies

Costtransformationmustalwaysbelinkedtothevaluethatorganisationscreate.Thispartprovidesthelinkbetweencostsandvalue.



P2B: Capital investment decision-makingOrganisationshavetoallocateresourcesandkeystrategicinitiativestoensurethattheirstrategiesareproperlyimplemented.Capitalinvestmentdecision-makingistheprimarymeansbywhichsuchresourcesareallocated betweencompetingneeds.Thissectioncoversthecriteria,processandtechniquesthatareusedtodecidewhichprojectstoundertake.Ofparticularinterestisthefinancialappraisalofdigitaltransformationprojects.


1.Applythedatarequiredfordecision-making. Applythefollowingfordecision-making:

a.Relevantcashflows

b.Non-financialinformation

2.Explainthestepsandpertinentissues inthedecision-makingprocess.

Explain:

a.Investmentdecision-makingprocess

b.Discounting

c.Capitalinvestmentsasrealoptions

3.Applyinvestmentappraisaltechniques toevaluatedifferentprojects.

Applythefollowingtoevaluateprojects:

a.Payback

b.Accountingrateofreturn

c.IRR

d.NPV

4.Discusspricingstrategies. Discuss:

a.Pricingdecisions

b.Pricingstrategies



• Incrementalcashflows

• Tax,inflationandotherfactors

• Perpetuities

• Qualitativeissues

• Sourcesandintegrityofdata

• Roleofbusinessintelligencesystems

Thequalityofdecisionsdependsonthequalityandtypeofdatathatisavailabletodecision-makers.Whattypeofdatadodecision-makersneedformedium-termdecisions?Wheredotheygetthisdata?Inadigitalworldthiswouldcomefromdatalakesthroughtodatawarehousesandbusinessintelligencesystems.

• Originationofproposals,creationofcapitalbudgets,go/nogodecisions

• Timevalueofmoney

• Comparingannuities

• Profitabilityindexforcapitalrationing

• Decisiontomakefollow-oninvestment, abandonorwait(capexasrealoptions)

Whatarethestepsintheinvestmentdecision-makingprocessforsimpleaswellascomplexdecisions?Whatkeyconceptsunderpinthetechniquesthatareused?Whatarethecriteriaforacceptingprojects?Howisuncertaintydealtwith?

• Processandcalculation

• Strengthsandweaknesses

• Appropriateusage

• Useinprioritisationofmutuallyexclusiveprojects

Thispartcoversastraightforwardapplicationofthetechniquesusedtoappraiseprojects.Theseshouldbeextendedtodealwiththeevaluationofdigitaltransformationprojectsthatdonothavethesameprofileasothercapitalprojects.

• Pricingdecisionsformaximisingprofitinimperfectmarkets

• Typesofpricingstrategies

• Financialconsequencesofpricingstrategies

Whatpricingstrategiesareopentoorganisationsoperatinginimperfectmarkets?Howdotheseaffectthecapitalinvestmentdecisionprocess?


P2C: Managing and controlling the performance of organisational units

Thestructureandstrategiesoforganisationsshouldalignwitheachothertoensureeffectivestrategyimplementation.Responsibilitycentresaretheorganisationalunitsthatareallocatedresourcesandchargedwithimplementingorganisationalstrategy.Thissectionshowshowtomanagetheperformanceoftheseorganisationalunitstoensure thattheyachievethestrategicandotherorganisationalobjectives.Keyconcepts,techniquesandissuesareexploredandexamined.


1.Analysetheperformanceofresponsibilitycentresandpreparereports.

a.Analyseperformanceofcostcentres,revenuecentres,profitcentres,andinvestmentcentres.

b.Preparereportsfordecision-making.

2.Discussvariousapproachestotheperformance andcontroloforganisations.

a.Discussbudgetsandperformanceevaluation.

b.Discussotherapproachestoperformance evaluation.

3.Explainthebehaviouralandtransfer pricingissuesrelatedtothemanagement ofresponsibilitycentres.

Explain:

a.Behaviouralissues

b.Useandethicsoftransferpricing



• Objectivesofeachresponsibilitycentre

• Controllableanduncontrollablecostsandrevenue

• Costsvariability,attributablecostsandrevenueandidentificationofappropriatemeasures ofperformance

• Useofdataanalyticsinperformancemanagementofresponsibilitycentres

Whatareresponsibilitycentresandhowshouldtheybematchedtothestrategyoforganisations?WhataretheKPIsofeachtypeofresponsibilitycentre?Howistheirperformanceevaluatedandwhy?Whattypesofreportsarepreparedforresponsibilitycentremanagers?Howdotheyuseanalytics,visualisationandself-servicetechnologiestoenhancetheperformancemanagementofresponsibilitycentres?

• Keyperformanceindicators(e.g.,profitability,liquidity,assetturnover,returnoninvestment andeconomicvalue)

• Benchmarking(internalandexternal)

• Non-financialperformanceindicators

• Balancedscorecard

Howarebudgetsusedtoevaluatetheperformanceofresponsibilitycentres?Whatisbestpracticeinthisarea?Howareothermethodologieslikethebalancedscorecardusefulinmanagingperformance?

• Internalcompetition

• Internal trading

• Transferpricingforintermediategoodswheremarketsexistandwherenomarketsexist

• Typesoftransferpricesandwhentousethem

• Effectoftransferpricingonautonomy,andmotivationofmanagersofresponsibilitycentre

• Effectoftransferpricingonresponsibilitycentreandgroupprofitability

Whatarethebehaviouralissuesinresponsibilitycentreperformancemanagement—inparticularastheyaffectcontrollableandnon-controllablecostsandrevenue?Howshouldtheybemanagedsothatresponsibilitycentresworkeffectivelywitheachothertomaximiseperformanceofthewholeorganisationratherthaneachresponsibilitycentre?Whatrolecantransferpricingplayinthisarea?


P2D: Risk and controlRiskisinherentintheoperationsofallorganisations.Thissectionanalysesrisksanduncertaintiesthatorganisationsfaceinthemediumterm.Therisksaremainlyoperationalinnature.


1.Analyseriskanduncertaintyassociatedwith medium-termdecision-making.

Conduct

a.Sensitivityanalysis

b.Analysisofrisk

2.Analysetypesofriskinthemediumterm. a.Analysetypesofrisk

b.Managerisk



• Quantificationofrisk

• Useofprobabilisticmodelstointerpret distributionofprojectoutcomes

• Stress-testingofprojects

• Decisiontrees

• Decision-makingunderuncertainty

Whatrisksdoorganisationsfaceinrelationtocapitalinvestmentdecision-makingandtheimplementationofthosedecisions?Howarethoserisksincorporatedinthedecision-makingprocessandmanagedintheimplementationof thedecisions?

• Upsideanddownsiderisks

• TARAframework—transfer,avoid,reduce,accept

• Businessrisks

• Useofinformationsystemsanddatain managingrisks

7574


Financial reporting standards forpreparinggroupaccounts

Preparegroup accounts forstakeholders.

Integrated reporting in a multi-stakeholderworld

Financing capital projects

Analyse financial statements toprovideinsights.

F2: Advanced Financial ReportingA. Financingcapitalprojects

B. Financialreportingstandards

C. Groupaccounts

D. Integratedreporting

E. Analysingfinancialstatements


F2A: Financing capital projectsForselectedstrategic(capitalinvestment)projectstobeimplemented,fundsmustbesourcedattherightcostandattherighttime.Thisisakeyroleofthefinancefunctionandshowshowitenablestheorganisationtocreatevalue.Thissectionlooksatthesourcesandtypesoffundsandhowmuchtheycost.


1.Compareandcontrasttypesandsourcesof long-termfunds.

Compareandcontrast:

a.Long-termdebt

b.Equityfinance

c.Marketsforlong-termfunds

2.Calculatecostoflong-termfunds. Calculate:

a.Costofequity

b.Costofdebt

c.Weightedaveragecostofcapital



• Characteristicsofdifferenttypesofsharesandlong-termdebts

• Ordinaryandpreferenceshares

• Bondsandothertypesoflong-termdebt

• Operationsofstockandbondmarkets

• Issuanceofsharesandbonds

• Roleofadvisors

Whatarethetypesoffundsthatcanbeusedtofinancemediumtolong-termprojects?Whataretheiruniqueandsharedprofilesandunderwhatconditionsaretheysuitablefororganisationsseekinglong-termfunds?Whatistheimpactofthesefundsontheriskprofileoforganisations?Wherecanthesefundsbesourced?Whatarethecriteriathatorganisationsmustfulfiltoaccessfundsfromthesesources?

• Costofequityusingdividendvaluationmodel (withorwithoutgrowthindividends)

• Post-taxcostofbankborrowing

• Yieldtomaturityofbondsandpost-taxcost ofbonds

• Post-taxcostsofconvertiblebondsuptoandincludingconversion

Whatisthecostofeachtypeoffunds?Whatisthecostofthetotalfundsusedbytheorganisationtofunditsprojects?Howcantheorganisationminimisethecostoffundswhilstensuringtheavailabilityofadequatefundsattherighttimeandatthesametimemaintaininganappropriateriskprofile?


F2B: Financial reporting standardsThefinancefunctionisresponsiblefornarratinghoworganisationscreateandpreservevalue.Differenttypesofnarrativesareusedfordifferentaudiences.Financialreportingisusedforexternalstakeholders.Thissectionexaminesthebuildingblocksforconstructingthenarrativesinthefinancialstatements.Itcoversthekeyfinancialreportingstandardsonwhichthefinancialstatementswillbebased.


1.Explainrelevantfinancialreportingstandardsforrevenue,leases,financialinstruments,intangibleassetsandprovisions.

Explainthefinancialreportingstandardsfor:

a.Revenue

b.Leases

c.Provisions

d.Financialinstruments

e.Intangibleassets

f.Incometaxes

g.Effectofchangesinforeigncurrencyrates

2.Explainrelevantfinancialreportingstandardsforgroupaccounts.

a.Explainthefinancialreportingstandardsforthekeyareasofgroupaccounts



• IFRS15—RevenuefromContractswithCustomers

• IFRS16—Leases

• IAS37—Provisions,ContingentLiabilities and Contingent Assets

• IFRS9—FinancialInstruments

• IAS32—FinancialInstruments:Presentation

• IAS38—IntangibleAssets

• IAS12—IncomeTaxes

• IAS21—EffectofChangesinonForeign ExchangeRates

Howshouldimportantelementsofthefinancialstatementbetreatedinthebooks?Whatprinciplesshouldunderpinthese?Howdofinancialreportingstandardshelptoensurethis?Usingfinancialreportingstandardsterminologythispartwillbelookingatissuesinrecognitionandmeasurement.Themostimportantissueswillbeconsideredhere.


• IAS27—SeparateFinancialStatements

• IAS28—InvestmentinAssociatesandJointVentures

• IFRS3—BusinessCombinations

• IFRS5—Non-currentAssetsHeldforSaleorDiscontinuedOperations

• IFRS10—ConsolidatedFinancialStatements

• IFRS11—JointArrangements

Whatarethekeyprinciplesthatshouldgovernthepreparationofgroupaccounts?Howaretheyreflectedinfinancialreportingstandards?Theapproachshouldfocusontheaspectsofgroupaccountsthatareessentialfordiscussionswiththerestofthebusiness.Therefore,theemphasisshouldbeonawarenesscreationandbasicunderstandingofthetechnicalelements.


F2C: Group accountsOrganisationssometimesacquireormergewithotherorganisationstoimprovetheirstrategicperformance,positionandprospects.Theperformanceandpositionofcombinedoperationsarereportedthroughgroupaccounts.Thissectioncoverstheapplicationoftherelevantfinancialreportingstandardstopreparegroupaccounts.Thetopicscoveredarethosethatareessentialtoconductingconversationswithdifferentpartsofthebusinessabouttheperformanceofthegroupanditscomponentparts.


1.PreparegroupaccountsbasedonIFRS. Preparethefollowingbasedonfinancialreportingstandards:

a.Consolidatedstatementoffinancialposition

b.Consolidatedstatementofcomprehensiveincome

c.Consolidatedstatementofchangesinequity

d.Consolidatedstatementofcashflows

2.Discussadditionaldisclosureissuesrelatedtothegroupaccounts.

Discussdisclosurerequirementsrelatedto:

a.Transactionbetweenrelatedparties

b.Earningspershare




• IAS27—SeparateFinancialStatements

• IAS28—InvestmentinAssociatesandJointVentures

• IFRS3—BusinessCombinations

• IFRS5—Non-currentAssetsHeldforSaleorDiscontinuedOperations

• IFRS10—ConsolidatedFinancialStatements

• IFRS11—JointArrangements

Thisisaboutthepreparationofbasicgroupaccountsapplyingthefinancialreportingstandardslearnedintheprevioussection.Basicunderstandingofthetechnicalissuesisrequired.Thus,itshouldcovertherulesofconsolidation,goodwill,foreignsubsidiaries,minorityinterestsandassociatedcompanies.Theseshouldbeplacedinthecontextoftheorganisation’sstrategyasexecutedthroughmergersandacquisitionsandthesettingupofsubsidiaries.Inaddition,itcanbelinkedtotheperformancemanagementofresponsibilitycentres.

• IAS24—RelatedPartyDisclosures

• IAS33—EarningsPerShare

Whatotherissuesshouldbedisclosedoutsidethefinancialstatements?Why?Again,thefocusisonbuildingawarenessandbasicunderstandingofthetechnicalissuesinordertoequipfinanceprofessionalstoconductmeaningfuldiscussionswiththerestoftheorganisationabouttheperformance,positionandpotentialoftheorganisation.


F2D: Integrated reportingInamulti-stakeholderworld,therehasbeenacallforbroaderformsofreportingtocoverwideraudiencesandissuesofconcerntothem.TheInternationalIntegratedReportingFrameworkdevelopedbytheInternationalIntegratedReportingCouncil(IIRC)isoneofthemostinfluentialframeworksthatseekstofulfilthisrole.ThissectionintroducescandidatestotheFrameworkanditscomponents.


1.DiscusstheInternational<IR>Framework activities.

a.DescribetheroleoftheInternationalIntegratedReportingCouncil.

b.Explainintegratedthinking.

c.DiscusstheInternational<IR>Framework.

2.ExplaintheSixCapitalsofIntegratedReporting. Explainthemeasurementanddisclosureissuesof:

a.Financialcapital

b.Manufacturedcapital

c.Intellectualcapital

d.Humancapital

e.Socialandrelationshipcapital

f.Naturalcapital



• Contextofintegratedreporting

• InternationalIntegratedReportingCouncil

• Integratedthinking

• International<IR>Framework

• BenefitsandlimitationsoftheFramework

ThissectionlooksattheInternational<IR>Frameworkasameansofaddressingtheneedforwiderformsofreportinginamulti-stakeholderworld.ItintroducestheroleoftheIIRCandusestheconceptofintegratedthinkingasthefoundationalconceptoftheInternational<IR>Framework.ItalsodiscussestheFramework,itsbenefitsandlimitations.

• Definitionofthesixcapitals

• Measurementanddisclosureissuesrelating tothesixcapitals

ThesixcapitalsareakeypartoftheInternational<IR>Framework.Thissectiondefinesthesixcapitalsandexplainsthemeasurementanddisclosureissuesrelatingtothem.


F2E: Analysing financial statementsTheanalysesoffinancialstatementsenableorganisationstoexplaintheirperformanceandtocomparetheirperformanceandprospectsovertimeandagainstothers.Itcanshowhowvulnerabletheyandtheirbusinessmodelsaretodisruption.Thissectionshowshowtheseanalysesareconductedandtheirlimitations.


1.Analysefinancialstatementsoforganisations. Analysefinancialstatementstoprovideinsighton:

a.Performance

b.Position

c.Adaptability

d.Prospects

2.Recommendactionsbasedoninsightsfrom theinterpretationoffinancialstatements.

a.Recommendactions

3.Discussthelimitationsofthetoolsusedfor interpretingfinancialstatements.

Discuss:

a.Datalimitations

b.Limitationsofratioanalysis


• Ratioanalysis

• Interpretationofratios

• ReportingofratiosalongthedimensionsoftheGartnerDataAnalyticsmaturitymodel—descriptive,diagnostic,predictiveandprescriptive

• Linktoorganisation’sbusinessmodel

Thefinancialstatementsnarratehoworganisationscreateandpreservevalueusingfinancialnumbers.Analysesoffinancialstatementsallowsfinanceprofessionalstogobeyondthenumbersandputthenarrativeintoeverydaybusinesslanguagetofacilitatediscussionsandcollaborationwiththerestoftheorganisation.TheanalysiscouldbebasedontheGartnerDataAnalyticsmodelwhichpresentsinformationasdescriptive,diagnostic,predictiveandprescriptive.Thus,itwillcoverhindsight,insightandforesightintotheorganisation’sperformance,position,resilience(oradaptability)andprospects.Theanalysescanbelinkedtotheorganisation’sbusinessmodel.

• Linkagesbetweendifferentareasofperformance

• Predictiveandprescriptiveratios

• Impactofrecommendationsonwiderorganisationalecosystem

Drawlogicalconclusionsfromtheanalysis.Thefocusismainlypredictiveandprescriptiveareasofdataanalytics.Therecommendationsshouldalsobeorganisationwideandmustencompasstheecosystem.AlinkwiththebusinessmodelframeworkinE2isessential.

• Qualityandtypeofdataused

• Comparability—bothinsegmentandinternationally

Whatarethelimitationsofthedataandtechniques usedintheanalysesoffinancialstatements?Howdotheyaffecttherecommendations?Howcouldthey beovercome?



The Strategic Level

Strategic Level summary Oncompletioncandidatesshouldbeableto:supportorganisationalleaderstocraftstrategy;evaluateandmanagerisksthatmightpreventorganisationsfromsuccessfullyimplementingstrategy;valueorganisations;andsourcefinancialresourcesrequiredtoimplementofstrategy.

Widescope

Fullyintegrated

Financialandbothquantitative andqualitativenon-financial

Futureandsomepresent

Long-termdecision-making

Externalcombinedwithinternal (whole organisation)

Aggregate (fewer details)

Influence

E3 Strategic

Management

Formulatestrategy andcreateconditions

forsuccessful implementation.

F3 Financial Strategy

Createfinancialstrategy, evaluateandmanage

financialriskandassess organisationalvalue.

P3 Risk Management

Analyse,evaluateand managestrategic, operationaland cyberrisks.


Summary of the Strategic Level Syllabus


A.TheStrategyprocess

B.Analysingtheorganisational ecosystem

C.Generatingstrategicoptions

D.Makingstrategicchoices

E.Strategiccontrol

F.Digitalstrategy

P3: Risk Management

A.Enterpriserisk

B.Strategicrisk

C.Internalcontrols

D.Cyberrisks


A.Financialpolicydecisions

B.Sourcesoflong-termfunds

C.Financialrisks

D.Businessvaluation

91

E3: Strategic Management A. Thestrategyprocess

B. Analysingtheorganisationalecosystem

C. Generatingstrategicoptions

D. Makingstrategicchoices

E. Strategiccontrol

F. Digitalstrategy

90

E3: Structure and Outline

Thestrategyprocess

Create a digital strategy thatenablesthedigitaltransformationofthe

organisation.

Analyseorganisational ecosystem to diagnose

theopportunities andchallengesto

createvalue.

Makestrategic choices andintegratetheminto acoherentstrategy.

Deploystrategic control systemstocreateandcommunicateaction plansandallocate

resourcesto implementstrategy.

Searchfor,develop andevaluatestrategic

options.

92CIMA Professional Qualification Syllabus 93

E3A: The strategy processStrategyisattheheartofwhatorganisationsdo.Thissectionprovidesthefoundationofstrategicmanagementfortheorganisation.Itintroducesthestrategyprocessthatiselaboratedonintherestofthesubject.


1.Explainthepurposeofstrategy. a.Definestrategy.

b.Explainthepurposeofstrategy.

2.Discussthetypesandlevelsstrategy. Discuss

a.Typesofstrategy

b.Levelsofstrategy

3.Outlinethestrategyprocess. a.Outlinetherationalandemergentprocessesof arrivingatstrategy.


• Differentdefinitionsofstrategy

• Essentialfeaturesandcharacteristicsofstrategy

ThissectionintroducestherestofE3.Itprovidesthevariousdefinitionsofstrategyandoutlinesitsessentialfeaturesandcharacteristics.Itdiscussesthedifferenttypesandlevelsofstrategyandtheleaderswhohaveresponsibilityforthem.Finally,itlooksatthestrategyprocessfromboththerationalandemergentperspectives.

• Intendedandemergentstrategy

• Corporate,businessandfunctionalstrategies

• Analysisoforganisationalecosystem

• Generatingoptions

• Strategicchoice

• Strategiccontrol



E3B: Analysing the organisational ecosystemEveryorganisationinhabitsanecosystemwithinwhichitadaptsandevolves.Thisecosystemcomprisesmarketsandsociety,hasitsplayersanditsownsystemofgovernance.Organisationscanalsojoinwithotherstoformasmallerecosystemwithinthebroaderonetoreflecttheirstrategicpreferences.Thissectionprovidescandidateswithanunderstandingofthedynamicsoftheecosystem(boththewiderandthesmallermoredeliberateonesformedbyorganisations)andhowitaffectsthestrategyoftheorganisation.


1.Analysetheelementsoftheecosystem. Analyse

a.Marketsandcompetition

b.Societyandregulation

2.Discussdriversofchangeintheecosystem. Discussthefollowingdriversofchange:

a.Institutionalandsystemic

b.Social

c.Market

d.Technology

e.Sustainability

3.Discusstheimpactoftheecosystemon organisationalstrategy.

a.Discusstheimpactofstrategicnetworksand platformsonorganisationalstrategy

b.Conductstakeholderanalysisinnetworks



• SWOTanalysis

• PESTELanalysis

• Competitoranalysis

• Customeranalysis

• Widerecosystems

• Industryecosystems

Whattypesofmarketsdoorganisationsoperatein?Whatarethe“rulesofthegame”inthesemarkets?Whatarethesourcesandopportunitiesfordisruptioninthemarket?Howdoessocietyregulatethemarketsandprovide“permissiontoplay”fororganisations?

• Globalisation

• Geopolitics

• Demography

• Customerempowerment

• Digitaltechnology

• Automation

Whatarethedriversofchangeintheecosystem?Howaretheindividualdriverslinked?Whattypeofoutcomesdotheybringindividuallyandcollectively?Whatrisksandopportunitiesdotheybringorganisations?

• Valuecreationinecosystems

• Participantsandinteractionsinnetworks andplatforms

• Technologyenablersinnetworks

• Processofcreatingnetworksandplatforms

• Stakeholderanalysisinnetworks

• Corporatesocialresponsibility

Inadigitalworldwhatistheimportanceofnetworksandplatforms?Whataretheroles,interactions,andgovernancesystemsintheecosystems?Whoarethekeyplayers?Howdoesthisaffectthebusinessmodeloforganisations?


E3C: Generating strategic optionsStrategyisaboutchoiceofoptions.Theseoptionsmustbegeneratedanddevelopedbasedonthedynamicsoftheecosysteminwhichtheorganisationoperatesandthefoundationalcontextsoftheorganisation(e.g.itspurpose,valuesetc).Thissectioncovershowoptionsaregeneratedandlinksthemtothepurpose,valuesandvisionoftheorganisation.Inaddition,itlooksattheroleofvariouspartsandlevelsoftheorganisationinthestrategyprocess.


1.Discussthecontextofgeneratingoptions. Discuss:

a.Theroleofgovernanceandethicsinthestrategyprocess

b.Thepurpose,visionandvaluesoftheorganisationandtheirimpactonstrategy

2.Discusshowtogenerateanddevelopoptions. Discusshowto:

a.Framekeystrategicquestions

b.Diagnoseorganisation’sstartingposition

c.Forecastpotentialorganisationaloperating ecosystem

d.Usevariousframeworkstogenerateoptions

.



• Rolesandresponsibilityofleadersoforganisationsforstrategy

• Definitionofpurpose,visionandvaluesoforganisations

• Linkagebetweenpurpose,visionandvalues toeachotherandtostrategy

Whoisresponsibleforvariousaspectsofthestrategyformulationprocess?Howarethoserolesdeterminedandgoverned?Howdoestheorganisationderiveitspurpose,visionandvalues?Whatprocessesexisttoensurethatstrategyisbasedonand/orarealigned tothese?

• Product/marketmatrix

• Genericstrategies

• Trendanalysis

• Systemmodeling


• Tangibleandintangiblevaluedriversand datatomeasurethem

• Gametheoryperspectives

• Realoptionperspectives

Whatarethecorestrategicquestionstoaskandwhatarethecriteriaandconstraintsforaskingthem?Whatistheorganisation’sstartingpoint?Whereandhowdoesitmakemoney?Whatpotentialfuturesmightitinhabitandwhataretheforcespotentiallydrivingthesefutures?Whatarethepotentialpathwaystothisfuture?Whatnewbusinessmodelsareinplay?

.


E3D: Making strategic choicesOnceoptionshavebeengeneratedinvariousareasoftheorganisation’soperationstheorganisationhastochoosebetweenthealternatives.Thechoiceisbasedonpredefinedcriteriaandanevaluationoftheoptionsagainstthesecriteria.Thevariousoptionschosenmustthenbeintegratedintoacoherentwholetoformtheorganisation’sstrategy.Thissectioncovershowtheoptionsareevaluated,chosenandintegratedcoherentlytoformthestrategyoftheorganisation.


1.Evaluateoptions. a.Developcriteriaforevaluation.

b.Evaluateoptionsagainstcriteria.

c.Recommendappropriateoptions.

2.Producestrategybytheintegrationofchoicesinto coherentstrategy.

Conduct:

a.Valueanalysis

b.Portfolioanalysis



• Suitability,acceptabilityandfeasibilityframework Whatarethedifferentcriteriatoguidethechoiceofoptions,onehowaretheyprioritisedandwhy?

• Valuechainanalysis

• Managingproductportfolio

Whatarethecriteriatoensureeffectiveintegrationandwhy?Whatarethetrade-offstobemadewhenputtingtheindividualchoicestogether?Howdoesoneensureintegratedthinking?


E3E: Strategic controlOncestrategyhasbeenformulated,ithastobeimplemented.Thisinvolvesdevelopingandcommunicatingactionplans,allocatingresourcesandmonitoringtheimplementationoftheplans.Inaddition,implementingstrategyinvolvessignificantchange.Thenatureofthesechangesshouldbeevaluatedandappropriatewaysofmanagingchangehavetobedevelopedandimplemented.Thissectionexamineshowtheseimplementationobjectivesareachievedandhowchangeismanaged.


1.Developstrategicperformancemanagement system.

a.Developdetailedactionplans

b.Communicateactionplans

c.Monitorimplementation

d.Alignincentivestoperformance

2.Adviseonresourceallocationtosupportstrategy implementation.

a.Adviseonresourceavailability

b.Alignresourceallocationtostrategicchoices

3.Recommendchangemanagementtechniques andmethodologies.

a.Assessimpactofstrategyonorganisation

b.Recommendchangemanagementstrategies

c.Discusstheroleoftheleaderinmanagingchange

.


• Actionplans

• Target setting

• Criticalsuccessfactors(CSFs)

• Keyperformanceindicators(KPIs)

Howdoestheorganisationpreparethegroundsforexecutingstrategy?Howdoesitcreateandcommunicateactionplansforimplementation?Howisthewholeorganisationmobilised,motivatedandincentivisedtoimplementtheplans?Whatrolecanintegratedreportingplay?

• Auditofkeyresourcesandcapabilitiesrequired toimplementstrategy

• Matchingresourcestostrategy

Whataretheresourcesneededtoimplementstrategy?Wherearetheresourcesneeded?Howdoestheorganisationre-alignresourceallocationfromexistingunitsorprojectstonewonesthatmatchthestrategicchoicesmade?

• Typesofchange

• Impactofchangeonorganisationalculture

• Resistancetochange

• Approachesandstylesofchangemanagement

• Roleofchangeleaderincommunication

Whatistheimpactofthenewstrategyonthewholeorganisation,partsoftheorganisationandpartnersoftheorganisation?Whattransformationisrequired andhowdoestheorganisationdrivethesechanges?

.



E3F: Digital strategyStrategytakesplacewithinspecificorganisationalcontextsandecosystems.Theprimarycharacteristicsofthecurrentcontextisdigitaltransformation.Organisationsneedtothinkthroughtheirapproachtostrategywithinthisperspective.Thissectioncovershowtointroducethinkingaboutdigitaltransformationinthestrategyoforganisations.


1.Describethegovernanceofdigitaltransformation. a.Describetherolesandresponsibilitiesoftheboardandexecutiveleadershipindigitalstrategy.

2.Analysedigitaltransformation. Analyse

a.Digitaltechnologies

b.Digitalenterprise

3.Discussthevariouselementsofdigital strategies.

Discuss:

a.Economicsofdigitisation

b.Digitalecosystems

c.Digitalconsumption

d.Dataandmetrics

e.Leadershipandculture



• Roleofboardandseniorleadershipindigitalstrategy

Whoisresponsibleforleadingtheprocessof digitaltransformation?Whatistheirroleinthe processandwhy?

• Cloudcomputing


• Processautomation

• Artificialintelligence


• Blockchain

• Internet of things

• Mobile

• 3-Dprinting

Whatarethetechnologiesthatunderpindigitaltransformation?Howaretheyevolvingandwhatimpactdotheyhaveontheorganisationanditsimmediateandwideroperatingenvironment?Whattypeoforganisationdosuchtechnologiescreate?Whataretheelementsofthebusinessandoperatingmodelsofsuchdigitalenterprises.

• Businesscasefordigitaltransformation

• Participants,interactionsanddynamicsof ecosystemandimpactonstrategy

• Trendsinconsumption(e.g.,hyperpersonalisation, movefromproductsandservicestoexperience)

• Newmetrics(scale,activeusageandengagementmetrics)

• Leadershipindigitaltransformation

Whatistheeconomicandbusinesscasefordigitisation?Howdoestheorganisationcreatepartnershipsintheecosystemtoensurestrategicsuccess?Whatarekeytrendsunderlyingtheconsumptionoftheorganisation’sproductsandservicesbycustomersandconsumers?Whatdataandmetricsshouldorganisationsusetoevaluatesuccessofdigitalenterprises?Howshouldleadersandtheirorganisationsthink,actandreactdifferentlybecauseofdigitaltransformation?

105

P3: Risk ManagementA. Enterpriserisk

B. Strategicrisk

C. Internalcontrols

D. Cyberrisks

104


Identifyandevaluate enterprise risks and their

sourcesthatcanimpedethe implementationofstrategy.

Developprocessestoidentify, evaluateandmanage

cyber risks.

Developappropriateresponses to strategic risks.

Evaluatetheuseofinternal controlstomanage enterpriserisks.


P3A: Enterprise riskNotallintendedstrategiesareimplementedduetovariousfactors.Thesefactorsconstitutetheoperating enterprise-widerisksoftheorganisation.Thissectioncovershowtoidentify,evaluateandmanagetheserisks.


1.Analysesourcesandtypesofrisk. Analyse:

a.Sourcesofrisks

b.Typesofrisks

2.Evaluaterisk. a.Evaluatetheimpactofrisk

b.Assessthelikelihoodofrisks

c.Analysetheinteractionofdifferentrisks

3.Discusswaysofmanagingrisks. Discuss:

a.Rolesandresponsibilities

b.Risktolerance,appetiteandcapacity

c.Riskmanagementframeworks

d.Riskanalytics

P3: Risk Management


• Upsideanddownsiderisks

• Risksarisingfrominternalandexternalsources

• Risksarisingfrominternationaloperations

• Strategicandoperationalrisks

Whatarethetypesandsourcesofrisksthatwouldpreventorganisationsfromimplementingtheirintendedstrategy?

• Quantificationofriskexposure

• Riskmaps

Whatistheimpactoftherisksontheorganisation?Whattechniquesareavailabletoevaluatetheimpactofsuchrisks?

• Roleofboardandothersintheorganisationforidentifyingandmanagingrisks

• RiskmitigationincludingTARA–transfer,avoid, reduce,accept

• Assurancemapping

• Riskregister

• Riskreportsandresponses

• Ethicaldilemmasassociatedwithriskmanagement

Howisriskmanagedintheorganisation?Howisresponsibilityforvariousaspectsofriskmanagementdistributedintheorganisation?Howdoestheorganisationalignitsrisktolerance,appetiteandcapacitytoitsdecisionsandactions?Whatriskmanagementframeworksarethere?Howisriskinformationcommunicatedtotheorganisation?


P3B: Strategic riskAfundamentalriskoftheorganisationisthatitsstrategyisthewrongoneandthatevenifimplementedperfectly,itwillachievethewrongoutcomefortheorganisation.Inaddition,somerisksareofsuchhighsignificancethattheycanaffecttheveryexistenceoftheorganisation.Thissectioncoverswheretheserisksemanatefrom,evaluatesthem andexplainshowoversightofsuchrisksiscriticaltothegovernanceoftheorganisation.


1.Analyserisksassociatedwithformulatingstrategy. a.Analyserelevanceoftheassumptionsonwhichstrategyisbased.

b.Discusspotentialsourcesandtypesofdisruptionstostrategy.

2.Evaluatethesourcesandimpactof reputationalrisks.

Evaluate:

a.Sourcesofreputationalrisk

b.Impactofreputationalriskonstrategy

3.Explaingovernancerisks. Explain:

a.Theroleofboardanditscommitteesinmanaging strategicrisk

b.Failureofgovernanceanditsimpactonstrategy

P3: Risk Management


• Analysisofstrategicchoice


• Stress-testingstrategy

Whataretherisksthatthestrategyoftheorganisationiswrong?Whatarethesourcesofsuchrisks?Howdoestheorganisationevolveitsstrategyinadynamicenvironmenttokeepitrelevant?

• Risksofunethicalbehaviour

• Impactonbrandandreputationoforganisation

Whatisreputationalriskandwhyisitanimportantstrategicrisk?Whatarethetypesandsourcesofreputationalrisksandwhatistheirimpactontheorganisation?Howcantheybemanaged?

• SeparationoftherolesofCEOandchairman

• Roleofnon-executivedirectors

• Rolesofauditcommittee,remunerationcommittee,riskcommitteeandnominationcommittee

• Directors’remuneration

Whatistheroleoftheboardinriskmanagement?Howdoesgovernanceriskoccur?Howisthisrolegovernedbythevariouscorporategovernance codesandprinciples?


P3C: Internal controlsControlsystemsareanintegralpartofmanagingrisks.Variouscontrolframeworkshavebeendevelopedtoassistinthisprocess.Inaddition,theinternalauditfunctionperformsavitalroleinhelpingtoimplementandmonitorimplementationandadherencetothecontrolframeworks.Thissectioncovershowinternalcontrolsystemscanbeusedeffectivelyintheriskmanagementprocess.


1.Analyseinternalcontrolsystems. a.Discussrolesandresponsibilitiesforinternal controls.

b.Discussthepurposeofinternalcontrol.

c.Analysethefeaturesofinternalcontrolsystems.

2.Recommendinternalcontrolsforrisk management.

a.DiscusstheCommitteeofSponsoringOrganisationsoftheTreadwayCommission(COSO)internalcontrolandriskmanagementframework.

b.Assesscontrolweakness.

c.Assesscompliancefailures.

d.Recommendinternalcontrolsforrisk management.

3.Discussvariousissuesrelatingto internalauditinorganisations.

Discuss:

a.Formsofinternalaudit

b.Internalauditprocess

c.Effectiveinternalaudit

d.Theinternalauditreport

P3: Risk Management


• Roleofriskmanagerasdistinctfrominternalauditor

• Controlsystemsinfunctionalareas

• Operationalfeaturesofinternalcontrol

Whataretherolesofinternalcontrolsystemsinmanagingrisks?Whatareitskeyfeaturesandwhy?

• Governanceandculture

• Strategyandobjectivesetting

• Performance

• Reviewandrevision

• Information,communicationandreporting

• Identifyingandevaluatingcontrolweaknessandcompliancefailures

ThisintroducestheCOSOframeworkasacomprehensivewayoflookingatinternalcontrolsinriskmanagement.Theobjectiveistogetcandidatestounderstandthekeyelementsandknowhowtoapplytheminevaluatinginternalcontrols.

• Complianceaudit,fraudinvestigation,value formoneyauditandmanagementaudit

• Operationofinternalaudit

• Assessmentofauditrisk

• Processofanalyticalreview

• Independence,staffingandresourcing of internal audit

• Preparationandinterpretationofinternal auditreports

Thispartlooksatthecriticalrolethattheinternalauditfunctioncanplayinriskmanagement.Theobjectiveistocreateawarenessandunderstandingofthevariousissuesininternalauditandhowtheylinktoeachother.


P3D: Cyber risksInadigitalworldoneofthemajorthreatsiscyberrisk.Howaredataandoperatingsystemsprotectedfromunauthorisedaccessandmanipulation?Howarebreachesidentified,analysed,remediedandreported? Thesearesomeofthequestionscoveredinthissection.


1.Analysecyberthreats. Analyse:

a.Natureandimpactofcyberrisks

b.Typesofcyberrisks

c.Riskofsecurityvulnerabilities.

2.Reviewcybersecurityprocesses. Review:

a.Cybersecurityobjectives

b.Securitycontrols

c.Centralisationincybersecurity

3.Discusscybersecuritytoolsandtechniques. Discuss:

a.Forensicanalysis

b.Malwareanalysis

c.Penetration testing

d.Softwaresecurity

4.Evaluatecyberriskreporting. a.Evaluatecyberriskreportingframeworks

P3: Risk Management


• Malware

• Applicationattacks

• Hackers

• Resultofvulnerabilitiesincludingdowntime,reputationalloss,customerflight,legalandindustryconsequences

Thispartlooksatwhereandhoworganisationscanbevulnerabletocyberthreatsandthetypeandsourcesofsuchthreats.Inaddition,itlooksattheimpactsuchthreatscanhaveonorganisations.

• Protection,detectionandresponse

• Centralisedmanagement

• Centralisedmonitoring

Theprincipalaimhereistoenablecandidatestounderstandhowtomanagecyberthreatsthroughcybersecurityprocesses.Whatobjectivesshouldorganisationssetinthisarea?Whatcontrolsareavailabletoorganisations?

• Systemlevelanalysis,storageanalysisandnetworkanalysis

• Reverseengineering,decompilationanddisassembly

• Networkdiscovery,vulnerabilityprobing,exploitingvulnerabilities

• Tiersofsoftwaresecurity

Thispartlooksatthetoolsandtechniquesavailabletomanagecyberrisks.Candidatesareexpectedtohaveabasicunderstandingofthetechniquesandhowtheycanbedeployedtogether.

• Descriptioncriteriaincludingnatureofbusinessandoperations,natureofinformationatrisk,riskmanagementprogrammeobjectives,cybersecurityriskgovernancestructureetc.

Howshouldcyberrisksbereported?Whatreportingframeworksareavailable?

115

F3: Financial StrategyA. Financialpolicydecisions

B. Sourcesoflong-termfunds

C. Financialrisks

D. Businessvaluation

114


Analyseandevaluatethe sources of long-term financestomeet theorganisation’sfinancing

requirements.

Identify,assessandmanage financial risksassociatedwith cashflowsandcapitalprojects.

Makefinancial policy decisions thataligntotheorganisation’s

strategicobjectives.

Developandapply business valuation techniquestomeasure thetangibleandintangiblevalue

oforganisations.


F3A: Financial policy decisionsTheoverallstrategyoftheorganisationmustbesupportedbyhowitsfinancesareorganised.Thisrequiresanunderstandingofthedifferentstrategicfinancialobjectivesandpolicyoptionsthatareopentoorganisations.Thechoiceoftheseobjectivesandpolicyoptionswillbeheavilyinfluencedbythefinancialmarketrequirementsandtheregulatoryenvironmentinwhichtheorganisationoperates.Thissectionexaminestheseissues.


1.Adviseonstrategicfinancialobjectives. a.Analysedifferenttypesoforganisationsandtheirobjectives.

b.Adviseonfinancialobjectives.

c.Adviseonnon-financialobjectives.

2.Analysestrategicfinancialpolicydecisions. Analysethefollowingpolicydecisionareas:

a.Investment

b.Financing

c.Dividends

d.Interrelationshipsbetweenpolicydecisionareas

3.Discusstheexternalinfluencesonfinancial strategicdecisions.

Discusstheinfluenceofthefollowingonfinancialstrategicdecisions

a.Marketrequirements

b.Taxation

c.Regulatoryrequirements



• Profitandnot-for-profitorganisations

• Quotedandunquotedcompanies

• Privateandpublicsectororganisations

• Valueformoney,maximisingshareholderwealth

• Earningsgrowth,dividendgrowth

• Impactofunderlyingeconomicconditionsandbusinessvariablesonfinancialobjectives

• Enhancingthevalueofothernon-financialcapitals(humancapital,intellectualcapitalandsocialandrelationshipcapital)

• UnitedNationsSustainabilityDevelopmentGoals

Thissectionisaboutaligningfinancialobjectivesandpoliciestothestrategiesoftheorganisation.Thekey aimistomakesurethattheorganisationhasaproperbasistodeterminewhattypesoffundstoaccessandhowtousethosefunds.Todothiseffectivelyfinanceprofessionalsmustbeabletoevaluatetheopportunitiesandconstraintsplacedonthemintheoperatingenvironment—particularlyfinancialmarketrequirements,theimpactoftaxationandtherequirementsofindustryandfinancialmarketregulators.

• Useofpolicydecisionstomeetcashneedsofentity

• Sensitivityofforecastfinancialstatementsandfuturecashpositiontothesepolicydecisions

• Considerationoftheinterestsofstakeholders

• Lenders’assessmentofcreditworthiness

• Considerationofdomesticandinternational taxregulations

• Considerationofindustryregulationssuchas priceandservicecontrols


F3B: Sources of long-term fundsWhattypesoffundsareavailabletoorganisationstofinancetheimplementationoftheirstrategies?Howmuchofeachtypeshouldtheygofor?Andwhatistheimpactontheorganisation?Whereandhowdotheygetthesefunds?Andhowdotheyprovideincentivestoprovidersofsuchfundssothatthefundsareavailableattherighttime,intherightquantitiesandattherightcost?Thesearesomeofthequestionscoveredbythissection.


1.Evaluatethecapitalstructureofafirm. Evaluate:

a.Choiceofcapitalstructure

b.Changesincapitalstructure

2.Analyselong-termdebtfinance. Analyse:

a.Selectingdebtinstruments

b.Targetdebtprofile

c.Issuingdebtsecurities

d.Debtcovenants

e.Taxconsiderations

3.Evaluateequityfinance. a.Evaluatemethodsofflotation

b.Discussrightsissues

4.Evaluatedividendpolicy. Evaluatepolicyinthefollowingareas:

a.Cashdividends

b.Scripdividends

c.Sharerepurchaseprogrammes



• Capitalstructuretheories(traditionaltheoryandMiller and Modigliani (MM) theories)

• Calculationofcostofequityandweightedcostofcapitaltoreflectchangesincapitalstructure

• Impactofchoiceofcapitalstructureonfinancialstatements

• Structuringdebt/equityprofilesofcompanies inagroup

Howshouldimportantelementsofthefinancialstatementbetreatedinthebooks?Whatprinciplesshouldunderpinthese?Howdofinancialreportingstandardshelptoensurethis?Usingfinancialreportingstandardsterminologythispartwillbelookingatissuesofrecognitionandmeasurement.Themostimportantissueswillbeconsideredhere.

• Typesofdebtinstrumentsandcriteriaforselectingthem

• Managinginterest,currencyandrefinancingriskswithtargetdebtprofile

• Privateplacementsandcapitalmarketissuance ofdebt

• Featuresofdebtcovenants

• Methodsofflotationandimplicationsformanagementandshareholders

• Rightsissues,choiceofdiscountratesandimpactonshareholders

• Calculationoftheoreticalex-rightsprice(TERP)andyieldadjustedTERP

• Featuresandcriteria

• Impactonshareholdervalueandentityvalue,financialstatementsandperformance


F3C: Financial risksThereisalwaysariskthattheorganisationwillnotbeabletoattractenoughfundstofinanceitsoperationsandinextremeconditionswillfailtosurviveasaresult.Thissectioncoversthesourcesofsuchrisksandhowtoevaluateandmanagesuchfinancialrisksappropriately.


1.Discussthesourcesandtypesoffinancialrisks. Discuss:

a.Sourcesoffinancialrisk

b.Typesoffinancialrisk

2.Evaluatefinancialrisks. a.Evaluatehowfinancialrisksarequantified

3.Recommendwaysofmanagingfinancialrisks. a.Recommendwaystomanageeconomic andpoliticalrisks

b.Discusscurrencyriskinstruments

c.Discussinterestrateriskinstruments



• Economicrisk

• Politicalrisk

• Currencyrisk

• Interestraterisk

Managingrisksrelatedtofinancesissimilartomanagingothertypesofrisksingeneralapproachandmethodology.However,therearespecificdifferencessuchasthesourcesandtypesoffinancialrisks,howtheycanbequantifiedandwaysinwhichtheyaremanaged.Thissectionlooksattheveryspecificissuesrelatedtomanagingfinancialriskswithinageneralriskmanagementframework• Theoryandforecastingofexchangerates

(e.g.interestrateparity,purchasingpower parityandtheFisherEffect)

• Valueatrisk

• Responsestoeconomictransactionandtranslationrisks

• Operationsandfeaturesofswaps,forwardcontracts,moneymarkethedges,futuresandoptions

• Techniquesforcombiningoptionsinordertoachievespecificriskprofilesuchascaps, collarsandfloors

• Internalhedgingtechniques


F3D: Business valuationTheprimaryobjectiveofallstrategicactivityistocreateandpreservevaluefororganisations.Howdoestheorganisationknowwhetherithassucceededinthisobjective?Sometimes,inordertoimplementstrategies,organisationshavetoacquireotherorganisations.Howdoestheacquirerdeterminethevalueofitsacquisition?Thissectioncovershowtousetechniquesinbusinessvaluationtoanswersuchquestions.


1.Discussthecontextofvaluation. Discuss:

a.Listingoffirms

b.Mergersandacquisitions(M&A)

c.Demergersanddivestments

2.Evaluatethevariousvaluationmethods. a.Evaluatedifferentvaluationmethods

b.Discussthestrengthsandweaknessesofeachvaluationmethod

3.Analysepricingandbidissues. Analyse:

a.Pricingissues

b.Bidissues

4.Discusspost-transactionissues. Discuss:

a.Post-transactionvalue

b.Benefitrealisation


• ReasonsforM&Aanddivestments

• Taxationimplications

• Processandimplicationsofmanagement buy-outs

• Acquisitionbyprivateequityandventurecapitalist

Thissectionlooksattheconditionsunderwhichorganisationsneedtocalculatetheirownvalueorthevalueofotherorganisationsorsub-unitsthereof.Itintroducescandidatestovaluationtechniques.Ofparticularimportanceinthedigitalworldisthevaluationofintangibles.Thislinksalsotohowtoreportintangiblevalueandtheirdriversinintegratedreporting.Inaddition,howshoulddigitalassetsbevalued?Oneofthereasonsforvaluationiswhenmergingoracquiringfirms.Howshouldsuchdealsbestructured,implementedandclosed?Forexamplewhatshouldtheformsoftheconsiderationbe?Whatarethetermsoftheacquisition?Howdoesoneenablebenefitrealisation,particularlyforsynergiesoncetheacquiredorganisationhasbeenintegratedintotheacquiringorganisation?

• Assetvaluation

• Valuationofintangibles

• Differentmethodsofequityvaluation(shareprices,earningsvaluation,dividendvaluation,discountedcashflowvaluation)

• CapitalAssetPricingModel(CAPM)

• Efficientmarkethypothesis

• Formsofconsideration

• Termsofacquisition

• Targetentitydebt

• Methodsoffinancingcashofferandrefinancingtargetentitydebt

• Bidnegotiation

• Post-transactionvalueincorporatingeffectofintendedsynergies

• M&Aintegrationandsynergybenefitrealisation

• Exitstrategies



Exam information and timetableExams Availability Type of

assessment Length of assessment

Location

Objective tests CanbesatgloballyatPearsonVUE testcentres

LocationsofPearsonVUEcentrescanbefoundviathe CIMAwebsite

E3P3F3

E2P2F2

E1P1F1

On-demandand yearround

Computerised objectivetests

90minutes

Case study exams

StrategicLevel

ManagementLevel

OperationalLevel

Four sittings peryear

Casestudy exam

3 hours

ActualdatesforthecasestudyexamsittingsareavailableontheCIMAwebsite.

International Accounting Standards and Exposure DraftsTheexaminationswillbesetinaccordancewithrelevantInternationalAccountingStandardsandInternationalFinancialReportingStandards.ThisalsoappliestomaterialcontainedinFinancialReportingExposureDrafts.Detailsofexaminablestandardsforagivenperiodwillbecommunicatedintherelevantexaminationblueprint.

Mathematical tables and formulaeRelevantmathematicaltablesandformulaewillbeincludedwithintheappropriateexaminationandwillbeprovidedintherelevantexaminationblueprint.

Formoreinformation,gotocimaglobal.com/examblueprints.

Programme design and the international education standards International education standardsCIMAisamemberoftheInternationalFederationofAccountants(IFAC)andsupportstheprinciples,standardsandguidelinessetoutwithintheIFACInternationalEducationStandardsforProfessionalAccountants.

CIMA pre-qualification education programmesDesignersanddeliverersofCIMAtuitionprogrammesarerequestedtorefertotheIFACInternationalEducationStandardsandreflectthecontentswhendevelopinglearningprogrammesforCIMAstudents.

CIMA initial professional development – practical experienceThoseresponsibleformanaging,supervisingandmentoringCIMAstudentsastheyacquirerelevantpracticalexperiencearerequestedtorefertotheIFACInternationalEducationStandardsandreflectthecontentswhendevelopingwork-basedexperienceprogrammes.

Copyright©CIMA2019

Publishedin2019by: CharteredInstituteofManagementAccountants TheHelicon,SouthPlace London EC2M2RB

WhilstCIMAallowsthesyllabustobeusedtopromotetheCIMAProfessionalQualification,noresponsibility forlossoccasionedtoanypersonactingorrefrainingfromactionasaresultofthisdocument,canbeaccepted byCIMA.

CIMArecognisesandaimstoprotectbotheconomicandmoralrightsinthisworkandobjecttoanydistortions ofthework,particularlythosewhichareprejudicialtoitsreputation,orwhichprovidefalseattributionofauthorship,passingoffordefamation.

CIMAreservestherighttomakechangestothequalificationstructureandsyllabus,asitdeemsnecessary. Copyright©2019PearsonEducation,Inc.oritsaffiliate(s).Allrightsreserved.

CGMA,CharteredGlobalManagementAccountant,andtheCGMAlogoaretrademarksoftheAssociationofInternationalCertifiedProfessionalAccountants.ThesetrademarksareregisteredintheUnitedStatesand inothercountries.

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