Assessing performance reports Flashcards
what is a performance report, reasons performance report fails?
The exam point is to to evaluate if performance report is adequate, evaluate existing performance systems and suggest improvements
Exam questions - Rezilla, chiven, arcade, METIS
Reasons performance reports fail are for a number of reasons
1. Reporting regime is difficult to change
2. Audience based - look at level of detail and recipient
- Report may be sent to wrong people who don’t need it e.g. IT
director getting production report
- Level of detail may not fit the audience e.g. detailed report sent to
the board and summary sent to operational managers
3. Content based
- No adjustment made for items outside of control of recipient e.g.
Head office costs not being separated, forex.
- No adjustment for budget error or other planning errors
- Budget for variable costs not being flexed
- Figures only include financial data without considering non -
financial data
4. Analysis based
- Most often there is no analysis - no variances, no ratios, budget v
actual
- No segmentalization of product lines or regions before analysis
takes place
- Analysis tends to be very basic
5. Targets based
- No discussion of targets carried out in advance
- Inappropriate targets or comparators provided in the report e.g.
seasonality and periods
6. Explanation based
- No explanation for unusual figures
- Explanation required for all variances with no materiality or
material
- Explanations requested for adverse variances only with
favourable variances ignored i.e.. things we are doing well gets
ignored and is demotivating
Suggestions to improve performance
This should be clearly reversing the problems found in the questions and provide solutions
Use table approach is question asks for evaluation and suggestion to improve -
Add value and use examples for suggestions
Shareholder wealth is measured by dividends, cash and market value of shares
Trend analysis should be introduced
Assessment of performance reports involves a critique of the report itself - layout distribution and content
