sa_july11_perfmeasurement ACCA

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ACCA F8 AA Audit and Assurance (AA) 笔记(二)

ACCA F8 AA Audit and Assurance (AA) 笔记（二）今天整理Threats and safeguard toindependence的题目，同样是需要分两栏，分别写出threats和safeguard这部分我们练四道题：2013 Dec Q4 (c)题目让我们找五个ethical risks 和对应的safeguards，与昨天介绍的recommendations 要对应weakness一样，safeguards 也要做到具体且有针对性。

考试时记得要分两栏写，这里为了方面大家看就用蓝色Ethical risk 黑色写 Steps to reduce the risks1. Salt & Pepper has guaranteed that their audit will not last longerthan two weeks and will minimize disruption to companies, which will bringaudits difficulties to gather sufficient andrisk类型写上）Salt & Pepper should cease thisadvertising campaign immediately as it is not in compliance with ACCA’s Code ofEthics and Conduct. The firm should inform the clients that the audit durationwill be based on the level of audit risk present2. Salt & Pepper has offered all new audit clients a free accountspreparation service for the first year of the engagement, which willincrease the risk of self-reviewSalt & Pepper must ensure that thiswork is undertaken by a team separate to the audit team.3. The firm is not updating engagement letters for existing clients, sothe engagement letters will not be reviewed to ensure that they are stillrelevant and up to date.Salt & Pepper should comply fully withISA 210 and annually review the need for revising the engagement letters.4. An existing client of Salt & Pepper has proposed an audit feebased on a percentage of the client’s final pre-tax profit. This is acontingent fee arrangement and is prohibited as it creates a self-interestthreat.Salt & Pepper should politely declinethe proposed contingent fee arrangement and inform the client that the feeswill be based on the level of work required to obtain sufficient andappropriate audit evidence.5. Salt & Pepper intends to use junior staff for the audit of their newclient as the timing of the audit is when the firm is very busy. Junior staffmay not be competent enough and the risk of giving an incorrect audit opinionis increased.Salt & Pepper should try to increasethe amount of experienced team members. If this is not possible, they shoulddiscuss with thedirectors of Cinnamon to see whether the timing of the auditcould be changed.6. Salt & Pepper has n ot contacted Cinnamon’s previous auditors. Inthis way Salt & Pepper cannot know the reasons why Cinnamon changed their auditors.They may have been acting unethically and their previous auditors thereforerefused to continue.Salt & Pepper should contact theprevious auditors to identify if there are any ethical issues which wouldprevent them from acting as auditors of Cinnamon.2014 Specimen Q1 (a)没有说明找几点的，一般是一分一点。

六西格玛测量系统分析

* 注意：5.15标准差代表99%的测量系统变异，5.15标准差为工业标准
2.测量变异指标：%R＆R值→测量变异量/流程总变异量
%R＆R=
σ测量 σ总变量
●判断标准：
×100%
●最佳情形：≤10% ●可接受情形：≤30%
测量系统变异（Ⅰ）
• 仪器偏差 - 不同的仪器即使侧量同一物件，平均值也会造成可以察觉的不同
仪器一偏差量
Master Value
仪器二偏差量
仪器一
平均数
仪器二
平均数
Precision（变异性）
• 测量系统中的总变异 • 测量重复值的自然变异 • 名词： Random Error, Spread, Test/ Retest error • 重复性与再现性
• 描述为 no drift , sudden shifts , cyclic trends , etc. • 使用趋势图（ Trend Chart ）来评估
时间1 时间2
校验数值 ( 参考标准)
测量稳定性
稳定性是指：对同一部品间隔一段时间测量所得平均的差异．
Time 2 Time 1 测量系统的磨损，气温，温度等对测量结果的影响
种类的数目 1数据类
2-4数据类
控制
可以用于控制，只有当：
1）当流程变化与规格比较时，其值小
2）在预期流程变化范围内，损失功效是扁平的
3）变化的主源引起平
均变化
1）基于流程分布，可以使用半变量控制技术
2）可以产生非敏感变量控制图
分析
1）对于评估流程参数和指数是不能接受的
2）只表示流程是否正在产生一致或不一致部分
1
2
3

ACCA P1考试：Integrated Reporting and Sustainability

ACCA P1考试：Integrated Reporting and Sustainability 本文由高顿ACCA整理发布，转载请注明出处1.4 Social Impact AssessmentSocial impact assessment- "Social impact assessment includes the processes of analyzing, monitoring and managing the intended and unintended social consequences ... of planned interventions (policies, programs, plans, projects) and any social change processes invoked by those interventions. Its primary purpose is to bring about a more sustainable and equitable biophysical and human environment." -International Association for Impact Assessment"The Social Footprint Method (SFM) is an approach to measurement and reporting that quantifies the social sustainability performance of an organisation." -Center for Sustainable OrganisationsAlthough SIA is often conducted as a compliance process for government approvals many resource developers voluntarily undertake SIA to understand better their Social Footprint (SF) and respond to societal expectations.Unlike the EF, which measures an entity's use of, and impact on, natural capital, the SF deals with impacts on people and communities, measured through the concept of using "anthro capital" (capital created by people).Unlike the EF, the SF can be increased; a greater investment can be made in each area of the SF to increase the capital available.**Increasing the school leaving age and providing greater skills training (SF investment) helps to ensure that a welleducated workforce is available for economic development (capital increase).Anthro capital, which underlines the well-being of people, comprises three elements:Human capital (e.g. personal health, knowledge, skills, experience, human rights, ethical entitlements);Social capital (e.g. social networks, cohesion, shared interests, mutually held knowledge, democratic activities, goodwill, social intercourse); andConstructed capital (e.g. physical infrastructures, roads, utilities built by people).As with CSR, there is a broad spectrum of views on the concept of SF and who holds what responsibilities. At one end, the view is that governments are responsible for society and should thus ensure appropriate levels of anthro capital are available.However, at some stage along the spectrum, organizational demands on anthro capital may be such that governments will not or cannot sustain the needs of organisations. At that stage, the organisation may become a net benefactor to the anthro capital of society.**In most developing nations, the SF of an organisation can be substantial because of lax governmental regulations and involvement.Also, an organisation's CSR philosophy may include a postconventional, normative approach to its effect on employees, the community and society, regardless of the government's support of anthro capital.更多ACCA资讯请关注高顿ACCA官网：。

Career-concerns-and-accounting-performance-measur

Career concerns and accounting performance measures in nonproﬁtorganizationsAnil Arya ⇑,Brian MittendorfOhio State University,United Statesa b s t r a c tMany in the nonproﬁt sector view accounting-based performance measures to be overly inﬂuential and counterproductive in the evaluation of charities and their leaders.The con-tention is that such measures are imperfect and often biased,leading to dysfunctional rationing of fundraising and administrative infrastructure.To examine these concerns and the broader question of nonproﬁt executive incentives,we develop a model of non-proﬁt executives who are concerned with inﬂuencing external perceptions.In doing so,we demonstrate that accounting-based performance measures alter executive incentives in critical ways.In particular,disclosure of the functional classiﬁcation of nonproﬁts’expenses can reduce incentives to overinvest in fundraising and restore investments in programs;at the same time,it also comes with the potential downside of undermining key investments in long-term infrastructure.Ó2014Elsevier Ltd.All rights reserved.IntroductionIn his now-viral TED talk (‘‘The Way We Think About Charity is Dead Wrong’’),Dan Pallotta provided a voice to many in the nonproﬁt sector who view the reliance on accounting-based performance measures for non-govern-mental organizations (NGOs)to be detrimental to their overall effectiveness.The viewpoint,elaborated upon in books by Pallotta (2010),Stern (2013),and others,is that by developing an imperfect picture of how much of a non-proﬁt’s resources are devoted to its mission,the functional classiﬁcation of expenses has become a key focus of outsid-ers’evaluation of NGOs and their executives;this focus,in turn,incentivizes executives to cut key investments in fundraising and advertising.Despite the almost universal acceptance of this view and concomitant disdain for accounting performance measures in the nonproﬁt com-munity (even spawning the ‘‘Overhead Myth’’movement to discredit reliance on accounting measures),there has been little or no formal analysis of the viewpoint.In this paper,we present a parsimonious model of non-proﬁt executives’incentives in order to examine the conse-quences of reliance on accounting-based performance measures.The model captures two key elements:(i)to the extent that nonproﬁt executives are driven by extrinsic motivation,such incentives are typically not due to explicit pay arrangements but rather an incentive to inﬂuence external perceptions;and (ii)the primary accounting per-formance measure that is critical and unique to nonproﬁts is the functional classiﬁcation of expenses,which provides an assessment of the portion of expenses attributable to achieving an organization’s mission,i.e.,the program expenses.Our setting provides a formal analysis of actions non-proﬁt executives are incentivized to undertake when at least part of their motivation is driven by a desire to boost market perceptions of their effectiveness.Consistent with intuition,we show that the more the market values the ability to generate revenues and/or the more executives can beneﬁt from administrative perquisites,the more focus executives place on efforts to generate revenues.Similarly,the more the market values the ability to efﬁciently focus/10.1016/j.aos.2014.10.0020361-3682/Ó2014Elsevier Ltd.All rights reserved.⇑Corresponding author.resources toward a mission and/or the less executives can beneﬁt from perquisites,the more emphasis they place on using(rather than generating)resources effectively. Interestingly,we also show that the more efﬁcient an orga-nization is in using resources,the less incentive an execu-tive has in trying to generate such resources.Among other things,this suggests that if left unchecked,the natural order of things may lead to inherently inefﬁcient organiza-tions being the ones generating the bulk of donations.The model also presents a different view of observed executive pay-to-performance sensitivities.That is,though empirical observation of variation in nonproﬁt executive pay moving in concert with accounting metrics is often interpreted as evidence of contractual performance pay arrangements,implicit market forces may also explain such variability.In particular,despite the lack of explicit incentive pay,our model demonstrates how external demands for nonproﬁt executives will generate pay that varies predictably with accounting outcomes.This mar-ket-driven view of pay-to-performance sensitivity also offers additional empirical implications.For one,we show that the more the market places a premium on revenue-generating ability relative to the ability to devote resources to the mission,the more sensitive pay will be to revenue and the less sensitive it will be to the measure of program expenses.This means that in markets characterized by strong presence of for-proﬁt entities,for whom revenue is at a premium(e.g.,education;health care),the more (less)pay should appear sensitive to revenues(program expenses).Additionally,we show that the more precise the accounting cost allocation exercise,the less sensitive pay will be to revenue and the more sensitive it will be to program expenses.In other words,the greater the uncertainty about the functional allocation of expenses (driven by,say,the use of SOP98-2in allocating joint costs),the greater the pay sensitivity will be to revenue and the less weight the market will place on program expenses.Returning to the fundamental criticism of how account-ing estimates can distort incentives,our model of career concerns of nonproﬁt executives demonstrates that the incentive to inﬂuence external perceptions in itself can dis-tort decisions away from what may be in the best interest of donors.In particular,in order to boost perceptions of revenue-generating abilities,a nonproﬁt executive may overinvest in fundraising efforts.This,in turn,can lead to a reduced focus on improving efforts to efﬁciently direct resources to the organization’s mission.Interestingly,the functional classiﬁcation of expenses stipulated by account-ing rules can help mitigate each of these concerns.By tracking expenditures that go into the revenue-gen-eration process,the accounting measure helps sift out what revenues are attributable to executive ability and what are simply due to high fundraising spending.This undercuts the incentive for the executive to overinvest in fundraising as a means of trying to posture to a market-place that values revenue generation.The attempt to separate program expenses as part of functional expense classiﬁcation also gives the marketplace a second measure on which to evaluate executives–their efﬁciency at putt-ing resources to use.The newfound emphasis on program expenses incentivizes executives to put more energy into cutting administrative bloat and effectively directing resources toward the mission.However,this desire to cut administrative costs to sig-nal greater efﬁciency to markets comes with a downside in that it also encourages executives to divert resources from potentially useful long-term infrastructure spending. In other words,since accounting does not provide a natural distinction between wasteful and useful administrative spending,it incentivizes executives to‘‘trim the fat’’even in cases where some administrative spending is critical. That is,an additional implication of our model is that it provides a theoretical justiﬁcation for the so-called non-proﬁt starvation cycle(Gregory&Howard,2009),where efforts to trim administrative costs undermine long-term viability.Taken together,our results suggest a nuanced balance between viewing accounting measures with utter suspi-cion or with unadulterated faith is warranted.The func-tional classiﬁcation of expenses shifts the executive’s emphasis away from excessive fundraising while also simultaneously forcing him to focus on the use of resources.The latter entails a trade-off.When excessive administrative spending is the norm in the absence of functional classiﬁcation,the tight discipline introduced by accounting metrics proves beneﬁcial.On the other hand,cost cutting can be excessive when it discourages spending on valuable infrastructure.The paper’s proposi-tions succinctly capture these economic forces.This paper lies at the nexus of the literatures on career concerns incentives and accounting performance measure-ment for NGOs.In terms of theﬁrst literature stream,the seminal analysis of career concerns incentives is Holmstrom(1982,1999).This initial analysis of implicit career incentives was expanded by Dewatripont,Jewitt, and Tirole(1999a,1999b)who generalize the model to examine,among other things,the allocation of effort across tasks,complementarities between skill and effort,and alternative information structures.The career concerns framework has also generated insights about managerial investment(Holmstrom&Ricart i Costa,1986),informa-tion acquisition incentives(Milbourn,Shockley,&Thakor, 2001),team dynamics(Auriol,Friebel,&Pechlivanos, 2002),job design(Kaarboe&Olsen,2006),disclosure reg-ulation(Autrey,Dikolli,&Newman,2007),and perfor-mance measure design(Arya,Frimor,&Mittendorf,2010; Autrey,Dikolli,&Newman,2010).Theoretical inquiry of career concerns is motivated by circumstances wherein employees face limited explicit incentive compensation but rely on salaries determined by labor markets.Driven by both donor and regulatory restrictions,such limited incentive pay is commonplace among NGOs,making incentives to inﬂuence external per-ceptions all the more important to examine in nonproﬁts.Surprisingly,there is a dearth of theoretical study of incentives among NGOs and none(to our knowledge)on the incentives of nonproﬁt executives to inﬂuence market-place perceptions.That said,there has been substantial empirical study of NGO behavior and the role of accounting measures therein.In terms of executive pay incentives, Baber,Daniel,and Roberts(2002)and Sedatole,Swaney,2 A.Arya,B.Mittendorf/Accounting,Organizations and Society40(2015)1–12Yetman,and Yetman (2013)each demonstrate,to different degrees,that key accounting measures (in particular,reve-nues and program expenses)are associated with pay vari-ations among nonproﬁt executives.Frumkin and Keating (2010)demonstrate that executive pay is more heavily inﬂuenced by pay levels at peer institutions than it is by performance.In a sense,our study brings together these two seemingly disparate views by theoretically examining how the inﬂuence of outside pay opportunities can alter executive behavior and induce variation in the observed sensitivities between pay and nonproﬁt performance despite the absence of explicit incentive pay.To this end,our study also relates to and complements the work of Krishnan,Yetman,and Yetman (2006)and Krishnan and Yetman (2011),who demonstrate that nonproﬁts are incentivized to manage accounting performance measures in order to manage external perceptions.Our model incor-porates the potential for both bias and noise in accounting measures and demonstrates the consequences for execu-tive incentives,pay,and efforts.ModelAn executive of a nonproﬁt organization is charged with generating revenues and putting those revenues to use in fulﬁlling the organization’s mission.The revenues raised by the organization,R ,depend on the extent of ﬁnancial resources devoted toward fundraising and the executive’s skill and effort in generating funds.In particular,R ¼a ﬃﬃﬃF p þh R þe R þj ,where F denotes fundraising expen-ditures,a denotes inherent fundraising efﬁciency,h R denotes the executive’s skill in raising funds,e R ,e R P 0,denotes the executive’s effort in revenue generation,and j reﬂects all other revenue-related factors.The organization’s net revenues,R ÀF ,are split between use for administration and for implementing the nonproﬁt’s programs.The executive has a measure of con-trol over this split.In particular,the amount directed toward programs is P =b [R ÀF ]+h P +e P 1+e P 2+w .Here,b 2(0,1)denotes the default fraction of resources devoted to programs,h P reﬂects the executive’s skill in efﬁciently utilizing resources for programs,e P 1and e P 2,e Pi P 0,reﬂect executive efforts to divert resources to programs,and w reﬂects other factors.Higher program skills (h P )can reﬂect abilities to ﬁnd efﬁciencies and reduce redundant expendi-tures but can also reﬂect a higher degree of integrity,i.e.,a lower willingness to divert resources for personal beneﬁt (as in Shleifer &Wolfenzon,2002).The two effort terms reﬂect that the executive can take actions to shift resources toward programs,and such resource shifts could either divert from wasteful administrative spending (e P 1)or could reduce useful administrative spending (e P 2).To elaborate,administrative expenses,denoted by A ,equal the residual expenditures R ÀF ÀP .These adminis-trative expenses consist of both useful and wasteful com-ponents –some administrative spending,denoted A I ,is infrastructure spending critical to mission success while the remainder represents wasteful spending.Denoting the maximum infrastructure needs by I ,infrastructurespending is simply A I ¼I Àe P 2,reﬂecting that the execu-tive can take effort to boost program spending in the short-run at the expense of long-run mission success by neglecting key infrastructure.The remaining administra-tive funds,R ÀF ÀP ÀA I ,though unhelpful to the mission,may yield some perquisites for the executive;executive perquisites equal c [R ÀF ÀP ÀA I ],c 2(0,1).The prior belief of the executive’s skills,held by all,is that h R and h P are independent and normally distributed,with mean h and variance r 2h (with precision denoted s h ¼1=r 2h).Similarly,j is normally distributed with mean j and variance r 2j (with precision denoted s j ¼1=r 2j );forw ,the corresponding mean,variance,and precision valuesare denoted w ,r 2w,and s w ,respectively.As is often the case in nonproﬁt organizations,the exec-utive is not provided explicit incentive pay.However,mar-ket demands for his skill may necessitate adjustments to his future pay.The executive’s future wage,denoted w ,is determined by a competitive labor market.The market wage is w ¼k E h R f g þ½1Àk E h P f g ,where E Áf g denotes mar-ket expectations,and k (1Àk )reﬂects the degree to which the market cares about the executive’s ability to generate revenues (efﬁciently use revenues on programs).While we model the executive’s incentive as one of market-driven pay,this can be more broadly thought of as an incentive to boost market perceptions –under this inter-pretation,boosting market perceptions may be valued by the executive even if it does not come with higher pay since it can come with greater visibility or higher-proﬁle positions.Under either interpretation,the market’s expec-tations rely on (observable)revenues and the functional classiﬁcation of expenses.The classiﬁcation splits total expenses into its three components:fundraising expenses (F ),program expenses (P ),and administrative expenses (A =R ÀF ÀP ).In choosing his efforts,the executive balances the potential for future compensation and perquisites withhis personal cost of efforts,k R e 2R ,k P 1e 2P 1,and k P 2e 2P 2.Given this basic structure,we investigate how career concerns affect nonproﬁt executives’efforts,and how these incen-tives are inﬂuenced by the functional classiﬁcation of expenses.Fig.1summarizes the sequence of events.ResultsFirst-best benchmarkBefore deriving the equilibrium that arises when non-proﬁt executives are interested in external perceptions and internal perks,we begin with a ﬁrst-best benchmark.That is,what is the outcome if the executive is solely focused on mission impact?In this setting,the entity’s mission is enhanced both through current program expen-ditures (P )and investments to boost the long-term impact of such expenditures (A I ).In particular,denote the overall welfare,W ,as the expected value of mission-based expen-ditures (both programs and infrastructure)less effort costs:W ¼E f P þA I g Àk R e 2R Àk P 1e 2P 1Àk P 2e 2P 2:A.Arya,B.Mittendorf /Accounting,Organizations and Society 40(2015)1–123If the executive is concerned only with welfare,he solves the following program in choosing fundraising expenditures and efforts:Max F;eR ;e P1;e P2E f PþA I gÀk R e2RÀk P1e2P1Àk P2e2P2E f b½a ﬃﬃﬃFpþh Rþe RþjÀF þh Pþe P1þwþI gÀk R e2R Àk P1e2P1Àk P2e2P2:ð1ÞSolving(1)yields theﬁrst-best benchmark,as summarized in Lemma1.(All proofs are provided in the appendix.) Lemma1.The welfare-maximizing equilibrium entails:FÃ¼a24;eÃR¼b2k R;eÃP1¼12k P1;eÃP2¼0;andWÃ¼½1þb hþb jþ wþIþ14a2bþb2k Rþ1k P1 "#:Theﬁrst-best outcome presented in the lemma offers some intuitive properties.First,the level of fundraising undertaken is increasing in the organization’s inherent fundraising efﬁciency,a.The effort undertaken on boosting revenues is increasing in the degree to which the organiza-tion efﬁciently uses funds for its mission,b,and decreasing in k R,the cost of revenue effort.Finally,the executive undertakes efforts to trim wasteful spending but does nottrim infrastructure spending(eÃP1>0and eÃP2¼0).Withthis intuitive benchmark in place for comparison,we next consider the outcome when nonproﬁt executives are inﬂuenced by external perceptions.Equilibrium market wagesWhile there is little doubt that nonproﬁt executives are motivated by a desire to improve society,they are also not immune to the pressures to boost perceptions of their abil-ity and performance.Such career concerns may even be more pronounced in nonproﬁt organizations than their for-proﬁt counterparts due to the notable absence of expli-cit incentive pay arrangements.In such cases,a nonproﬁt executive’s actions are not solely determined by overall welfare but also affected by a desire to inﬂuence external perceptions and future pay potential.Following this frame-work,we work backwards in the game to determine the equilibrium,starting with a derivation of how the market wage is determined.The wage depends on market beliefs about the executive’s revenue-generation skill as well as his skill in efﬁciently utilizing the raised resources.Market beliefs, in turn,can be conditioned on revenues(R)and,under functional classiﬁcation,on the decomposition of expenses into fundraising(F),program(P),and administration(A). Since A simply equals RÀFÀP,it follows that market beliefs are effectively based on R,F,and P.Conditioned on this information set,and relegating technical details to the appendix,the market’s conjecture about the execu-tive’s revenue-skill equals:E f h R R;F;P gj¼s hs hþs jhþs js hþs jRÀaﬃﬃﬃFpÀe cRÀ j!:ð2ÞIn(2),e cRrepresents the market’s conjecture of the execu-tive’s revenue effort.The reason conjectures come into play is that the market wage is not a reward for past efforts or successes but instead a market-based inference of skill parameters from observation of past performance.Thus, in making inferences about h R,the market seeks to adjust performance to remove parts attributable to past effort and other non-persistent components.The market does not observe effort,but instead relies on its belief about what effort was–in equilibrium,such conjectures will be correct.In particular,the inference of revenue-skill in(2) reﬂects a weighted average of the market’s prior belief and a signal of ability inferred from observed revenues. This signal equals observed revenues less the portion attributable to fundraising expenses,conjectured effort to boost revenues,and other(transitory)factors.The weights placed on the two components depend on the precision of the prior belief(s h)relative to that of the observed revenue-based signal(s j).In a similar fashion,the market’s conjecture of skill in efﬁciently directing resources towards programs is:E f h P R;F;P gj¼s hs hþs whþs ws hþs wPÀb½RÀF Àe cP1Àe cP2À wÀÁ!:ð3ÞIn(3),e cP1and e cP2represent the external market’s conjec-ture of efforts to divert resources from wasteful and useful administrative spending,respectively.The market’s expec-tation of skill in efﬁciently using resources is again a weighted average of its prior and a signal of such ability derived from observed program expenses.In this case, the program expenses are adjusted for net revenues,con-jectured cost-cutting efforts,and other transitory factors. The weights depend on the relative precision of the prior (s h)and the accounting-based estimate inherent in functional classiﬁcation(s w).Given(2)and(3),the executive’s market wage,after the market has observed revenue and the functional classiﬁcation of expenses,can be expressedas: 4 A.Arya,B.Mittendorf/Accounting,Organizations and Society40(2015)1–12w¼ks hs hþs jhþs js hþs jRÀaﬃﬃﬃFpÀe cRÀ j!þ½1Àks hs hþs whþs ws hþs wPÀb½RÀF Àe cP1Àe cP2À wÀÁ!:ð4ÞThe two parts of the wage are derived from the infer-ences of ability to generate revenue weighted by k,and the inference of ability to effectively deploy funds toward the mission weighted by1Àk.Delaying consideration of the executive’s effort choices for now,consider the impli-cations of equilibrium market wage for observed pay-to-performance sensitivities.Takeﬁrst the relation between revenue and pay.From theﬁrst term in(4),higher revenues are indicative of higher fundraising skill and are rewarded as such.This is consistent with the empirical evidence in Baber et al. (2002)and Sedatole et al.(2013)who each show a positive relationship between pay and overall revenue for nonproﬁt executives.In this case,however,the relationship is not evidence of contractual performance pay,but instead dri-ven by market forces.From the second term in(4),a second feature is also in play:higher revenues also indicate that a given level of program expenses is attributable to scale rather than exec-utive skill at efﬁciently employing resources.Roughly,this is consistent with the notion of a program expense ratio (here it is difference rather than ratio),reﬂecting that higher revenues alone demand higher program expenses. As such,to the degree the external market cares about and can effectively isolate skills at efﬁciently using resources,higher revenues can actually reduce pay.These two forces mean that pay-to-performance sensi-tivity of revenues is increasing in the extent to which the market values the executive’s ability to generate revenue (k)and decreasing in the informativeness of the functional classiﬁcation of expenses(s w).Proposition1.Sensitivity of pay to revenue,@w/@R,is:(i)increasing in labor market demand for revenue skills(k);and(ii)decreasing in the informativeness of functional expense classiﬁcation(s w).Part(i)of the proposition provides a notable empirical implication.For some nonproﬁts,the ability to generate revenues is far more important than their efﬁcient use when it comes to outside market wages.For example,it is often discussed that the presence of for-proﬁt counterparts in health-care and education creates a greater outside demand for revenue generation and less demand for ability to achieve missions(i.e.,higher k).This suggests that such nonproﬁts should empirically see a higher pay-to-performance sensitivity when it comes to revenues,this despite the fact that there no explicit incentive contracts in play.Part(ii)of the proposition demonstrates the subtleties of inferring the usefulness of accounting estimates based on how they are used.Since higher revenues indicate that pro-gram expenses are less attributable to executive skill in managing resources,the more the market relies on program expenses to infer such skills,the less it will reward higher revenues.This means that the more effective an accounting estimate of cost-management(program expenses)is,the less the market relies on another(revenues).So,a reduced reliance on one accountingﬁgure may actually indicate more,not less,effective inference of skill.Now consider how pay varies with observed estimates of program expenses.Again,using(4)reveals the equilib-rium pay-to-performance sensitivity.Proposition 2.Sensitivity of pay to program expenses, @w/@P,is:(i)decreasing in labor market demand for revenue skills(k);and(ii)increasing in the informativeness of functional expense classiﬁcation(s w).The predictions again mirror empirical data but provide a different interpretation due to the absence of incentive pay:higher program expenses are associated with higher pay.However,this relation is muted the more the market cares about revenue-generation skill(k).This may provide some explanation for the varied degrees to which Baber et al.(2002)and Sedatole et al.(2013)observe market rewards for program expenses.While higher program expenses are rewarded,the degree of this reward varies predictably with both market priorities(k)and the non-proﬁt’s accounting system(s w).Further,in contrast to Proposition1(II),Proposition2(II)shows that more precise accounting estimates of efﬁciency in utilizing resources implies a more positive pay-to-performance relation when it comes to program expenses.Career concerns equilibriumNoting the inﬂuence of outcomes on market wages as derived above,and taking market conjectures of effort as given,the executive has incentives to incur efforts in order to inﬂuence perceptions.That is,knowing the out-comes will be used to infer ability,the executive has incentive to inﬂuence such outcomes.Though any such efforts will be correctly inferred in equilibrium,the exec-utive nonetheless cannot resist the temptation.In partic-ular,working backwards in the game,the executive chooses cost-cutting efforts to maximize expected wage, less effort cost adjusted for perks from administrative expenditures,as in(5):Max eP1;e P2kshshþs jhþs jshþs jRÀaﬃﬃﬃFpÀe cRÀ j!þ½1Àks hs hþs whþs ws hþs whþeP1þe P2Àe cP1Àe cP2ÀÁ!Àk R e2RÀk P1e2P1Àk P2e2P2þc½ð1ÀbÞðRÀFÞÀ hÀe P1À wÀ :ð5ÞFrom(5),the executive’s effort choices weighs three fac-tors:(i)higher efforts increase program expenses and thus perceptions of efﬁciency in utilizing resources;(ii)higher efforts are personally costly;and(iii)higher effort to reduceA.Arya,B.Mittendorf/Accounting,Organizations and Society40(2015)1–125wasteful spending(e P1)also reduces perks.Taken together, these features lead to the executive’s cost-reduction effort choices.As it turns out,the choices that solve(5)are free of the market’s conjectures,e cPi,ensuring they are also the equilibrium choices.The equilibrium efforts aimed at reducing administrative costs are:e P1¼^e P1¼Max½1Àk s w2k P1½s hþs w Àc2k P1;0&'ande P2¼^e P2¼½1Àk s w2k P2½s hþs w :ð6ÞThe following proposition summarizes some key charac-teristics of the equilibrium efforts to reduce administrative spending.Proposition3.In the presence of career concerns,(i)the(non-zero)effort to reduce administrative waste(^e P1)is decreasing in both labor market demand forrevenue skills(k)and executive perk consumption(c).(ii)the effort to reduce infrastructure spending(^e P2)is decreasing in labor market demand for revenue skills(k)but unaffected by executive perk consumption(c).Intuitively,the proposition demonstrates that the more the market cares about revenues(and less it cares about cost-efﬁciency),the less effort the executive exerts to cut administrative spending.It also shows that the more the executive cares about consuming perks now rather than inﬂuencing pay in the future,the less he will exert efforts to reduce wasteful administrative spending.Using these equilibrium efforts,we can now work back-ward to determine the executive’s choice of fundraising expenditure and revenue effort.The executive makes this choice to maximize expected wage less effort cost adjusted for perk consumption,as in(7):Max eR ;Fks hs hþs jhþs js hþs jhþeRÀe cRÀÁ!þ½1Àks hs hþs whþs ws hþs whþ^eP1þ^e P2Àe cPiÀe cP2ÀÁ!Àk R e2R Àk P1^e2P1Àk P2^e2P2þc½ð1ÀbÞðaﬃﬃﬃFpþ hþe Rþ jÀFÞÀ hÀ^e P1À wÀI :ð7ÞFrom(7),the executive’s revenue effort balances three factors:(i)higher effort increases revenues and thus mar-ket inferences of revenue ability;(ii)higher effort is costly; and(iii)higher effort generates more revenues,a portion of which are consumed as perks.While fundraising expendi-tures,F,do not inﬂuence market perceptions(the market observes them so removes them in the inference process), they can inﬂuence the level of funds available to be con-sumed as perks,making them another nontrivial choice. These factors,taken together,determine the optimal reve-nue and fundraising choices,each of which are indepen-dent of market conjectures of effort and thus comprise the equilibrium outcomes.The solutions to(7)are:e R¼^e R¼k s j2k R½s hþs j þc½1Àb2k Rand F¼^F¼a24ð8ÞThe critical properties of revenue effort are presented inProposition4.Proposition4.In the presence of career concerns,revenueeffort(^e R)is:(i)increasing in labor market demand for revenue skills(k);(ii)increasing in executive perk consumption(c);and(iii)decreasing in the organization’s inherent program efﬁ-ciency(b).Intuitively,(i)demonstrates that the more the marketcares about the executive’s ability to generate revenue,the more incentive he has to exert revenue effort to(tryto)inﬂuence the market’s perception.Interestingly,andin contrast to the case of cost-cutting efforts,(ii)demon-strates that the desire to consume perks now also pro-vides revenue effort incentives.The reason is that if theexecutive gets to make use of a portion of revenues toconsume as perks(e.g.,nicer ofﬁce,ﬁrst-class travel,etc.),that alone provides him incentive to generate reve-nues.The underlying force in(ii),however,is mitigatedby the organization’s inherent efﬁciency in usingresources(e.g.,board oversight,restrictions on spending,etc.),as conﬁrmed in(iii).That is,if the organization isparticularly efﬁcient in using resources,the executive isaware that fewer resources will become perks,and hisincentives to generate resources are muted.This compar-ative static suggests that,absent intervention,organiza-tions which are particularly poor at using resources mayironically also be the ones that have executives who domore to generate such revenues.The incentives that underlie the career concerns equi-librium derived herein are the desire to inﬂuence pay inthe future and the desire to consume perks in the present.The desire to inﬂuence pay is best reﬂected by k which cap-tures the relative importance the market places on abilityto generate resources versus utilizing the resources,whereas the incentive for current perquisite consumptionis captured by c.Fig.2demonstrates the consequences ofeach incentive on equilibrium efforts.The comparative statics reﬂected in the left panel ofFig.2point to a reasonable empirical test about differenttypes of nonproﬁts.Among nonproﬁts for whom executiveoutside opportunities stress revenues(e.g.,health care),one would expect greater(lower)effort by executives ingenerating(efﬁciently using)resources.The changedincentives to cut costs manifests itself on two dimensionsin that an incentive to efﬁciently use resources also entailssome myopic cost-savings that reduce infrastructure.The comparative statics in the right panel of Fig.2pro-vide empirical implications about different types of execu-tives.If one views the importance of current perquisitesrelative to future pay as proxied by an executive’s age(those early in their career are more concerned with futurepay),we would expect to see more(less)experiencedexecutives to be focused on revenue generation(resourceutilization).Interestingly,though,the temptation to cutinfrastructure spending to appear more efﬁcient isuniversal,i.e.,applies equally to all stages of one’s career.6 A.Arya,B.Mittendorf/Accounting,Organizations and Society40(2015)1–12。

国际注册内部审计师考试攻略

国际注册内部审计师考试攻略一、ACCA+CIA 双重持证ACCA (特许公认会计师公会)与IIA(国际注册内部审计师协会)达成协议，自2015年11月起，ACCA会员可参加为其特别设计的CIA(国际注册内部审计师)测试。

一旦ACCA会员通过此项测试，则可获得国际注册内部审计师称号。

该测试包含了CIA资格考试的核心考纲以及学习目标。

ACCA与IIA都对此次携手合作表达了良好的祝愿。

ACCA战略与发展执行董事Alan Hatfield表示，虽然ACCA会员在其学习过程中已经学习了相当的有关风险、内部控制以及公司治理的知识，但连篇累赘的有关低质量内审以及由此造成的投资者信心下降的报道，还是提醒我们应该加强有关内部审计的学习。

此次为ACCA会员提供CIA挑战测试不但可以帮助他们获得CIA称号，也是一个提升他们内审专业知识的良机。

而IIA主席兼CEO Richard F. Chambers也表示与ACCA的协议达成创造了双方合作的'先河。

此外，ACCA还在其官方的网站上开辟了专门的版块为IIA及ACCA会员提供有关内审的相关资料。

这些资料包括了一些专业的指导以及有关内审的文章，为管理层以及审计委员会提供了有益的帮助。

ACCA and IIA joinforces to boost internal audit industry with new exam and specialised resources，Internal auditexam offered to ACCA members alongside membership of the IIA。

This deal willprovide an opportunity for ACCA members to become CIA certified through acustomised exam, which will include key syllabus and learning outcomes of theCIA exam.“This is an excellent opportunity to allowexisting ACCA members to further develop their expertise in this specialisedfield in which, being qualified clearly matters. Offering the CIA ChallengeExam to our members is a value-add, where our members working in internalaudit, or those who are looking to develop a career in internal audit, canobtain the CIA designation and clearly demonstrate their expertise in thisarea.“ACCA has alsolaunched a new resource for IIA and ACCA members working in internal audit witha section on the ACCA website. Thisincludes useful guides and articlesincluding internal audit for managers and also for the audit committee.二、CIA考试指南信息一.时间:每年举行一次，时间为11月第3周的周六、周日。

CSA 1211指南：通过了解被审计单位及其环境识别和评估重大错报风险

《中国注册会计师审计准则第1211号——通过了解被审计单位及其环境识别和评估重大错报风险》应用指南（2010年11月1日修订）一、风险评估程序和相关活动（参见本准则第八条）1．了解被审计单位及其环境（以下简称“了解被审计单位”）是一个连续和动态地收集、更新与分析信息的过程，贯穿于整个审计过程的始终。

了解被审计单位是必要程序，特别是为下列关键环节的职业判断提供了重要基础：（1）评估重大错报风险；（2）按照《中国注册会计师审计准则第1221号——计划和执行审计工作时的重要性》的规定确定重要性；（3）考虑选择和运用会计政策的恰当性和财务报表披露的充分性；（4）识别需要特别考虑的领域，如关联方交易、管理层运用持续经营假设的适当性或考虑交易是否具有合理的商业目的；（5）确定在实施分析程序时使用的预期值；（6）应对评估的重大错报风险，包括设计和实施进一步审计程序以获取充分、适当的审计证据；（7）评价已获取审计证据的充分性和适当性，如假设的适当性以及管理层口头声明和书面声明的适当性。

2．注册会计师可能将实施风险评估程序和相关活动获取的信息作为审计证据支持对重大错报风险的评估结果。

此外，注册会计师还可能获取有关类别的交易、账户余额或披露及相关认定以及控制运行有效性的审计证据，即使这些程序并非作为实质性程序或控制测试而专门计划实施的。

注册会计师还可以在实施风险评估程序的同时选择实施实质性程序或控制测试，以使审计工作更有效率。

3．注册会计师需要运用职业判断确定所要求了解的程度。

注册会计师的主要考虑是获取的了解是否足以实现本准则规定的目标。

当然，要求注册会计师对被审计单位获取的总体了解的程度，要低于管理层在管理被审计单位时所获取的了解的程度。

4．需要评估的风险包括由于舞弊导致的风险，也包括由于错误导致的风险，本准则涉及这两类风险。

但是，由于舞弊非常重大，针对为获取用于识别由于舞弊导致的重大错报风险的信息所实施的风险评估程序和相关活动，《中国注册会计师审计准则第1141号——财务报表审计中与舞弊相关的责任》及其应用指南提出了进一步要求并提供了指引。

西门子 7KG85xx 电能质量仪表和电力监测仪设备手册说明书

电能质量仪表和电力监测仪SICAM P850/P855 7KG85xxV02.22/V02.60设备手册前言开源软件目录用户信息1概述2设备设计3被测量与记录4入门5连接原理6使用PC时的操作7使用显示屏时的操作8时间同步9校准10维护、存储和运输11故障和LED指示灯12技术数据13运行指示14操作参数15词汇表索引E50417-H105D-C482-A7免责声明可能会有更改和错误，恕不另行通知。

本文所述内容仅包含产品的一般描述和/或性能特点，并不一定会反映所述产品的具体情况，可能会随着产品的进一步开发而进行修改。

性能特点要求仅在签署合同中明确约定后才具有约束力。

未经书面授权禁止披露、复制、分发和编辑本文档或者使用和传播其中的内容。

注册商标SIPROTEC™、DIGSI™、SIGRA™、SIGUARD™、SAFIR™、SICAM™ 和 MindSphere™ 是西门子股份公司的商标。

任意禁止未经授权使用。

本文中的所有其他产品名称可能是商标，若第三方出于自身利益使用这些商标，可能会侵犯所有者的权益。

注意鉴于人身安全，请遵守本文所述的警告和安全说明（若有）。

3SICAM P850/P855，7KG85xx，设备手册E50417-H105D-C482-A7，2019年07月版前言本手册目的本手册介绍了电能质量仪表和电力监测仪SICAM P850/P855的应用、功能、安装、调试和操作。

目标受众本手册适用于电气系统和发电厂的项目工程师、调试人员及操作人员。

适用范围本手册适用于电能质量仪表和电力监测仪SICAM P850/P855。

符合性声明标准有关更多信息，敬请访问以下网站中的UL 数据库：。

ACCA 1.1 S7 (0421) consol notes

ACCA PAPER 1.1Preparing Financial StatementBasic consolidationDefinitionsAn undertaking is the parent of a subsidiary if any of the following apply.(a) It holds a majority of the voting rights in the undertaking. T(b) It is a member of the undertaking and has the right to appoint or remove directors holding a majority of the voting rights atmeetings of the board on all, or substantially all, matters.(c) It has the right to exercise a dominant influence over the undertaking:(i) by virtue of provisi ons contained in the undertaking’s memorandum or articles; or(ii) by virtue of a control contract. The control contract must be in writing and be of a kind authorised by the memorandum or articles of the controlled undertaking. It must also be permitted by the law under which that undertaking is established.(d) It is a member of the undertaking and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in the undertaking.(e) It has a participating interest in the undertaking and:(i) it actually exercises a dominant influence over the undertaking; or(ii) it and the undertaking are managed on a unified basis.(f) A parent undertaking is also treated as the parent undertaking of the subsidiary undertakings of its subsidiary undertakings.All subsidiaries are required to be consolidated unless they qualify for exclusions.Definitions: Parent companySubsidiary companyConsolidated accountsDirect Holding:Indirect Holdings:⏹Vertical group:A80%B60%C⏹ D group⏹Diamond groupAcquisition method and merger methodDifference between acquisition and merger:Features of acquisition accounting in the consolidated accounts⏹Only the post-acquisition profits of a newly acquired subsidiary are included in consolidated reserves.⏹The net assets of a newly acquired subsidiary should be brought into the CBS at fair value to the acquiring group at the date ofacquisition⏹The difference between the fair value of the consideration given and the fair value of net assets acquired represents goodwill. Consolidated goodwillFair value of consideration paid(cost)Less: Fair value of net assets (=OSC+ pre-acquisition reserves)Consolidated reservesParent company:+ Share of retained post-acquisition reserves of SubMinority Interest in CBS=% * net assets of Subsidiary at B/S date.Calculation of goodwillExample 1A Ltd acquired 80% of the ordinary shares ofB Ltd for £100,000 on 31st December 2000. At that date the net assets of B Ltd per their accounts were £80,000. The net assets included land and buildings with a book value of £75,000, which could be sold on the open market for £110,000 and stock with a book value of £15,000 but which only has a net realisable value of £10,000. (The above fair values of £110,000 and £10,000 have been used for illustration only). The calculation of goodwill is shown below.(The net assets must be included at their fair value.)Example 2A Ltd acquired 80% of the ordinary shares ofB Ltd for £100,000 and 10,000 £1.00 preference shares for £15,000 on 31st December 2000. At that date the net assets of B Ltd were £80,000. The financing section of B Ltd is shown below.£Preference shares 20,000Ordinary shares 50,000Retained profits 10,00080,000The calculation of goodwill is shown as follows:The key point when preference shares are involved is that the net assets of the subsidiary company are effectively split into two parts. The share of net assets represented by ordinary shareholder interests (as in the previous examples) and the share of net assets represented by preference shareholder interests.The net assets represented by preference shares are always equal to the nominal value of the preference shares. The share of net assets represented by ordinary shares is then the remainder of the net assets i.e. net assets less the nominal value of preference shares.Example 3A Ltd acquired 80% of the ordinary shares ofB Ltd on 31st December 2000 by issuing 40,000 of it’s own £1.00 ordinary shares to the share holders of B ltd. At that date the net assets of B ltd were £80,000. The market value of each share in A ltd is £2.50. The calculation of goodwill is shown as follows:The key point when calculating the value of shares issued as consideration is that each share is valued at its fair value.Positive goodwillNegative goodwillRetained profit reservesPre-acqPost-acqThe group consolidated reserves are the par ent company’s own reserves and the parent company’s share of the post acquisition reserves of the subsidiary. The following example illustrates this.Example 1Alpha Ltd acquired 80% of the ordinary shares of Beta Ltd on 31 December 2000. At that date Alph a’s own reserves were £20,000 and Beta’s reserves were £12,000. At the 31 December 2001 Alpha’s own reserves were £30,000 and Beta’s reserves were £17,000 (ignore goodwill).The calculation of group reserves as at December 31 2001 is as follows:££Example 2Aria Ltd acquired 75% of the ordinary shares of Hymn Ltd on 31 December 1999. At that date Aria’s own reserves were £20,000 and Hymn’s reserves were £12,000. At the 31 December 2001 Aria’s own reserves were £40,000 and Hymn’s reserves were £22,000. Goodwill of £10,000 arose upon the acquisition of Hymn Ltd. This is to be amortised over ten years.The calculation of group reserves as at December 31 2001 is as follows:1. post-acq2. adjustments3. accumulated amortised g/wCalculation of Minority InterestThe minority interest is calculated as the minority share of the subsidiary company's net assets at the balance sheet date. The net assets of a business can be calculated as the entire share capital plus reserves.Example 1Ball Ltd acquired 80% of the ordinary shares of Bat Ltd on 31 Dec 2000. Bat Ltd has a share capital of 100,000 $1.00 ordinary shares. On 31 Dec 2001 Bat's reserves were $17,000.The calculation of the Minority interest at 31 Dec 2001 is as follows:Example 2Cow Ltd acquired 75% of Chicken Ltd on 31 Dec 2000. The balance sheet extracts of Chicken Ltd as at 31 Dec 2000 and 2004 are as follows:2000 2004$1.00 ordinary shares $100 $100Retained profits $200 ($300)Answer:Example 3Cardiff Ltd acquired 80% of the ordinary shares and 10% of the preference shares of Derby Ltd a number of years ago. The net assets of Derby Ltd as at 31 Dec 2001 are represented below:$000'sOrdinary shares 1,000Preference shares 400Retained profits 4,000Net assets 5,400Answer:When calculate MI involving preference shares, we have to effectively split the net assets into two parts. Firstly that part of net assets represented by preference shareholder interests which is always equal to the nominal value of the preference shares in issue and secondly the remaining net assets attributable to ordinary shareholders. MI in non-group owned preference shares isthe nominal value of any preference shares not owned by the parent company. It is possible that the minority preference share holding could be more than 50%Multiple Choice QuestionsQuestion 1Parent plc acquired 70% of the ordinary shares of Baby plc for £100,000 on 31st December 2001. At that date the net assets of Baby plc were £110,000.What is the goodwill arising upon the acquisition of Baby plc?a. £10,000b. £23,000c. £40,000d. £10,000 capital reserveQuestion 2Bee plc acquired 90% of the ordinary shares of Wasp plc for £100,000 on 31st December 2001. The book values and fair values of thea. £1,000b. £19,000c. £100,000d. £1000 capital reserveQuestion 3Rugby plc acquired 60% of the ordinary shares and 50% of the preference shares of Soccer plc for £100,000 on 31st December 2001. Ana. £10,000b. £14,000c. £34,000d. £40,000Question 4Aardvark plc acquired 75% of the ordinary shares of Bobbin plc on 31st December 2001. The consideration consisted of 10,000 of its own £1.00 ordinary shares and £80,000 in cash. At the acquisition date the net assets of B Ltd were £100,000. The market value of each share in Aardvark plc is £4.00.What is the goodwill arising upon consolidation?a. £5,000b. £10,000c. £20,000d. £45,000a. Share capital £920,000, Share premium £50,000b. Share capital £1,000,000, Share premium £80,000c. Share capital £1,080,000, Share premium £130,000d. Share capital £1,080,000, Share premium £210,000Intra-group stock transferP to S (downstream)P sells to S at $5,000 with cost $3,000 (all remains unsold at the end of year)S to P (upstream)P owns 80% of S. During the year, S sells to P at $40,000 (cost+ 25%mark up) and all remains unsold at y/e.Intra-group fixed asset transfersP sells to S (downstream)Example: P sells to S FA at $7,000 with the cost of 5,000. Depreciation 20%JE:S sells to PP owns S 80%. S sells to P FA at $7,000 with the cost of $5,000. Depreciation 20%JE:。

Performance-based(精)

Examples:案例：

Police department: crime rate 警察局：犯罪率 Fire department: number of lives or value of the property saved by the fire department 消防局：挽救的人数和财产的价值 Education department: high school graduation rate 教育局：高中生毕业率
Performance
Budgeting
预算
(Program evaluation, measurement, data collection) （项目评价、测量、数据收集） measurement results 绩效测量效果
Program Management
项目管理
Personnel 并加强公共项目的效率和效果
Budget Inputs Budget Results Budget Input Budget Results..

Borrow heavily from the private sector
很大程度上借鉴了私有部门管理的理念
A common model of “performance-oriented budgeting” 绩效为导向的预算的普遍模式(also see the attachment)
Input measures – e.g., number of police officers, amount of spending 投入测量—例如警员的数量、支出水平 Output measures – e.g., number of cases processed, number of people served 产出测量—例如处理案件的数量、服务对象的数量 Cost-efficiency measures – e.g., cost per customer, spending per 1,000 population 成本效率测量—例如消费者的人均成本、每千人支出水平

SQA标准答案

Assessment Exemplar for Higher National Graded UnitDL18 34: HND Business with AccountingGraded Unit 1Exemplar 21st edition: July 2005Published by the Scottish Qualifications Authority Hanover House, 24 Douglas Street, Glasgow,G2 7NQ, and Ironmills Road, Dalkeith, Midlothian EH22 1LEThe information in this publication may be reproduced to support SQA qualifications. If it isreproduced, SQA should be clearly acknowledged as the source. If it is to be used for any other purpose, then written permission must be obtained from the Support Materials Development Officer at SQA. It must not be reproduced for trade or commercial purposes.© Scottish Qualifications Authority 2005Contents1Introduction2How to generate evidence 3Assessment exemplar1 IntroductionThis pack must be used in conjunction with a copy of the Graded Unit specificationwhich details the standard of performance expected of the candidate. A copy of theGraded Unit specification can be obtained from SQA.This pack supplements the instructions for designing the assessment task and assessing candidates for the Graded Unit specification. It aims to provide an example ofassessment that is valid, reliable and practicable. The assessment task(s) detailed in this pack corresponds to the instructions for designing the assessment task outlined in theGraded Unit specification.Whilst the example provided is intended for guidance, it may also be used as anassessment instrument, as long as the centre ensures the integrity and confidentiality of the assessment in the first and subsequent years of use and between centres. It may be used in a variety of ways including, for example:♦as an assessment instrument, in whole or in part♦to exemplify the standard of performance expected of candidates achieving the Graded Unit, ie as a benchmark♦to help you develop your own assessment for the Graded Unit♦to help you develop a valid and practicable assessment for the Graded Unit within the subject area of the Group Award to which it contributes♦to give you new ideas♦as a staff development toolIt is important that you make sure that the assessment exemplar is used in a contextappropriate to the delivery of the Graded Unit and to the Group Award of which it formsa part. Although the content of this exemplar has been prior moderated as a suitableinstrument of assessment, you should note that using this assessment exemplar does not automatically guarantee successful external moderation. It is still your responsibility to make sure that all the appropriate internal quality assurance procedures are satisfactorily completed. For example, a valid, effective and approved internal moderation systemmust be in use at your centre.Recommended readingBefore using this material you might find it useful to look at some of our otherpublications, in particular:♦Guide to Assessment and Quality Assurance for Colleges of Further Education♦Guidance on Assessment Arrangements for Candidates with Disabilities and/or Additional Support Needs♦Quality Assurance Principles, Elements and CriteriaDetails of these and other SQA publications are available on our website. Mostpublications can be downloaded free of charge from our website at on the ‗Publications, Sales and Downloads‘ section. If you require a publication to be sent to you, please contact our Customer Contact Centre on 0845 279 1000 quoting theproduct code and, where a charge is applicable, have a purchase order number or credit card details available.Details of all HN assessment exemplars published after April 2004 are listed on our website on the HN subject specific pages. Your centre‘s SQA or HN Co-ordinator will have access to these HN assessment exemplars on SQA‘s secure website. Please approach them for copies. However, if you require a paper copy you can obtain one from SQA‘s Customer Contact Centre, Scottish Qualifications Authority, 24 Douglas Street, Glasgow, G2 7NQ (telephone: 0845 279 1000 or fax: 0141-242 2123).Other related UnitsThis Graded Unit has been validated as part of the HND Business with Accounting at level 7 within the Scottish Credit and Qualifications Framework (SCQF)1. Centres are required to develop the assessment instrument in accordance with the validated specification.It is recommended that the candidate should have completed, or be in the process of completing, the following Units relating to these specific aims prior to undertaking this Graded Unit:Unit code SCQF level TitleDE39 34 7 Business AccountingDE3A 34 7 Economic Issues: An IntroductionDE3C 34 7 Marketing: An IntroductionDE3D 34 7 Managing People and Organisations(All these are mandatory Units in the HND Business with Accounting)Core SkillsThe Graded Unit specification will detail the Core Skills covered. Where Core Skills have been embedded in a Graded Unit specification and an assessor wishes to use an alternative method of assessment, she/he must ensure that the assessment generates the Evidence Requirements specified in the Graded Unit specification. It is recommended that the centre seek prior moderation for the alternative method to ensure that the Core Skill is still covered.There are no Core Skills embedded in this Graded Unit.2 How to generate evidenceIntroductionThe Scottish Qualifications Authority‘s system of assessment measures the evidence of a candidate‘s attainment of knowledge, understanding and skills against defined criteria.The assessment process must allow for evidence of each candidate‘s performance to be generated and collected. This evidence must then be judged against the standards set out in the Graded Unit specification. To achieve the Graded Unit the candidate mustsuccessfully meet the standards and there must be evidence to prove this.The Graded Unit specification defines the criteria you need to use to judge whether or not the candidate has met the standards. All Graded Units have the following:Instructions for designing the taskThese tell you what the candidate actually has to do.Recommended prior knowledge and/or skillsThis section details the recommended knowledge and skills which the candidate should have completed or be in the process of completing prior to undertaking this Graded Unit.Assessment guidelinesThis section should give guidance on how best to conduct the assessment to generate the evidence required.It is important to realise that it is up to the assessor to judge when and if the candidate has satisfactorily met the standards. This decision should be based on the quality and correct quantity of evidence collected, set against the standards in the Graded Unit.The assessment instrument in this pack should not create any unnecessary barriers toachievement for open/distance learning delivery and the additional support needs ofindividual candidates should be taken into account. You may need to adapt it so that you can assess candidates with additional support needs or candidates who are undertakingthe Graded Unit on an open/distance learning basis. However, whilst taking into account the needs of the candidate concerned, the methods of assessment you choose must still be valid, reliable and practicable. If you have any questions or problems, or if you are in any doubt as to whether or not the alternative assessment you have chosen is still valid, please contact the Customer Contact Centre on telephone: 0845 279 1000.External Moderation — Guidance on Best PracticeIn order to increase the likelihood of successful external moderation it is stronglyrecommended that you read the guidance documents on SQA‘s website.3 Assessment ExemplarAssessment tasksThe table below summarises how the assessment exemplar task is to be marked and also indicates the evidence which should be retained for external moderation.Conditions of assessmentThese are set out in the Graded Unit specification. They are also given below.The assessment is based on a closed-book written examination lasting three hours. The examination consists of a case study of an organisation and questions relating to the case study. The examination questions are unseen and the assessment should be conducted in controlled and invigilated conditions.The case study should be given to candidates no less than 10 days prior to the date of the examination. Candidates may not bring their copy of the case study to the examination with them. A fresh copy of the case study must be given to candidates at the time of the examination.Assessment task Closed-book examinationwith seen case studyAssessment task instructionsAn examination paper and a case study of Robert Wiseman Dairies plc are given on the following pages.As noted above, candidates may be given a copy of the case study no less than 10 days before the date of the examination. They are not allowed to bring their copy to the examination and should be given a clean copy on the day.The examination should last for three hours. In accordance with the Graded Unit specification, the total marks for the examination are 100. Assessors should aggregate the marks achieved by the candidate to arrive at an overall mark for the examination.Assessors will then assign a grade to the candidate for this group award Graded Unit based on the following grade boundaries:♦ A = 70% — 100%♦ B = 60% — 69%♦ C = 50% — 59%The examination has been structured to meet the requirements of the Graded Unit specification. The table below illustrates how this is achieved. The Graded Unit specification stresses that the weightings given are an approximation.HND BUSINESS WITH ACCOUNTING GRADED UNIT 1EXAMINATIONThis examination is based on the case study of Robert Wiseman Dairies plc which you have been able to read beforehand. The copy which accompanies this examination is the same as the one you have already seen.The questions are based on the case study material and you should make use of examples drawn from the case study to illustrate your answers. You should also make reference to concepts and ideas which you have studied in the following four Units in your HND:Unit code TitleDE39 34 Business AccountingDE3A 34 Economic Issues: An IntroductionDE3C 34 Marketing: An IntroductionDE3D 34 Managing People and OrganisationsYou are not required to refer to material from any other Units.Attempt ALL questions. You have THREE hours in which to complete the paper.1 Explain how changes in its external environment may have influenced theactions of senior managers in Robert Wiseman Dairies. (12)2 Using examples, explain how the information in W iseman‘s financial statementscan be used to demonstrate the success of the company. (12)3 (a) Using examples from the case study, outline the main factors which may affectthe demand for milk. (7) (b) Explain how these factors might have affected the activities of Robert WisemanDairies. (10) (c) Outline the main factors which supermarkets such as Asda and Tesco may takeinto account when choosing which milk supplier to use. (7)(24) 4 In the re-structuring of Robert Wiseman Dairies in 2002, marketing becamepart of the Commercial Division rather than a separate division in its own right.Discuss the advantages and disadvantages of this as far as Robert Wiseman Dairiesis concerned. (10)5 Robert Wiseman Dairies only produces milk and cream products. It does not,unlike its two main rivals, make other dairy products. Analyse the ways in whichthis may affect its marketing. (10)6 Robert Wiseman Dairies considers that good relationships with its suppliers are vital to itsbusiness.(a) Explain why these relationships are important to the company. (6)(b) Outline the difficulties that Robert Wiseman Dairies may have in keepinggood relationships with its suppliers. (6)(c) In the light of these difficulties, discuss the actions that managers inRobert Wiseman Dairies could take to try to ensure that good relationshipsare maintained in the future. (8)(20)7 Assess the strengths and weaknesses of Robert Wiseman Dairies at the end ofJanuary 2005. (12)ROBERT WISEMAN DAIRIES plcBackground informationRobert Wiseman Dairies plc (RWD) is based in East Kilbride. Its main activity is the production and distribution of liquid milk and cream. The company began in the 1940s when Robert Wiseman started retailing milk from his farm. It became a public limited company in 1994 but it remains a family business. It is now run by two of Robert Wiseman‘s son s, both of whom have been working for the company for more than 30 years. Alan Wiseman is Chairman and Robert Wiseman junior is Managing Director. Alan and Robert Wiseman junior are the biggest shareholders in the company and at the end of 2004 owned over 50% of the shares between them.RWD buys raw milk from farmers and milk co-operatives and processes the milk in five major processing dairies, three in Scotland and two in England. Milk is a perishable product and raw milk has to be purchased from sources which are reasonably close to processing dairies.The milk is distributed to retailers from the dairies or through 13 distribution depots throughout the UK. These depots enable milk to be supplied to customers who are located at some distance from one of the five main dairies.Robert Wiseman Dairies has grown organically and through acquisition of other companies such as Gilmours, a milk processor based in Ayrshire and Appleby Dairies, a small dairy company in Manchester. Since the late 1980s, it has concentrated particularly on expansion into England and a strong presence in the English m arket has been a key part of the company‘s strategy. RWD opened a new custom built dairy in Manchester in 1995 and one at Droitwich Spa near Birmingham in 2001. The former supplies the North of England while the latter serves the large market in the South of England. The need to obtain funds to finance these expansions was an important factor in the company‘s decision to become a plc.Structure of Robert Wiseman DairiesIn 2002, the company was re-structured into three core business Units, Operations, Commercial and Finance. These replaced the twelve departments into which the company had previously been divided. Appendix 1 gives some details of the business Units.The new structure had several objectives:♦to streamline and simplify the management structure♦to focus on key aspects of the company‘s business♦to make future growth and acquisition more effective — it should make it easier to integrate the operations of newly acquired businesses as they can slot directly into theproduction and distribution operationsThe sale of milk in the UKThe liquid milk market in the UK is dominated by three companies, Arla Foods, Wiseman‘s and Dairy Crest which together have about 70% of sales. Arla Foods, a Danish company with UK operations based in Leeds, became the largest company in 2004 when it merged with Express Dairies. The liquid milk market in Scotland and the UK is static and growth comes from capturing a larger share of the existing sales.Milk processors buy their milk from farmers and, after processing and packaging, sell it to retailers. Traditionally, milk in the UK was delivered to households but retailers, particularly the major supermarkets, are now by far the most important customers of milk processors. The success of milk processors depends on their ability to win contracts to supply retailers. Contracts are often negotiated on an area basis which requires the processor to supply all a retailer‘s outlets in a particular area. This means that a processor must have the facilitie s to distribute milk in that area. However, it also enables supermarkets to have contracts with more than one milk processor for different geographical areas. Contracts are relatively short term and thus come up for tender and negotiation on a regular basis.Relationships with customersRWD‘s main customers are the larger supermarkets such as Tesco. It also supplies ‗middle-ground‘ retailers like Spar and Costcutter as well as independent retailers (it supplies 4,000 corner shops in Scotland) and organisations such as schools and hospitals.Relationships with customers often change. In May 2004, after a review of its buying policy, Asda announced that, in future, it would buy all its milk from Arla Foods. This was a break from the traditional practice of supermarkets of using more than one supplier and meant that both Dairy Crest and RWD were dropped as suppliers. RWD lost its contract with Asda for the supply of 180 million litres of milk a year. It accounted for 15% of RWD‘s turnover and effectively wiped out the 15% increase in sales which the company had enjoyed during 2003. Asda was RWD second biggest customer and its oldest supermarket customer, which it had been supplying since 1979. Managing Director, Robert Wiseman, described himself as not offended but ‗hurt and disappointed‘.RWD has, however, been able to recover from this setback. Later in 2004, it secured new deals with Sainsbury‘s and Tesco‘s. Its share of Sainsbury‘s milk sales has risen from 20% to 50% while it now supplie s 60% of Tesco‘s requirements — up from 40%.In late 2004, its sales were 100 million litres more than before it lost the Asda contract. Another example of the potential risk in relationships with customers is the takeover of Safeway by Morrison, a rival supermarket chain. Morrison is now reviewing its milk buying policy for its expanded operation. RWD is Safeway‘s main supplier but Arla is the main source of milk for Morrisons.Relationships with suppliersRWD buys 60% of its milk direct from farmers and the remaining 40%, about 500 million litres a year, from milk co-operatives (ie associations of farmers who act collectively). RWD endeavours to build a strong, loyal farmer network and has a deliberate policy of obtaining high quality fresh milk. It is the only major milk producer which collects milk fresh from farms each day and it has a core procurement strategy of paying a higher price to farmers than other milk processors.In December 2004, however, RWD announced that it was cutting the price it paid for milk by 0.5p a litre to 19.16p a litre, a change which would save the company £5.5m. It was a response to Arla which had reduced its prices to 19.08p per litre in September 2004. This rivalry between milk producers has put strain s on Wiseman‘s relationships with its suppliers. The lower price means lower incomes for dairy farmers which can make it difficult for some to survive.In late 2004, First Milk, a Scottish milk co-operative, began negotiations to buy 15% of shares in RWD. Robert and Alan Wiseman agreed that they would personally sell 8% of their joint shareholding. They also guaranteed that they would make 15% of their shares available to First Milk if other shareholders did not agree to sell shares. Both RWD and First Milk see the share purchase as a beneficial move which will bring their interests closer together.First Milk is one of the largest milk co-operatives in the UK and supplies most of the milk which Wiseman buys from co-operatives. It has more than 4,000 dairy farmers who produce 2.5 billion litres of milk a year, more than 20% of the UK total output. It makes other dairy products such as Arran and Black Abbey cheese which it sells to the major supermarket chains. This is the first time that a milk supplier has bought into a milk processor. Other co-operatives which have tried to enter the milk processing market have invested in their own processing facilities.Operational efficiencyRWD pays particular attention to developing and maintaining productive and efficient operations. Some examples of this are given below.♦installing reverse osmosis technology in its Droitwich and Bellshill dairies with the result that its wastage levels in 2003 were half the industry average♦using plastic packaging technology which involves building a bottle making plant next to the dairy so that bottles go straight from manufacture to the dairy filling machines. The system also allows milk to be packaged in the exact size and shape of packaging needed at any particular time. It improves quality control and saves costs — it eliminates the need to transport empty bottles by road, for example.♦improving logistics by developing its IT capacity so that the right orders get to the right customers on timeRobert Wiseman Dairies and the Office of Fair Trading (OFT)In June 2000, the Competition Commission began an inquiry into the supply of fresh milk to middle-ground (non-supermarket) retailers in Scotland. Its provisional findings were that a monopoly situation existed in terms of the legislation in that RWD supplied at least a quarter of fresh processed milk to these retailers.In 2002, the investigation was closed as the Commission was unable to find evidence that RWD was able to use the situation to its advantage by engaging in anti-competitive practices such as charging low prices with the aim of driving competitors out of business.A major complainant had been Express Dairies which had been losing sales to RWD in Scotland. In 2003, the OFT re-opened the investigation into RWD in the light of information obtained during its investigation of the merger between Express Dairies and Arla Foods. RWD strongly denies any illegal activities, especially since milk processing in the UK is a very competitive market.The products of Robert Wiseman Dairies and their promotionRWD specialises in the production of liquid milk and cream. Unlike its main rivals, it does not make other dairy products such as cheese and butter (Arla Foods makes Lurpak butter, for example). It is, however, involved in the development of new milk products.RWD produces own-label milk for supermarkets but also sells under its own brands. One of these is ‗Robert Wiseman Dairies‘ but others include ‗Fresh‘N‘Lo‘, a semi-skimmed milk. RWD focuses its promotional efforts in two main areas. Firstly, it promotes its own brands using the company‘s distinctive black and white packaging and the slogan ‗Fresh Milk Daily‘. Secondly, RWD is involved in ‗generic‘ marketing campaigns to en courage consumers to drink more milk. It is, for example, the biggest of five contributors to the Scottish Dairy Marketing Company‘s ‗The White Stuff —Milk Moustache‘ campaign launched in 2003. These do not promote individual companies but aim to make consumers more positive about drinking milk which should benefit all sellers of milk. In this way, RWD can help sales of the milk it supplies to supermarkets but which is sold under their names.(The above information is taken from the Robert Wiseman Dairies plc Annual Reports, 2000–2004 and from the company’s website at . Additional material came from the Competition Commission Report, Scottish Milk: A Report on the Supply of Fresh Processed Milk to Middle Ground Retailers in Scotland (2000) available from)NB:The above and the accompanying appendices are current at 31 January 2005 and refer to the situation at that date.Appendix 1: Core business UnitsThe three core business Units in Robert Wiseman Dairies plc are:♦Operations — led by Martyn Mulcahy, Operations Director. This covers all aspects of getting milk from the farm to the final customer. It is responsible for buying milk,processing it and distributing it to buyers. Distribution includes the company‘s vehicle fleet. It has responsibility for maintaining product quality and for logistics.♦Commercial — led by David Dobbins, Commercial Director. This concentrates on dealing with customers and building business relationships. It has the responsibility of monitoring company performance and includes marketing and PR as well as human resourcemanagement.♦Finance — led by Billy Keane, Finance Director. Its prime purpose is financial processing, reporting and control but it also covers information technology and the negotiation and management of all company contracts.Appendix 2: Mission statementOn their website, Robert Wiseman Dairies give their mission statement as follows:―Our aim is to be the recognised supplier of choice to the fresh liquid milk market.We endeavour to understand the nature and significance of our customers needs allowing us to focus our attention and energy on delivering the highest quality products and tailored service to meet their requirements.We will continue to build a culture of continuous improvement which employees understand and share and where individual employee contribution and development is recognised, valued and rewarded.We will ensure that employees are supported by dairy facilities and a distribution network of the best quality and efficiency.We believe that being alert and receptive to change allows us to make uninterrupted progress towards our goal of being the best fresh liquid milk processors and suppliers.‖Appendix 3: Some measures of achievement for Robert Wiseman DairiesSome quantitative data on Robert Wiseman Dairies♦66% of its sales are now in England.♦In 2002/2003 annual sales of milk exceeded 1 billion litres for the first time.♦The dairy at Droitwich Spa is the biggest in the group. The initial investment in it in 2001 was £32m. The company spent £7m in 2004 to install the final phase which will bring total capacity up to 500 million litres a year. In 2004, it had a throughput of 368 million litres and also accounts for 55% of the company‘s production of pot cream.♦In 2004, RWD invested £2m in its other dairies in addition to the money spent at Droitwich Spa.♦In 2003, it purchased 153 new commercial vehicles and now has over 1,000 of them.♦99.9% of supermarket deliveries are achieved on target.♦10% of annual capital expenditure is committed to new IT equipment. In 2004, £1.5m was spent on improving logistics.♦Since flotation in 1994 RWD has spent over £230m on capital investment.♦RWD is the only company in the industry which is self sufficient in bottles — it makes.♦It achieves its annual target of less then three complaints per million Units.Some qualitative data on Robert Wiseman Dairies:♦It is the only dairy company which has been accredited with the environmental standard ISO14001 across all of its operations: processing, distribution, vehicle maintenance.♦In 2004, Robert Wiseman won the UK Entrepreneur of the Year award presented by the accountancy firm, Ernst & Young.♦In 2002, the Droitwich dairy was the first food factory in the UK to win an Integrated Pollution Prevention and Control (IPPC) permit which all dairies must have by 2005.♦Robert Wiseman Dairies has a policy of developing links with the community. For example, it encourages employees to raise money for a chosen charity and each year it also makes a financial award (known as the Community Award) to help a communityorganisation (one beneficiary for example has been the Pakistan Welfare Trust).♦It runs a Neighbourhood Shop of the Year competition and prints health and other community messages on its milk cartons.Appendix 4: Two issues for Robert Wiseman DairiesExpansion into EnglandRWD first moved into supplying the English market during the late 1980s. Two Scottish based multiple retailers, Farmfoods and Capital, began to expand into England. Both were customers of Wiseman‘s and in order to continue s upplying them with milk, RWD bought Appleby Dairies.Since then expansion in England has been a key part of the company‘s strategy and has been an important factor in the company‘s growth. It has been a significant factor in the company‘s success in a static market.Sometimes, expansion can have adverse consequences. In January 2005, Wiseman‘s announced that its depot in Loanhead, Midlothian would close and the business would be transferred to its depot in Whitburn, West Lothian. The closure is because RWD supplies less milk to Scottish supermarkets as a result of the decision by Asda to use Arla as its sole supplier. Arla closed two dairies in England in October 2004 but expects to create new jobs in Scotland due to the Asda contract.Competition CommissionIn its investigation which began in 2000, the Competition Commission investigated issues like: ♦whether the market to middle ground retailers in Scotland is a separate market from supply to other supermarket groups throughout the UK♦whether the Scottish market for the purchase of raw milk is a separate market from the rest of the UKAfter the Competition Commission re-opened their investigation in 2003, Charles Hall, a leading analyst of the UK milk market pointed out the market for processed milk is a competitive market and has been for a few years, which makes it unlikely that there is any price fixing going on.。

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A successful performance measure evaluates how well an organisation performs in relation to its objectives. Since the primary objective of commercial organisations is normally assumed to be the maximisation of the wealth of its shareholders, it follows that performance measures should evaluate this. In practice, many organisations use profit-based measures as the primary measure of their financial performance. Two problems relating to profit in this area are: • Profit ignores the cost of equity capital. Companies only generate wealth when they generate a return in excess of the return required by providers of capital – both equity and debt. In financial statements, the calculation of profit does take into account the cost of debt finance, but ignores the cost of equity finance. • Profits calculated in accordance with accounting standards do not truly reflect the wealth that has been created, and are subject to manipulation by accountants.

Economic Value Added – or EVATM – is a performance measurement system that aims to overcome these two weaknesses. EVATM was developed by the US consulting firm Stern Stewart & Co, and it has gained widespread use among many well-known companies such as Siemens, Coca Cola and Herman Miller.

Residual income EVATM is based on the residual income technique that has been used since the early 20th century. Residual income is a performance measure normally used for assessing the performance of divisions, in which a finance charge is deducted from the profits of the division. The finance charge is calculated as the net assets of the division, multiplied by an interest rate – normally the company’s weighted average cost of capital.

Example 1 Division A made a profit of $10,000 during the most recent financial year. The capital used by the division (equity plus long-term debt) was $70,000. The weighted average cost of capital of the company is 13%, and this is used when calculating the finance charge. The residual income of Division A was therefore:

$ Profit 10,000 Finance charge 9,100 (70,000 x 13%) Residual income 900

The finance charge of $9,100 represents the minimum return required by the providers of finance on the $70,000 capital they provided. Since the actual profit of the division exceeds this, the division has recorded residual income of $900. 2 ECONOMIC VALUE ADDED VERSUS PROFIT-BASED MEASURES OF PERFORMANCE JULY 2011

© 2011 ACCA EVATM is similar in structure to residual income. It can be stated as: EVATM = NOPAT – (k x capital) Where: NOPAT = Net operating profits after tax. (k x capital) is the finance charge, where k = the firms weighted average cost of capital and capital = equity plus long-term debt of the company at the start of the period.

This formula will not necessarily be given in the exam, so you need to learn it. NOPAT NOPAT means net operating profit after tax. This profit figure shows profits before taking out the cost of interest. The cost of interest is included in the finance charge that is deducted from NOPAT when calculating EVATM. Two approaches to adjusting for interest are taken. Either: • start with operating profit. Then deduct the adjusted tax charge. The tax charge should be adjusted because it includes the tax benefit of interest. Since interest is a tax-deductible item, having interest in the income statement means that the tax charge is lower. Since we are taking the cost of interest out of the income statement, it is also necessary to remove the tax benefit of it from the tax charge. To do this, multiply the interest by the tax rate, and add this to the tax charge, or • start with profit after tax, and add back the net cost of interest. This is the interest charge multiplied by (1 – rate of corporate tax).

Example 2 An extract from the income statement of Alpha Inc shows the following: $ Operating profit 1,000 Interest charge (100) Profit before tax 900 Tax at 25% (225) Profit after tax 675

NOPAT is either: Profit after tax 675 Add after tax interest (100 x 75%) 75 NOPAT 750

or: Operating profit 1,000 Less tax charge adjusted to exclude tax relief on interest (225 + (100 x 25%)) 250 NOPAT 750