This issue

Paper P10
TOPCIMA
Papers P3 study
notes
and P6
MABS and
MARCS

student one2one

GLOBAL
CONTACT
Details
Miho Endo,
n CIMA Contact
full-time student
E: cima.contact@
cimaglobal.com
T: +44 (0)20 8849 2251
F: +44 (0)20 8849 2450 You recently passed all six CIMA managerial level papers that I had the evidence. My husband qualified shortly afterwards,
in one sitting. How did you manage this rare feat? so it was a very happy time for us.
n Australia office
Level 3, The Plaza I hadn’t studied since I was at university ten years ago, but I’ve
Building, Australia been a full-time student for the CIMA exams, so it hasn’t been You also passed all five assessments in one go at certificate
Square, 95 Pitt Street,
Sydney NSW 2000 as hard for me as it would have been for someone with work level last year. What’s the secret of your success?
E: sydney@ and other commitments. I made CIMA the most important thing in my life. I treated it as
cimaglobal.com
T: 1800 679 996 if I were in the office and studied for eight hours a day while my
(toll-free within Australia) What was the biggest challenge for you? husband was at work. I also studied at the London School of
or: +61 (0)2 9776 7982
F: +61 (0)2 9262 5979
The language barrier. I came to London from Tokyo with my Business and Finance and went on revision courses.
husband two years ago so that he could complete his training I think I’m quite a self-disciplined person anyway. I wrote out
n CIMA Botswana
Plot 50370
as a solicitor. My English has improved a lot since then, but I a task list for myself each day and scheduled in which questions
Ground Floor was still nervous when it came to the exams. I knew there was I’d practise. To help with revision I made my own flash cards to
Acumen Park Building
Fairgrounds Office Park
a danger that I might not understand a question correctly. remind me of key points and formulas. I also made sure that I
Gaborone asked my tutor to explain any points I didn’t understand, which
E: cimabotswana@it.bw Which parts of the syllabus were the most satisfying? was particularly important at certificate level. You need to
T: +267 395 2362
F: +267 397 2982 Papers P7 and P8 were good for me. I’m really interested in understand this well if you want to do well at the other levels.
international accounting standards and I hope this will help
n CIMA China Office
Unit 1905 with my career now that I’ve returned to Japan. Not many You found time to get really fit as well.
Westgate Tower people have studied them here. I decided that I needed to be both mentally and physically tough
1038 Nanjing Road (W)
Shanghai 200041 if I was going to do my best. I usually visit the gym once or twice
E: CIMA-China@ Did you have any problems during the exams themselves? a week, but a month before the exams I started to run two to
vip.sina.com
T: +86 (0)21 52285119 I was very worried because I ran out of time several times. three kilometres every morning. I think that helped a lot.
F: +86 (0)21 52285120 Some of the phrases in the questions were difficult to grasp
n Hong Kong Division
and it took a while to understand the tricks that were hidden What do you plan to do now that you’re back in Japan?
Suites 1414 – 1415 between the lines. This meant that I couldn’t finish in time. I left my job as assistant manager of global business at Japanese
14th Floor
Jardine House
Because of that, I felt that maybe I wouldn’t pass. mobile phone company NTT DoCoMo when I came to London.
Central Hong Kong I’ll now be looking for a job that uses the knowledge I’ve gained
E: juliee.tan@
cimaglobal.com
So it must have been a long and difficult wait for your while studying. I do regret that there’s no CIMA presence in
T: +852 2511 2003 results to come through. Japan, but I plan to speak to CIMA about how I can continue
F: +852 2507 4701 Waiting for the results was hard. I was almost in despair. In with the exams. I’m also going to ask my former boss to certify
Continued on page 35. the end I had to stop thinking about it. When I received the my work experience for the purpose of qualifying with CIMA.
Global contact details e‑mail telling me that I’d passed all the papers, I thought that it Our accounting system is different here, but the government is
continued from page 33.
had been a mistake – or that my friends were playing a joke on reviewing it to make it more international. I’ll certainly let people
me. It was only when I received the letter from the institute know what a worthwhile experience it’s been. FM

financial
Illustration: Patrick Morgan October 2006  management 33
 pAPER p10

n India liaison office

Test of Professional Competence
in Management Accounting
DBS Corporate Centre
Second Floor
Raheja Chambers
213 Nariman Point
Mumbai 400 021
E: india@cimaglobal.com
Kadgee Clothing is hanging by a thread. Adrian Sims analyses the case study’s
T: +91 (0) 22 5630 9200
pre-seen material and considers how the firm might avoid coming unstitched.
n Malaysia Division
123 Jalan SS6/12
Kelana Jaya Urban Centre
47301 Petaling Jaya
Selangor Darul Ehsan This case describes a depressing situation that’s familiar to know what’s important to Kadgee? An important first step is to
E: kualalumpur@
cimaglobal.com
European manufacturing companies, which are having to fight understand the situation of the firm described in the pre-seen
T: +60 (0)3 7803 for business against lower-cost operations in the enlarged material. (The opening pages contain a brief history of the
5531/5536 European Union and beyond. company. Don’t spend too much time analysing this, because it
F: +60 (0)3 7803 9404
In the past, Kadgee made profits and had cash – it was in the merely sets the scene.)
n Republic of black at the bank. But now it’s teetering on the edge of losses Kadgee is an unlisted private company. Two people, Bruno
Ireland Division
45-47 Pembroke Road, and has deepening debts. Red is this season’s colour, but it’s not Burnak and Anton Kramer, hold 39 per cent of its shares. They
Ballsbridge, Dublin 4 one that suits either the shareholders or the bank. are both retired and no longer have daily connections with,
E: dublin@
cimaglobal.com The firm had grown until the nineties, at which point or perhaps even loyalties to, Kadgee given that they have
T: +353 (0)1 6430400 margins started to slip under the combined pressures of changes received no dividends for at least two years. They are likely to
F: +353 (0)1 6430401
in retailing and increasing global competition. It made losses resist any radical changes in direction.
n Singapore office from 1998 to 2002, but some extra nip-and-tuck measures by The management team has not been proactive in expanding
16 Raffles Quay,
Unit 33-03 B
the management team returned it to profitability in 2004-05. the business and Kadgee has come to depend on a small number
Hong Leong Building, But things are now on the slide again. Its cash position is so of key contracts. It has recently lost one of these, while the rest
Singapore 048581
E: singapore@
bad that it increased its bank overdraft by 61 per cent in 2005. are up for renegotiation. The company’s main response to its
cimaglobal.com And there’s not much in the pre-seen material to suggest that competitive challenges has been to improve efficiency. It has
T: +65 6535 6822
F: +65 6534 3992
it will get better. been retrenching rather than seeking new business based on its
Kadgee is hemmed in by a hostile operating environment. core strengths.
n South Africa Division In terms of Porter’s five forces, it has suffered market entry
Postal: PO Box 745
Northlands 2116 based on price from global competition, most recently from
Physical: Second Floor
Thrupps Centre, 204
China after its admission to the World Trade Organisation. The loss of Forum seems to have
This rivalry will increase further. The firm faces considerable
Oxford Road, Illovo
E: johannesburg@ buyer power from the heavily concentrated retail sector, come as a shock to Dieter Stutt.
Is there more bad news to come
cimaglobal.com
T: +27 (0)11 268 2555 where 73 per cent of its sales are to three clients – and
F: +27 (0)11 268 2556 major clients want their own labels instead of Kadgee’s.
n Sri Lanka Division Its second-largest client, Forum, has withdrawn its contract before exam day?
356 Elvitigala Mawatha with effect from the end of August. The management team will
Colombo 05
E: colombo@
need to decide how to rationalise to reduce output by 22.6 per
cimaglobal.com cent. It’s already planning to cut 34 jobs to save on wage Some managers have sought to move the firm away from
T: + 94 (0)11 250 3880
F: + 94 (0)11 250 3881
costs, but three of its six factories make Forum’s clothes. Would hard bargaining on prices by instead using CAD and supply-chain
closing an entire factory be more sensible, so that overheads can management solutions. It is currently negotiating for 2007.
n CIMA Zambia
Box 30640
also be avoided? Seemingly, Forum felt able to give six weeks’ notice of
Lusaka, Zambia All in all, morale is low, quality is falling and the company termination of contract and was persuaded to continue
E: lusaka@ hasn’t fashioned a strategy to turn itself around. buying until August 2006. This means that further contracts
cimaglobal.com
T: +260 1290 219 The examiner has set the same requirement in every could be terminated between now and the exam, which
F: +260 1290 548 TOPCIMA paper since September 2005. Let’s assume that a would affect the unseen material. The loss of Forum seems
n CIMA Zimbabwe pattern has been set, therefore, and that you will face the to have come as a shock to Dieter Stutt. Is there more bad
PO Box 3831 following requirement: prepare a report that prioritises and news to come before exam day? Is Stutt concealing bad news
Harare, Zimbabwe
E: harare@ advises on the main issues facing Kadgee Clothing, making from the board?
cimaglobal.com appropriate recommendations. Kadgee seems to be facing price reductions of the order of
T: +263 (0)4 250475
F: +263 (0)4 708600/ The five pages of unseen material that you’ll receive on four per cent, assuming that its failed negotiations with Forum
720379 exam day will be where the examiner introduces twists to the are typical. These would reduce revenue to below operating costs
plot. In the past, the unseen material has contained eight or so and Stutt’s explanations of where cost savings could be made
extra issues. You must use your analytical skills to prioritise the are less than convincing.
main ones and then justify your choices. So how do candidates Falling quality, owing to low employee morale, is endangering

financial
October 2006  management 35
paper p10
Kadgee’s prices, contracts and premium market position.
Morale has been further dented by the knowledge that jobs are
under threat.
Cash flows are in a mess. The cash flow statement shows that
the business is a net cash burner because of poor working capital
management owing to excessive inventory, increased credit
given and reduced credit received.
The company depends heavily on Stutt – it probably wouldn’t
have survived this long without him. It is vulnerable to staff in
other ways. It has five very skilled machinists and an undisclosed
number of other employees. These people are dedicated to
Kadgee because they have few other job opportunities, but some
have already been absent with stress and it does seem that the
firm relies heavily on the efforts and goodwill of its workforce.
There are potential ethical issues here.
The company has a number of financial problems. Operating
profits fell by 18 per cent between 2004 and 2005, despite only
a two per cent decline in revenues. Given that output increased
by more than 30 per cent between 1998 and 2005, this
reinforces the message that prices are falling.
Margins are very thin. The average selling price of a garment
in 2005 was €6.83 (€74,420,000 ÷ 10.9m) against a cost per
unit of €6.66 (€72,580,000 ÷ 10.9m) – a profit measured in
cents per item and a margin of only 2.47 per cent.
Kadgee offered to reduce prices by four per cent to keep the
Forum contract, yet it was unsuccessful. It can’t seem to afford a
four per cent cut, let alone a bigger one. For example, if all other
costs stayed the same in 2006 and revenues fell by four per cent,
it would make an operating loss of €1.14m.
The overdraft has grown by €580,000. This seems to have
resulted from the decline in operating profits and also from
some working capital issues. These include a deceleration in
inventory turnover from 31 to 40 days. Holding 40 days’ stock in
this industry is hazardous, because fashions change with the
seasons. This extra inventory has also sucked in €1.89m of scarce
working capital, so it’s incurring overdraft charges. It’s likely that
there’s some unsold stock in the warehouse or that stock is
being supplied to retailers to hold, which will be paid for only
when it’s sold.
It may seem that there’s some scope for borrowing. Kadgee
has 21 per cent gearing (loans + overdraft and a percentage of
loans + overdraft + equity) and interest cover of 3.5 times.
But disaster lies this way. Its earnings are volatile, which can be
seen by calculating its operational gearing (percentage change
in operating profit ÷ percentage change in turnover). In this case,
A few words of encouragement
Many students who are preparing for next month’s TOPCIMA paper may
be struggling with the idea of having to sit yet another exam, writes
Gary Leyshon. Haven’t you already proved your abilities by passing the
strategic level? Why are you now required to study for another exam that
has no set syllabus and covers material already tested in the other three
strategic level papers? And there may be as many as 20 pages of
information to read, analyse and assimilate, plus another two months of
preparation. All for a test that, based on current pass rates, carries a 40 per
cent chance of success. No one could blame you for feeling less than
enthusiastic about it, could they?
We tutors certainly encounter students who aren’t convinced about the
value of paper P10. Despite our best efforts, a considerable number of
candidates initially view it as “just another exam”, to quote one September
pilot student.
But, as soon as you start studying for TOPCIMA, you’ll begin to realise the
skills and commitment required to do well. You’ll also start to understand and
value the significance of this final test of competence. Once you grasp its
practical nature, you’ll be better able to associate with its purpose, recognise
its significance and benefit from the experience.
A few months ago I was lucky enough to attend a function during which
the uniqueness and purpose of TOPCIMA was clearly illustrated. I’d been
invited to a presentation of awards to successful CIMA students employed by
one of my firm’s major clients and, despite being thrilled at the prospect of
seeing many familiar faces beaming with happiness, nothing had prepared me
for what was to come. The ceremony went well and to finalise proceedings
the group finance director, John Kennerley, addressed the audience with an
unrehearsed speech. Without deliberately intending to, he explained the
reasons for the existence of TOPCIMA.
“The finance team of the future”, he said, “will be able to consider, for
example, exit strategies; governance issues and ethics; and expansion plans for
growth, such as acquisitions, adding value to the analysis by considering
value-chain development and simplifying processes while retaining
measurement accuracy.
“Those capable of contributing to the improvements that we plan for our
business will perform their duties through the application of theoretical
knowledge, breadth of discussion and depth of analysis over a diverse range of
criteria. They will be able to prioritise the recommended approaches,
exercising logic and judgment while focusing on the critical factors for the
success for our business, integrating financial and non-financial information
as appropriate.
“The skill of communicating via easily comprehensible recommendations
will only assist our success.”
I have often said to my students that they should prepare for TOPCIMA as
though it were a day in the office. Kennerley’s words quite clearly illustrate
this idea.
A case study in the making? Maybe. A simple coincidence? Unlikely.
This was a speech made by a finance professional based on many years of
experience at a senior level. To me this provides a clear illustration, were it
necessary, of the relevance of the CIMA qualification and, in particular, the
TOPCIMA case study.
Gary Leyshon, tutor of the year in CIMA’s 2005 Financial Management
Awards, is head of business development at FTC Kaplan, Reading.
financial
October 2006  management 37
Paper P10

for every one per cent change in revenue, its profit changes by
11.7 per cent. This firm has already lost €16.8m in revenue from
Forum and is facing the prospect of four per cent price cuts from
the remaining clients.
The asset base is depleting. Non-current assets have fallen by
€1.68m (14.6 per cent) and, commensurate with this, the
depreciation charge for each of the years exceeds the purchases
of tangible fixed assets. Having said that, some of the high
depreciation may have been a prudent writing down of the
remaining IT investment needed to set up the design centre in
2001. But the firm’s own technology also needs keeping up to
date, so it’s a worrying sign.
For some reason, our attention has been directed to one
shareholder. In 1998 Frankie Bayane spent €32,000 at €8 a share
to buy two per cent of the business, which was ailing at the
time. She played her part in turning the company around, but
we are bound to ask whether her investment was worthwhile.
We need, therefore, to conduct a business valuation. Given that
the net assets of Kadgee were €22,257,000 in 2005, this means
that her two per cent stake is worth €111.29 per share on a net
asset valuation basis against an income valuation basis, which is Switching off the lights and closing the company
likely to be much lower. As a rough calculation of the latter, the
EPS in 2005 was €4.62, which amounts to a total income value
is always a last resort. Don’t come into the exam
of €57.75 on the most generous income valuation basis. This has with a preconceived strategy to sell the business
been calculated as €4.62 ÷ eight per cent (I used eight per cent
for convenience because there is no cost of capital available in
the pre-seen material and the bank seems content to lend at shareholders shouldn’t assume that liquidation is the only way
this rate). If another company were to raise debt to buy Kadgee, to obtain value from this business. Switching off the lights and
it would gain tax relief on the interest, so the rate would be closing the company is always a terrible last resort. Don’t come
lower – say, 6.1 per cent if it paid at the small companies’ rate. into the exam room with a preconceived strategy to sell the
On the other hand, using equity to buy Kadgee would make the business – many students fail because they write rote-learned
cost of capital higher owing to the risk involved. answers that don’t fit the circumstances. You must be prepared
Kadgee is unquoted, so there’s no ready market or a willing to evaluate and advise on the basis of the information you’re
buyer for Bayane’s shares. In essence, she is locked in, holding given in the unseen.
shares that give no divided and which cannot easily be sold. In You need to consider ways to improve the earnings of the
March’s TOPCIMA exam a similar situation existed and a director business. Ansoff’s matrix will be useful here:
had resigned and wanted her shares bought back. n How could Kadgee penetrate its existing market better (eg,
It seems likely that Kadgee’s break-up value may exceed cut costs and prices further) or increase differentiation (eg,
its earnings value and that shareholders who presently receive launch its own label)?
no dividend may take an offer for the assets of the business. n What market development is available (eg, menswear,
Of course, net assets are very different from cash proceeds workwear or new sorts of retailers such as supermarkets)?
from liquidation. It seems unlikely that anyone in Europe will n What new products could it develop for the stores it supplies
be willing to buy clothing manufacturing equipment given the (eg, shoes, cosmetics or accessories)?
hostile market conditions. The calculation also ignores n Could it diversify by opening its own shops or selling directly
redundancy costs, which are a potential deal-breaker. But the via catalogues or the internet?

financial
38 management  October 2006
Paper P10
n Could it manufacture other textile products, such as curtains
and bedding?
In the exam you may be presented with proposals for trying
some of these ideas, whether they’re sensible or not. You will
have to evaluate them using numerical techniques such as net
present value and also the broader Johnson and Scholes criteria
of suitability, acceptability and feasibility.
The notion of acceptability brings us back to shareholders
and attitudes – ie, the balance of power in the boardroom.
Bruno and Andrin Burnak hold 58 per cent of the shares between
them and, we might reasonably assume, an attachment to their
family business. But suppose they were to disagree on an issue –
eg, a takeover approach or a risky “bet the business” investment.
It would leave one or the other needing to form a coalition of
investors with differing powers and interests to get their own
way. The percentage shareholdings seem almost contrived to
cause this, suggesting that a stakeholder analysis might be useful
as part of your preparation.
The pre-seen material gives strong pointers towards the sorts
of decisions that the management may have to take. Should it
follow its rivals’ lead and make some or all of its clothing outside
Europe. If it does, there will be implications for risk, control and
jobs. What further competitive advantage could be gained from
IT/IS applications?
One interesting connection here is the tendency for contracts
to lead to shorter runs of a greater range of lines. This could help
to explain the rising inventory costs and would presumably also
have implications for overheads given that set-ups are a
recognised cost driver. Is there a better way to respond to losing
the Forum contract than cutting 34 jobs? Perhaps moving the
affected staff to part-time contracts might provide a solution.
How can it restore quality and the total quality management
system again, particularly if buyers insert penalty payments for
poor quality into their contracts? Can it find another client to
take up the capacity released by Forum, or would it be possible
to win Forum back by offering lower prices or improved supply-
chain solutions?
Some of these are clearly short-term problems that need to
be solved immediately. The decision on relocation is more
difficult and will need greater consideration.
The growth of China as an economic giant has been one of
the major business dynamics of the 21st century. Studies
suggest that manufacturing costs there are lower than those in
Europe by a factor of 80 per cent or more. The EU has policies on
the textile industry. You should investigate these and consider
financial
40 management  October 2006
what’s happened to many of the European firms affected by
them. Don’t limit your research to clothing, because the same
issues have confronted makers of consumer durables, furniture
and even cars.
How could Kadgee respond? European manufacturers are
reacting in the following ways:
n They relocate production to China but retain development
and marketing in their home countries. The design centre and
Stutt’s networks seem the only really valuable foundations
from which to rebuild Kadgee’s business.
n They seek to avoid price competition by developing
distinctive brands at home that can command premium
prices. The pre-seen material states that most output goes
under the labels of the client stores, which suggests that
Kadgee does have some brands of its own. But building a
premium brand will take more cash than it can afford.
n They adopt mass customisation – ie, the basic products are
made in a low-cost location but are then customised nearer
to the customer to add value. The pre-seen material’s
references to the five expert machinists could be taken as a
hint in this direction.
n They seek to improve the supply chain so that clients rely on
the company to save them costs on inventory and logistics or
to remove the problem of stock-outs. Kadgee has played this
card already and restored profitability in the past few years,
but things are on the slide again. What more can be done?
Work out whether any of these options are suitable,
acceptable and feasible for Kadgee. Consider their implications
for jobs, skills, finance, marketing and organisational structure.
Research real businesses in the textile and clothing industry and
see what’s happened to them. FM
Adrian Sims, who teaches for BPP Professional Education in
Luton and Milton Keynes, is BPP’s subject manager for
TOPCIMA. This is an edited version of an article on the CIMA
web site. For the full version, plus advice on tackling the exam,
visit www.cimaglobal.com/topcima.
P10 Recommended reading
H Barnwell and A Sims, CIMA Study System: Test of
Competence in Management Accounting, 2006 edition,
CIMA Publishing/Elsevier, 2005.
pAPERS P3 AND P6
Management Accounting – Risk and
Control Strategy / Business Strategy
P3 and P6 approach the key topic of information from different angles. David Laws
discusses some issues that candidates might expect to encounter in the two exams.
Because information strategy (IS),
information technology (IT) and
information management (IM) appear in
both paper P3 and paper P6, you may be
hoping that you’ll need to study these
subjects only once. In fact, although
there’s an overlap between the papers, the
approach required by each one is different.
The CIMA Study Systems offer the
following definitions:
n IS “determines the long-term
information requirements of business”.
n IM “is concerned with methods by
which information is stored”.
n IT “defines the specific systems
that are required to satisfy the
information needs”.
So, IS deals with what information we
need to collect and why we need it; IM
deals with how the information is made
available to those who need it; and IT deals with how this
information is transferred. This may mean collecting more
information from inside the company or perhaps making more
and/or better use of it. It may also mean identifying and/or
gathering additional external information. Many people use IT as
a generic term to cover all of the above. In tackling P3 and P6, it
may be more useful to focus on the overall aims and benefits of
using information rather than worrying about whether
something is an example of IS, IM or IT, although understanding
the distinctions is a learning outcome of the P3 syllabus.
Business strategy is mainly concerned with creating and
maintaining competitive advantages, so a P6 question on
information may be along the lines of: “Could improved use of
information help to gain an advantage?” For an example, let’s
consider the theories of Michael Porter. In his generic strategies
model, he suggested that two ways to build competitive
advantage were cost leadership or product differentiation. For a
cost leader, information can be used to monitor spending more
closely – eg, to identify overspends more quickly and/or to
communicate these to the relevant managers more rapidly,
thereby helping with cost control. Alternatively, we might try
to reduce costs by researching alternative suppliers. We could
use an extranet to post details of the supplies we need and
encourage suppliers to submit quotes. Another example would
be the ticketing policy of low-cost airline Ryanair: tickets can be
purchased via its web site only, which
minimises the costs of sales staff. A
product differentiator might involve using
information to maintain an advantage. For
example, a bank differentiating itself on
customer service might use text
messaging to give its customers regular
updates on their account balances.
Technology can even act as a trigger
for change by creating new industries or
altering existing ones. The ability of
customers to research holidays, customise
itineraries and book directly on the web
has generated huge changes. In the travel
industry, for example, it has led to the rise
of new players, such as Lastminute.com,
and has changed the way that existing
companies, such as Thomas Cook, operate.
Customer‑facing technology is therefore
becoming essential in many industries.
The retail industry shows what can be achieved when
organisations can collect, circulate and analyse information
quickly and easily. Electronic point-of-sale technology and
communications technology allow managers to receive sales
information fast, making it easier for them to respond to the
effect of, for example, advertising campaigns; special offers (and
whether customers continue to buy when these end); the
weather etc. This information allows retailers to change their
sales policies, perhaps by changing stock levels or encouraging
customers to buy items with bigger mark-ups.
Risk and control strategy is mainly concerned with the risks
inherent in using and relying on information systems, as well as
how to control those risks. Clearly there are risks involved if a
supermarket relies heavily on sophisticated hardware and
software if that equipment then breaks down. A major concern
will be to ensure that the risk to the system is minimised. This
would include procedures to ensure that:
n Hardware is not damaged or stolen.
n The systems can cope with the demands placed on them
(eg, by using up-to-date hardware and software).
n Viruses are not allowed to spread on to the system (eg, by
restricting internet access).
There is also a risk that, if information is stored in a data
warehouse, it could be damaged or destroyed. An appropriate
response might be to restrict access to the information and to
financial
October 2006  management 43
Papers P3 and P6
make regular back-ups. Another risk might
be that unauthorised people (inside or outside
the organisation) could access the material.
There is a further danger that the data might
be processed incorrectly. For example, imagine
the potential problems if the information
system regularly allocates costs to incorrect cost
centres (perhaps after a reorganisation or
acquisition), or if the system used by a payroll
department processes deductions incorrectly. An
internal audit department might be asked to
review the output of key information systems to
identify problems of this sort.
From a strategic viewpoint, perhaps the
biggest risks concern incorrect decisions at the
system design stage. For example, in the internet
boom of the late nineties, one of the high-
profile failures was clothing retailer Boo.com.
The company differentiated itself by having a
high-tech web site with a lot of graphical
content. Unfortunately, it was slow to load and
hard to navigate. Boo.com spent in the region of
$100m and went bankrupt within a few years.
Other areas where poor initial design might
lead to problems include investment in an
information system that fails to achieve the cost
savings expected or becomes obsolete quickly.
Or the project may be overambitious, leading to
a system that’s more expensive than anticipated.
The UK government’s plan to computerise all
National Health Service records is a case in
point. This is the world’s largest civilian IT
project of all time. Whether it will deliver all the
benefits expected will only become clear in the
future. According to The Sunday Times (April 16)
the costs have already increased from an initial
estimate of £2.3bn to at least £15bn.
I hope that this article has illustrated that
information is a valuable commodity, but only if
it’s managed properly – which sounds
suspiciously like what you’re required to do to
pass the P3 and P6 exams. FM
David Laws is a senior lecturer at FTC Kaplan
in London.
financial
44 management  October 2006
Exam notice
Visit www.cimaglobal.com
regularly for updates.
n The CIMA certificate in business you are a new student starting the
accounting: new 2006 syllabus certificate level, we recommend that you
This is an entry requirement for the follow the 2006 syllabus and sit the
CIMA professional qualification and a related assessments.
recognised qualification in its own right. If you pass any of the assessments,
The new syllabus for it was launched at or are awarded exemptions, from the
CIMA’s lecturers’ conference in March. 2000 syllabus before March 2, 2007,
The institute has refreshed all five you will be given credits for subjects in
certificate subjects and introduced new the 2006 syllabus (see panel, below).
content on ethics and corporate Assessments for C1, C2 and C3 take
governance, so candidates should note 90 minutes each and those for C4 and
the following information: C5 take an hour each. All assessments
n Assessments based on the new 2006 for the 2006 syllabus take two hours.
syllabus will be available at CIMA- The pass mark for each one is 50 per
approved assessment centres from the cent and you will receive your results
first of this month. and, if you pass, a certificate of
n Assessments based on the old 2000 achievement immediately afterwards.
syllabus will be available at CIMA If you are unsuccessful, you will receive
approved assessment centres until some feedback on your performance.
March 1, 2007.
n Assessments based on the 2000 and n November 2006 exam entry for the
2006 syllabuses will be available professional qualification
concurrently between October 2, 2006 November’s exams will be held on Tuesday
and March 1, 2007. 21, Wednesday 22 and Thursday 23.
n All assessments are computer based. The deadline for entries was
n Both the 2000 and 2006 certificate September 21, but in extreme
syllabuses are available to download circumstances we will consider very late
from www.cimaglobal.com/certificate. entries. You must have suitable evidence
It’s essential that you read the from your employer to support your
syllabus before starting your studies. If application. We’ll charge a very late fee of
OLD AND NEW Certificate SYLLABUSES COMPARED
2000 subjects 2006 subjects
C1 Management Accounting C01 Fundamentals of
Fundamentals Management Accounting
C2 Financial Accounting C02 Fundamentals of Financial
Fundamentals Financial Accounting
C3 Business Mathematics C03 Fundamentals of Business Mathematics
C4 Economics for Business C04 Fundamentals of Business Economics
C5 Business Law C05 Fundamentals of Ethics, Corporate
Governance and Business Law
Exam notice
Visit www.cimaglobal.com regularly for updates.
£330 as well as the standard exam fees.
CIMA Contact can advise you if you
would like us to consider a very late entry.
n Cancellations and changes
We do not accept cancellations and will
not refund fees. The closing date for
requesting changes to papers or exam
centres was September 30.
n Admission advice letters
If you have entered for the exams online,
you must print out your admission advice
online. You can do this from October 18.
The admission advice shows the exact
details of your exam centre, as well as the
exams you have entered for. You must
take it with you to the exams and keep it
safely afterwards, because it contains your
candidate numbers.
n Exam rules
You must download and read the exam
rules from the CIMA web site when you
download your admission advice.
n Going to the exam
As well as your admission advice, you will
need to take another means of
identification, such as a passport or
driving licence, to the exam hall.
n Attendance slips
You must complete attendance slips
before starting each exam. The slips have
tear-off sections, which you should take
away and keep. These will be your proof of
attendance and are valid for four months
from the date of the exam.
n Pre-seen material for the TOPCIMA
case study
The TOPCIMA pre-seen material and
assessment matrix has been available to
download from www.cimaglobal.com/
topcima since September 11.
financial
46 management  October 2006
If you are taking TOPCIMA, it is your
responsibility to download this material
and familiarise yourself with it before the
exam. A “clean” copy of the pre-seen
material will be given to you in the exam.
You cannot take any notes in with you.
n Examinable legislation
A list of examinable legislation is available
on www.cimaglobal.com.
n Exam paper formats
Ensure that you visit the web site to
familiarise yourself with the exam paper
formats before taking the exams.
n Question papers
Please note that you cannot take question
papers out of the exam hall. The
November papers will be available at
www.cimaglobal.com/studyresources
immediately after the exams.
n Exam results
The results of the November exams will
be sent out at the end of January 2007.
Visit www.cimaglobal.com/cimaonline to
register to receive your results via e-mail.
n Important notice for managerial
level candidates
All managerial level candidates are
reminded that the answers to all
questions – including all section A
objective test sub-questions – must be
written in your answer books.
If candidates draft their responses on
the question paper, these should be
transferred to the answer book before the
end of the exam. It will be assumed that
all writings in the question paper are the
candidate’s notes, so they will not be
considered by the markers.
An article providing guidance on how
to answer section A questions is available
at www.cimaglobal.com/sectiona.
Changes to Managerial
Level Papers from May 2007
Changes to section weightings
The following three managerial level papers will have
new section weightings from the May 2007 diet:
P1 Management Accounting – Performance Evaluation;
P4 Organisational Management and Information
Systems; and P7 Financial Accounting and Tax Principles.
The new weightings will be as follows:
n Section A: 40 marks (currently 50 marks).
n Section B: 30 marks (currently 30 marks).
n Section C: 30 marks (currently 20 marks).
Change to assessment format
From May 2007, section C of paper P7 will contain one
compulsory question covering the preparation of at
least two of the three key financial reporting
statements: the income statement, balance sheet and
cash flow statement. This is the only change to the
assessment format for any paper. The assessment
format for sections A and B remain unchanged.
For papers P1 and P4, the assessment format
remains unchanged and is as follows:
n Section A: a variety of compulsory objective test
questions worth between two and four marks each.
n Section B: six compulsory short-answer questions,
each worth five marks.
n Section C: one question from a choice of two.
n Computer-based assessments at
certificate level
For full information on entering for a
computer-based assessment at certificate
level, visit the CIMA web site at
www.cimaglobal.com/certificateentry.
If you wish to sit managerial level
exams in November, you must have
completed all of your certificate level
subjects by September 1.
n Ask a tutor
Details of the next “ask a tutor” event will
be published on www.cimaglobal.com/
studyresources. This is a chance for you to
ask an experienced tutor a syllabus-related
question in the run-up to the exams.
n Queries
If you have any questions, please visit
CIMA’s web site to see if they are answered
there, or get in touch with CIMA Contact
(see page 33) or your local office. FM