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ACCT332-24S2: Advanced Management Accounting
A Guide on Preparing for the Final Examination
Conditions:
The final exam is 2 hours (120 minutes) and open book. See UC’s website for date, time and location of the final exam: https://www.canterbury.ac.nz/study/study-support-info/study- related-topics/examinations/exam-dates-rooms-and-timetables.
You can bring pens, a UC-stickered calculator, and any written or printed materials into the exam room (e.g. notes, textbook, etc.), limited to a quantity of materials that only occupies one small desk space. No other electronic or communication devices are permitted in the exam room.
Grade:
The final exam is worth 25% of your final grade. To pass ACCT332, you must receive at least 50% on average across all assessments and at least 45% on average in the test and final exam. For example, if you received 40% in the test, then you must receive at least 50% in the final exam to satisfy the latter condition (“the 45% rule”).
Topics Covered in the Final Exam:
The topics covered in the 2nd half of the course (weeks 7 to 12) are assessed in the final exam, although other topics covered in the 1st half of the course or in ACCT102 and ACCT222 may still be relevant.
Format of the Final Exam:
There are four questions in the final exam, each of which is worth 20 marks. You are required to answer any three out of four questions. Do not answer all four questions. If you answer all questions, only your first three answers will be marked. The last answer in your answer book will be ignored.
A redacted version of the exam paper is attached to this document. The “requirements” section of each question has been redacted (or removed).
Recommended Preparation:
A different company is the subject of each question. The questions are concerned with current issues faced by these companies. Use publicly available sources of information to learn about these companies,e.g. the company websites, annual reports, news articles, financial and market information from databases, etc. Research each company for few hours.
From the redacted version of the exam paper, you should be able to make an educated guess on the requirements of each question. Prepare notes on the likely requirements. These notes should form the basis of your answers in the final exam. Spend a few hours making notes on each question.
Collaboration and Referencing:
While this is an individual assessment, you may prepare for this exam with others. However, the study notes that you intend to take into the exam room should be based on your own work. Do not bring the study notes of other students into the exam room.
You are not permitted to use AI (e.g. ChatGPT) to prepare for the exam. AI has a distinctive writing style that will easily be noticed by the marker.
The answers you write into the answer book during the exam must be your own work. Do not copy your answers from the study notes of other students. Your answers may include short quotes from the work of others (e.g. a textbook), where any quotes areplaced in “quotemarks” followed by an abbreviated reference (e.g. Eldenburg et al., 2020).
To receive full marks to the questions in the final exam, you must cite the sources of the information that form the basis of your answers.
Be aware that lecturers reserve the right to orally examine students on the final examination. If there is suspected collusion (e.g. two or more students have near-identical answers) or suspected AI-usage, you could be asked to explain your answers orally to demonstrate that your answers are based on your own work.
Hints and Tips for the Exam:
ACCT332
For each question, spend about 5 minutes planning your answer and then about 30 minutes writing your answer. Spend any remaining time reviewing and adding to your answers.
ACCT332-24S2: Advanced Management Accounting
Final Examination (2 hours)
Redacted Version (requirements have been removed)
IMPORTANT: In the final exam, you must answer any three out of four questions.
1. Strategy, Structure and Culture
Fletcher Building is a public company listed on the NZX and ASX stock exchanges, operating “diversified businesses across our core markets of New Zealand and Australia, from resource extraction, product manufacturing and distribution through to property development and infrastructure construction.” (https://fletcherbuilding.com/about-us/)
The company’s strategic intent is: “ … creating sustainable value for our shareholders, delivering the best quality products and services for our customers, and meeting or exceeding the reasonable expectations of all our stakeholders.” (https://fletcherbuilding.com/about- us/what-is-important-to-us/)
Following the announcement of a half-year net loss of $120 million in February 2024,the Chief Executive Officer and Chairperson of the Board of Directors resigned. Fletcher Building’s 2024 Annual Report showed a full-year net loss of $227 million.
Fletcher Building took six months to search for and recruit a new Chief Executive Officer (CEO), Andrew Reding, who was appointed in August 2024. He has previously held leadership positions in Fletcher Building and Carter Holt Harvey. On his priorities, Reding said:
• “My immediate priorities will be to understand and then optimise the operational performance across the businesses for the prevailing challenging market conditions, see that we are well positioned when those market conditions improve, and work towards closing out the well-known issues the company faces.”
• “I will also be undertaking a strategic review which I will announce to the market in the first half of next year.”
(https://www.rnz.co.nz/news/business/525659/fletcher- building-appoints-industry-veteran-as-new-chief-executive)
Andrew Reding knows the history of Fletcher Building and its forebear, Fletcher Challenge. Collecting his thoughts on the strategic review, he ponders: How can Fletcher Building avoid history repeating with loss-making investments and realise its strategic intent of “creating sustainable value for our shareholders”?
Required: [REDACTED]
[20 MARKS]
2. Strategic Investment Decisions
Fonterra is a cooperative in the dairy industry, owned by farmers that supply it with milk. It manufactures a wide range of dairy products, which are sold in New Zealand and around the world.
Fonterra aims “to be the source of the world’s most valued dairy” in order to “generate returns for our farmer owners and unit holders, while bringing value to our customers and communities.” (https://www.fonterra.com/nz/en/our-co-operative/our-strategy.html)
Fonterra has three main areas of business:
• Consumer brands manufacture a range of products sold in supermarkets under brand names such as Anchor, De Winkel, Fresh ’n Fruity, Mainland, etc.
• Foodservice makes high-quality, long-life ingredients – including cream, cream cheese, cheese, butter and milk – for restaurants and bakeries.
• Ingredients manufacture milk powder and other basic products, sold in bulk (or large quantities) to other food manufacturers around the world.
The financial performance of these areas of business is shown in the table below:
Following shock losses in 2018 and 2019, Fonterra undertook a strategic and financial review of all areas of its business. As a result, Fonterra hired a new Chief Executive Officer (CEO), Miles Hurrell, in 2018 and sold its ice-cream business, Tip Top, to Froneri for $380m in 2019.
On 16 May 2024, Fonterra announced “a step-change in its strategic direction” including “exploring full or partial divestment options for some or all of its global Consumer business …”
(https://www.fonterra.com/nz/en/our-stories/media/fonterra-announces-step-change-in- strategic-direction.html)
Divesting the whole of the Consumer Brands area of business would be a long and complex process to carry out.
The following is a fictional scenario: Fonterra’s Chief Financial Officer (CFO), Andy Murray, recently attended a seminar on strategic investment decisions, where Professor Adler discussed the multi-attribute decision model (MADM). Afterwards, Andy wondered what insights MADM may generate if applied to the decision to divest the Consumer Brands area of Fonterra’sbusiness.
Required: [REDACTED]
[20 MARKS]
3. Managing Risks and Uncertainties
Ryman Healthcare is a property developer and retirement village operator. Prior to the Covid- 19 pandemic, Ryman Healthcare’s firm performance had been outstanding with its senior executives rated as first-class. The company’s share price peaked in January and February 2020 at almost $16 per share but has since declined to under $5 per share during 2024.
As a result, Ryman Healthcare’s Chief Executive Officer (CEO), Richard Umbers, resigned in April 2024, having only been appointed in October 2021. Ryman Healthcare’s Chair of the Board, Dean Hamilton, has taken over the CEO’s role until a new CEO can be appointed.
In June 2024, Dean Hamilton explained, “a grow-at-all-costs mentality and a Head Office Christchurch-centric operations were the core of Ryman’s problems” .
(https://www.theweeklysource.com.au/community-living/ryman-healthcare-chairman- explains-where-the-company-got-it-all-wrong)
A summary of Ryman Healthcare’s firm performance is shown in the table below:
Notes to the table:
* The difference between operating profit and net profit after tax relate to income tax and unrealised fair-value movements of investments.
** The number of units and beds relates to existing capacity in Ryman Healthcare’s retirement villages, while the number in the land bank relates to Ryman Healthcare’s potential to add capacity by developing land that the company owns.
The following is a fictional scenario: Ryman Healthcare’s Chief Financial Officer (CFO), Rob Woodgate, recently attended a seminar on the Levers of Control, presented by Robert Simons. Afterwards, Rob wondered how these Levers could be applied to Ryman Healthcare.
Required: [REDACTED][20 MARKS]
4. Managing the Triple Bottom Line
Spark is a public company listed on the NZX and ASX stock exchanges, operating in the telecommunications industry. Spark’s operating revenue (2023: $3.8 billion) and operating profit (2023: $2.0 billion) can be divided into two roughly equal segments: First, Spark provides mobile and broadband services to individuals and organisations; and second, it also provides a wide range of IT products and services to small and large businesses and government entities.
Spark has aggressive targets for growth in revenue, profit and cash flow. It also has a range of targets for social and environmental performance including:
• “Increase Māori and Pasifika participation within Spark by 5 percentage points by end FY26”
• “Extend the reach of our not-for-profit broadband service Skinny Jump, with YoY growth”
• “Achieve 40:40:20 gender representation across Spark”
• “Science-based target (SBTi): reduce Scope 1 and 2 emissions 56% from FY20–FY30 and ensure 70% of our suppliers by spend2 have SBTi-aligned targets in place by 2026”
(Spark New Zealand, 2024 Annual Report,p.83)
Spark was one of the first large public companies in New Zealand to include targets for social and environmental performance in its executive remuneration scheme, which applies to the Chief Executive Officer (CEO) and nine senior executives.
Spark’s 2025 executive remuneration scheme is summarised in the table below:
Notes to the table:
1. The CEO is also subject to a minimum required shareholding: “The CEO is expected to acquire and hold shares that are at least equivalent in value to 25% of the CEO’s base salary but ideally would increase this shareholding to 100% of base salary …” (Spark New Zealand, 2024 Annual Report,p.80).
2. If senior executives meet their targets, they will receive a bonus of 50% of salary (75% of salary for the CEO); and if they exceed their targets, they can receive a bonus of up to 100% of salary (up to 150% of salary for the CEO).
3. Operating profit is defined as earnings before interest, tax, depreciation, amortization and net investment income.
4. There are two measures of customer experience: iNPS (interaction net promoter score) and JCR (digital journey completion rate).
5. The measure of digital infrastructure is “Increase 5G connectivity to all towns with a population >1,500 by end FY26” (Spark New Zealand, 2024 Annual Report,p.83).
6. Target is cost of equity plus 1.5% per annum. This is an absolute target as opposed to a relative target where Spark’s total shareholder return is compared to that of a peer group or market index.
7. Targets are: “Reduce absolute scope 1 and scope 2 GHG emissions by at least 33.6% against baseline GHG performance [and] Scope 3 - at least 70% of suppliers by spend have established supplier science-based targets” (Spark New Zealand, 2024 Annual Report,p.76).
8. Target is: “Reducing gender pay gap by six percentage points to 16%” (Spark New Zealand, 2024 Annual Report,p.76).
The following is a fictional scenario: Alison Barrass, non-executive director and chair of the human resources and compensation committee at Spark, recently attended a seminar on performance management by Neil Crombie. Afterwards, Alison began to question Spark’s approach to measuring performance and rewarding executives. While Alison ruled-out Neil’s radical argument for abandoning incentive schemes, she did wonder how Spark’s remuneration policy and practices could be improved.
Required: [REDACTED][20 MARKS]