T4 Part B Case Study Exam September and November 2010
A Cheeky look at this time’s T4 case The tale of the politician and the Cheeky Girl provides an introduction to the industry at the centre of your final CIMA examination. Researching the industry I discovered that one of the least successful programmes made for UK TV was ‘Living with..the Cheeky Girls’ which gained 0.5% of the night’s TV viewers when it was screened on Living TV in July 2008. The Irimia twins found initial success in 2002 on the TV talent show Popstars: The Rivals (London Weekend Television) and produced a string of four Top 10 singles (mostly containing ‘cheeky’ in the title). The 2008 documentary was intended to re-launch their singing careers. Popular interest (or not) was added by the news that one half of the double-act had recently become engaged to be married to a Member of the UK Parliament, Lembit Öpik. A week after the broadcast it was announced that their relationship was over. Mr Öpik polled poorly again in the 2010 General Election and is now reported to be considering whether his future career would be better served as a stand-up comedian or by becoming the elected Mayor of London. But at the moment it’s for his cheeky moment that he is probably best remembered. The experiences of Mesdames Irimia and of Mr Öpik reflect something of the situation of the firm at the centre of the T4 exams in September and November 2010. There is a big difference between quality and popularity and some of the biggest margins are earned for programmes that are tacky rather than the ones that directors take pride in having made. The success of V and Y Productions (VYP) depends on understanding viewers’ tastes and they too seem to being trying to strike a balance between comedy, entertainment and serious current affairs. Reputations are important but transitory, and it takes consistent performance to sustain one as good at VYP’s. And the whole business can look contrived1 or passionate depending on how you look at it. And there are a lot of egos in the industry. If you are taking the exam you need to find out stuff about the industry too because this exam requires you to assume the role of someone working for the firm in the case study, VYP. You will need to show some understanding of the industry, the issues, and the nature of the clients and of the programmes. But this exam is not an excuse for overdosing on watching TV. You are a management accountant at VYP so you need to understand how this all affects revenues, costs and future shareholder value. And as someone about to take your final CIMA exam, you need to know how to use your analysis of the pre-seen material, and the other things you have learned about the real-world industry, to help you pass your exam.
The T4 Test of Professional Competence - Part B Case Study Examination Despite its recent change of name everyone will still refer to this as the TOPCIMA exam I’m sure. Names linger on and frankly that describes what it is. It’s a Test of Professional Competence in Management Accounting. It’s just that you are asked to demonstrate your professional competence in two ways: in your work record and by passing this Case Study exam. 1
You may be thinking that getting a Cheeky Girl into an exam article is a bit contrived too.
T4 Part B Case Study Exam September and November 2010
T4 Part A is your logbook (sorry….Career Profile…) and although you are advised to get this sorted, signed off and approved before you take this exam there is nothing to prevent you from taking this exam before your Career Profile is accepted. One of the effects of this splitting of T4 into two parts is that the pass mark for the T4 Part B exam effectively halves to 25 credits. The exam is marked out of 100 marks but that is converted to credits. I mention this because in late March this year some candidates suffered palpitations when they read they had scored 28 credits in the exam and assumed they had failed – in fact they had passed at 56%. As in the past this is a case study in two parts. The pre-seen material you already have consists of 19 pages including Appendices up to 4. On exam day you will receive the second part of the case, the unseen material. This will be a further 3 or 4 pages and will include more information, especially on things that have happened since the pre-seen runs out, which according to the financial data is end of March 2010 although page 11 seems to refer to commissioning changes more recent than March 2010.. In the exam room you must assimilate this unseen material and answer the requirements set. This format was introduced for the March 2010 exam and is the same as the old TOPCIMA exam but with two very significant changes: 1.
Your role will be internal not external
Before 2010 candidates were given the role of an external independent strategic consultant advising the Board of the firm in the case. That gave examiners license to ask for reports on grand strategic matters such as changes to the Board, the suitability of strategic acquisitions, and dealing with corporate-wide risks. The T4 –Part B examination is narrower and the examiner will tend to focus more on internal decisions, all-be-it that they will expect you to alert management to any wider-ranging implications of these. It may also be that you will be submitting your work to the Finance Director, Janet Black, and not to the Board. This suggests that the technical knowledge you will need to display is likely to come from the fields of management accounting more than from management and business strategy as it has in some previous TOPCIMA exams. 2.
Two items to submit, not one
The pass mark for this exam remains at 50 marks and you are still allowed 3 hours to write your response plus a further 20 minutes reading time before you write. In the past candidates were required to prepare a single report. You will be required to submit a report and in addition to submit a shorter item. In the March and May 2010 exams (available as a free download from the Studying section of www.cimaglobal.com) this was the requirement for drafts of a presentation of not more than 10 bullet points each summarising the key points from one specific issue discussed in the main report. CIMA wants to test your ability to communicate succinctly to management. It seems likely that you may be asked for slides in your exam, but don’t be surprised if instead you are asked to write a summary email, short letter, or key notes for a speech or presentation by Diane Innes. The final page of the September/November 2010 pre-seen shows the Case Study Assessment Criteria against which your submission(s) will be marked. The CIMA website contains useful articles giving guidance on how to get these . In brief I understand these to be: Technical: invoke appropriate non-numerical knowledge from other CIMA papers to support your analysis of the situation in the pre-seen and unseen parts of the Case Study and also your arguments and recommendations;
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T4 Part B Case Study Exam September and November 2010
Application: relate the technical theory specifically to the situation of VYP in the Case and, especially, to carry out appropriate supporting calculations to help you analyse the financial implications of some of the issues in the case as well as in justifying your recommendations; Diversity: use relevant real-world industry examples to give weight to your analysis and recommendations; Focus: select from the issues or decisions in the Case Study materials those of greatest immediate importance to VYP and devote appropriate amounts of the report to these; Prioritisation: place issues and decisions facing VYP in a priority order in your submissions by taking into account the potential impact and the urgency of each. The number of marks available for demonstrating this skill has fallen from 10 to 5 which reflects the fact that in the March and May 2010 exams there were less issues to choose between and that it will be your line manager who will initially define priorities rather than you as an independent consultant deciding these for yourself; Judgement: in discussing issues and decisions you must demonstrate understanding of the potential impacts on VYP of each and also identify and assess different potential courses of action available to VYP and discuss your supporting financial analysis of the alternative actions; Logic: provide clear recommendations to management on what VYP should do, justifying clearly how this recommendation comes from your earlier analysis, and indicating the steps to take to implement each recommendation. The number of marks for this skill has risen from 20 to 30 to include the 10 marks available for the part (b) requirement for slides or other short submission and will be awarded exclusively against this part (b) requirement; Integration: the written-style and presentation of your submission should be business-like and succinct and as a whole the submission should be complete and demonstrate consistent arguments from beginning to end (the marks available for this criterion have fallen from 10 to 5 which is probably to provide some of the additional marks under Logic and in recognition that in the past this criterion overlapped a lot with some of the earlier criteria); Ethics: the recognition of the implications of issues for the moral behaviour of VYP or of its employees or its impacts on the social responsibilities of VYP. This criterion is broken down into analysis of issues and choices and the justification of why you consider each issue to have an ethical dimension (5 marks) and the recommendations on how management should deal with them (5 marks). Some candidates will be taking this exam on PC. There are no special criteria to award marks for PC skills. Although the March and May papers for T4-Part B required slides CIMA has made clear that candidates will not be permitted to use PowerPoint or similar packages. Examination submissions on PC will be restricted to Word and Excel documents whilst on conventional scripts text, calculations and slides will be rendered by hand. Before you take your T4 examination, or indeed your first practice exam, you should ensure you: Understand these criteria fully. Do this by reviewing the CIMA website and download the March and May 2010 papers, solution and any other guidance such as the most recent Post-Exam Guide for the T4 examination. Review any technical theory from previous CIMA studies that may have relevance to VYP. When I read the pre-seen I found myself thinking of SWOT analysis, Porter’s 3 generic strategies, and product portfolios. I was also looking at the stakeholders and their interests but 3
T4 Part B Case Study Exam September and November 2010
also at the quality of the financial controls and recalling the issues of managing network organisations and the pros and cons of outsourcing. It’s also important to consider what may appear in the unseen material on exam day and have technical knowledge revised for these. In the past this has included managing joint ventures, bonus systems, share valuations, acquisitions, project appraisal, and cost and contribution analysis. Get some industry knowledge about VYP’s industry. Watch some TV of course to see formats of programmes and to read the end-credits to see who produces what. Visit the websites of indies and of the trade media such as Broadcast magazine. Try internet searches on ‘indie TV production’ but be selective, I got 4 million hits when I Googled that. Get some practice at timed mock exams. You have never taken an exam like this before and you will need to hone your technique (if you have taken an exam like this before you certainly do need to hone your technique!! Either that or get another hobby apart from sitting TOPCIMA exams). In 9 years of teaching CIMA case studies to hundreds of students I have never once heard a student leaving a mock exam complaining that they had learned nothing from it. I have seen many of them looking stunned and humbled at the experience, wanting to know how badly they had done and asking for more mocks to practice on. The point is not to predict what is coming up and learning what to say because this exam can’t be predicted. The point is to learn how to cope when the examiner throws the unexpected at you and to produce a decent submission, that means a complete report with justified recommendations the other shorter item requested, within 3 hours 20 minutes. Mock exams can be obtained on courses or bought or downloaded from the same commercial publishers that produce material for other CIMA exams. In this exam, and especially in regard to the part (b) requirement there are absolutely no marks for writing-out bits of the pre-seen and unseen parts of the Case Study. What is important is to get the key business points sorted. Let’s have a look at a few key points from the pre-seen material on VYP to get on the right track.
History and development of VYP VYP is a relatively young firm and a successful player in its market. It was established in 2003 and has grown strongly from 12 staff to 60 staff since (page 3). Its founders set out ‘to make innovative programme ideas that will appeal to its target audiences ….to be successful in terms of audience viewing figures’ (page 12). Many of the staff that have joined since, value the creative freedom it allows them. Its aim is ‘to make successful programmes for profit’ (pages 3 and 12). Its innovation continues, having diversified further by producing two critically successful Drama series in the past year (page 6 and Appendix 4). The financial data in appendix 4 shows operating profits rising at 35% (£3,382/£2,504k) and an almost 7% fall in operating margins on UK programmes (1- 9.4%/10.1%) is less than the 14% fall in commissioning rates described on page 11. This seems to have been achieved by managing its costs down, apparently by reducing the fees paid to artists and presenters (page 11) and also by improving its margins in Entertainment programmes. The margins on international sales of programmes has also increased (Appendix 4) and protected VYP’s overall bottom line. VYP is dependent on the competences of its core team. The pre-seen comments several times on this, notably on page 7 where it says ‘VYP’s skills lie with its creative and artistic programmemaking people’ and on page 8 that ‘The success of VYP is based on nurturing creativity and solid personal relationships with key members of staff’. This brings to mind the ‘Shamrock Organisation’ identified by Charles Handy, a core of highly-trained professionals supported by two other ‘leafs’; contract staff and specialists. Even these latter two groups are close 4
T4 Part B Case Study Exam September and November 2010
associates, page 9 reporting that VYP tends to use the same people over time. This core team of 60 (page3) consists of programme directors who originate most of the programme concepts (page 8), programme producers who manage the teams that make the programmes and control expenditure, four VT editors, a commissioning team under Sara Mills, and a finance team under Janet Black (which includes the booking managers), and the International sales team and legal team. A further ‘400 person-years of work’ is subcontracted (page 3). Keeping this team together is a principal contribution of Steve Voddil (page 8) and is accomplished by the ‘positive atmosphere’ (or culture), bonuses paid to creative staff (page 8) and equity participation for most senior managers. The challenge for VYP is how to keep this core team together if it decides to focus on particular types of programme, or if it is compelled to cut costs by the reduced commissioning revenues. The outsourcing VT Editing has so far been resisted by programme directors (page 8), principally on grounds of convenience. Reviewing this may be on the cards and could provoke problems for maintaining this core team. VYP has a diversified portfolio of programmes genre. Page 6 shows the range of genre and the contributions of each are detailed on page 18. It can be seen that Entertainment programmes generate much better margins than other programmes despite being the smallest proportion of its activity, being 12.4% of UK programme revenues (£3,380k/£27,310k) but 22.7% of broadcast time (page 17: 27.5 hours/121.3 hours). Entertainment has the lowest average commissioning revenue per hour at £122.9 (page 17) which is less than half the rate for most other genres. The fact that it can still return the highest margin suggest it is cheap to produce. Although extending this type of programme might improve profits it would not fit the original wish of VYP to produce differentiated programmes for peak times (page 12) although the average commissioned revenue does fall at the lower end of the £300,000 to £100,000 per hours band paid by broadcasters for ‘peak viewing’ programmes (page 7). VYP would also need to keep production costs under control. Drama programmes sit at the other end of the financial spectrum. These attracted the highest average commissioning revenue per hour, £426.3k (page 17) but accounted for the smallest proportion of programme time in 2010, 13.2% (16.0 hours/121.3 hours). They had the lowest margin due to problems with control over initial costs. The success of these programmes in attracting viewers seems not to have been fully translated into the hoped-for commercial success in terms of profits. However care must be taken before jumping to a conclusion such as that VYP should cease Drama and produce more Entertainment. In addition to the human issues such as the desire by VYP’s founders to provide quality, and the creative and artistic aspirations of the rest of the core team they need to consider the figures more closely. One substantial source of income has been international sales. The pre-seen does not indicate what programmes were sold. It is possible that the Drama programmes may be more readily sold internationally than Entertainment programmes which could depend on solely UK references and celebrities for their success. The margins from these International sales are not added to the margins for the individual genres. Secondly the margins are net of overheads. This can be seen by the fact that the total operating costs in Appendix 4 are the same as those in the Statement of Comprehensive Income (Appendix 2). All costs are charged-back to the programmes and this includes office overheads which are charged back by ‘production days’ (page 10). Production days are not the same as programme days. If Drama takes a lot of days to produce per hour of broadcast then it will attract a lot of direct costs and overheads that will depress the margins. Ceasing to produce 5
T4 Part B Case Study Exam September and November 2010
Dramas will not reduce overheads, it will merely mean they have to be allocated to other programmes and so reduce the margins on those instead. In the examination you could be asked to provide an evaluation of changes to the types of programme VYP produces.
Issues presently facing CeeCee The Examiner has the task of spinning two different exams from this pre-seen material. One is sat in September and the second is sat in November. Each develops independently from the pre-seen. That means that the things that happen in the unseen material introduced for the September exam have absolutely no bearing on the situation of VYP in November. The Examiner has left a number of threads dangling in the pre-seen which may become issues in the September or November exam. Exploring these now may help prepare you. 1.
Coping with reduced commissioning revenues
Rates of revenue per hour seem to have declined at between 14% and 25% in the past year (page 11). The ‘current economic environment’ has affected commercial broadcasters in particular, presumably due to the fall in the advertising revenues they use to fund their buying of programmes. This pressures VYP to try to reduce its costs but also to review the sorts of programmes it makes, particularly re-commissions where the rate reductions have been the steepest. This could lead to conflicts between the creative staff, such as programme directors, who put innovation and quality ahead of financial considerations, and the budget holders such as programme producers and finance staff who wish to achieve cost control. 2.
Improving cost control
VYP has had difficulties in controlling its costs. Page 10 refers to inaccurate forecasting resulting in ‘cost over-runs not being identified until the programmes were completed’. The Drama series also suffered unexpected costs (page 6). There are several observations to be made about cost controls at VYP.
Cost forecasts and cost budgets seem disjointed. According to page 5 the ‘detailed programme budget’ is drawn up by the commissioning team under Sara Mills using ‘standard daily rates for estimating purposes’. This leads to the negotiations with the broadcaster and the agreement of the hourly revenue for the programme. Control of the actual programme budget passes to the programme producer who signs off on all expenditure (page 10) including the staff booked on their behalf by members of the finance team (page 14). There is a database system into which producers enter forecasts of expenditure for the purposes of budgetary control but at the same time many maintain separate spreadsheets of actual expenditure (page 11). If it can be assumed that the database is used for the initial commissioning forecast and is the same one used by producers for the management reports then any underestimates of ‘standard day rates’ will give rise to unrealistic programme costings and the failure to spot cost overruns until after the programme is finished. The standard rates for staff are updated annually (page 10) and page 11 tells us that savings on one element of costs, artists fees, have been allowed to cross-subsidise other costs. This does suggest rather slack budgetary controls.
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T4 Part B Case Study Exam September and November 2010
You will recall the distinction between planning variances and operational variances. A planning variance arises when an original forecast, or a standard cost within it, was subsequently found to be unrealistic. At the foot of page 9 we are told that budgets last year were exceeded due to poor control over bookings by programme producers. A programme producer might retort that their performance was fine, and that it was the budget that was too ambitious. They might also question how controllable these costs are given that the bookings are made by members of the finance team under instruction from the production teams but presumably at the best rates that the finance team could find. Given the detail on the use standard rates and revenues in the pre-seen you might be provided with numerical data in the exam and asked to construct a forecast of costs for a programme or, possibly, to conduct a variance analysis on some reports.
Management accounting reports are infrequent. The bottom of page 10 confirms that budget reports are monthly. Page 9 indicates that programmes are often filmed in a few days, during which time the bulk of the costs (studio, film crew, talent, catering and so on) will be incurred. By the time the report is received it would be too late to pull-back on the costs of the programme. In support of this it can be noted that the cost overrun on the Drama series was due to initial costs and not to filming the 23 programmes (page 6) suggesting that the extended filming did mean the monthly reports allowed producers to exercise some control. The fact that producers track their costs on separate spreadsheets seems to suggest that the producers don’t feel able to rely on the management reports. In the exam you may be asked to recommend improvements to the management accounting systems at VYP. These could include having one integrated forecasting booking and accounting system, effectively an ERP system. You could also suggest weekly financial reports to programme producers and possibly the secondment of management accountants to production teams to help the programme producer who at present seems to be responsible for several programmes (page 11).
3.
Buying the new computer graphics package
This is mentioned on page 9 although no figures are given (yet). This brings to the fore the decision on whether to bring this in-house or whether to continue outsourcing. There is also the issue of affordability and commercial benefit. VYP has benefited from the flexibility of its present network arrangements. It has to keep winning new business. Appendix 3 (page 17) shows that in 2010 it produced 18 different types of programme and has on average 6-12 weeks warning that it may win the commission and 6 months to make the programme (page 5). The point here is that VYP has very little predictable work and therefore doesn’t know what skills and resources it will need until quite late on. It then assembles the team and resources it needs. Having a high reliance on outsourcing means it can vary its production skills and capacity to suit the work coming in. It avoids paying high fixed costs for assets it has no use for at present. Buying new graphics software would inflict the financial obligation to pay for it and this could only be recommended following a detailed assessment of VYP’s present cash position and the forecast demand on cash. At this point it is worth nothing that the pre-seen material doesn’t contain a Statement of Financial Position (or Balance Sheet as we un-reconstructed folk still like to call it). This may be 7
T4 Part B Case Study Exam September and November 2010
provided in the unseen material on exam day and, if so, caution should be exercised when assessing available cash resources. Page 4 tells us that broadcasters pay the total fee for the film at commissioning and that VYP has this to finance the making of the programme. This means that VYP may show substantial cash reserves but this will not be free cash that can be spent on software or whatever because it is already ear-marked for production. Page 12 tells us that VYP paid its first dividend during 2009 which might suggest it has recently become cash positive.
4.
Increasing international sales
International sales are very profitable and growing strongly as a consequence of the appointment, in 2007, of Tom Harrison. To obtain satisfactory international sales VYP has to produce programmes (or formats) with international appeal and also be able to retain the intellectual property rights (IPRs) in them. This may be a problem in the current environment where UK broadcasters are seeking to boost their incomes by taking a share in the success of these international sales. 5.
Spreading participation
On page 12 we are told that both Managing Directors would like more key employees to get profits and are considering issuing shares to more of the senior employees. There seems to be a distinction implied between key employees, who will get profits, and senior employees, who will get shares. Profits are not presently shared. Bonuses are paid for non-financial performance such as awards, viewing figures and re-commissions (page 8) which do not necessarily link to profits. For example the Drama series attracted high viewing figures but still had the lowest margins. A bonus of 5% of international sales is paid to Tom Harrison (page 10), and this is likely to be profit creating given that the costs of these sales is just the costs of his team and its travel and the margins remain high. Developing bonus systems featured in the March 2010 exam and could feature again. Good solutions would consider affordability, motivating potential, impact on group culture of rewarding individual rather than groups, and fairness in operation. For example we have already suggested that programme producers may not be entirely responsible for the cost over-runs of their programmes. Providing equity to senior employees has a number of implications. One consideration is equity in distribution. Page 12 confirms that VYP has 10 million authorised but un-issued shares. Page 15 refers to Sara Mills having already requested that she receives equity and we are told she is a highly valued employee. Janet Black may also wonder why she has only 5% of the equity when two VT Editors received 10% each, and the lawyer, Les Fisher, arrived several years later and received 15%. Clearly a good Business and Legal Affairs Director is essential in an industry that is dominated by the importance of tightly-worded contracts and the package Les Fisher negotiated demonstrates how he can use these skills on his own behalf. But although issuing equity generously may motivate the lucky recipients, it may de-motivate those who feel they have been overlooked. One conclusion from the table on page 12 is perhaps that creative managers seem more valued than some administrative managers. A second consideration is dilution of exiting shareholdings. If VYP issues more shares it will reduce the amount of dividend that goes to the existing shareholders. These shareholders are liable to insist on receiving a justification for this, for example how will a 10% o0r 15% increase 8
T4 Part B Case Study Exam September and November 2010
in the issued shares contribute to a rise in profits by 10% or 15%? Without such a compensating rise in profits the existing shareholders will lose potential dividend income. The shareholdings on page 12 show that providing Steve Voddil and John Young are in agreement they can out-vote the rest of the Board. But if they disagree then the outcome of decisions will be influenced by whom the smaller shareholders align with. 6.
Managing the conflict between artistic fulfilment and financial prudence
The pre-seen refers several times to programme directors lacking a concern for budgets (eg foot of page 8 and in the description of the role of Janet Black on page 14). This does suggest the potential for the cost control environment to be weak. Essentially it is maintained by the commissioning process, under Sara Mills, and the financial control process under Janet Black. But this will cause a tension throughout the business. The description of the background of the founding MDs, described on page 14, uses words like ‘flair’ and ‘frustration’, and the re-statement of VYP’s by its MD’s on page 12 combines seems to combine innovation and profits. Mismanagement of this tension could result in a seeping away of creative talent with the consequence that revenues might fall. Or it could result in a weakening in financial controls at a time when the squeeze on rates could lead VYP to become no-longer viable.
7.
Ensuring VYP remains creative and fresh
VYP doesn’t have a flow of revenues from business as usual. The only vaguely predictable future sales will come from re-commissioning and, as page 11 reports, the rates on this have dropped sharply. This means VYP is only as successful as its next programme idea. It has to be inventive and fresh. This will have several implications. VYP will need to continue to attract and to nurture creative talent. The discussion on page 13 of the interest John Young is taking a pair of promising under-graduates reflects the Board’s recognition of this. Perhaps the examiner is thinking of asking you to evaluate the benefits of a formal placement scheme or of links with education providers. VYP will also need to be able to deal with programme directors who have ceased to be creative. The company is only 7 years old and perhaps has not accumulated too much dead wood yet, but it will. This said, page 8 does refer to ‘a handful’ of programme directors and producers having left ‘by mutual agreement’ already which may point to potential issues in your exam. Dealing with redundancies and the performance of individual staff in a fair way is a good topic for your examiner to use to assess your appreciation of how to deal with ethical issues.
Some potential wild cards to consider The issues above are reasonably clear in the pre-seen. But it is not possible to predict the way the Examiner may decide to develop the case on exam day. The best we can do is to spend some time considering how we might respond if we are confronted with issues we were not expecting. Here are a few wild cards that the Examiner could deal you on exam day. I don’t have any ‘inside line’ on these so they are not tips. Rather they are based on what the same Examiner has introduced in the past. 9
T4 Part B Case Study Exam September and November 2010
1.
Loss of a key member of management
In past exams the candidates have opened the unseen material to read of the loss of a member of management from a variety of causes including ill health, martial problems, Boardroom tiffs, and a desire to sail around the World. These candidates had to assess the impact and, if significant, suggest ways to resolve it. VYP is a good team. The loss of a key manager could affect its future performance. The loss of either MD would jeopardise its reputation and the cultivation of the team spirit whilst the loss of Sara Mills could lead to less commissions or perhaps the taking on of work at loss-making prices. Losing Janet Black would sacrifice financial controls whilst losing Tom Harrison might reduce earnings from International sales. 2.
Acquisition bid from a competitor
In the real-world TV production industry firms like Shine, Endemol and All3Media, some of the super-indies referred to on page 2, have been consolidating the industry by acquisition. They have sales revenue of over £200m (compared to VYP’s sales revenue of 28.6m). If they sought to buy VYP you, as a management accountant, might be asked to comment on whether the offer price was a fair value or not. 3.
Acquisition bid for a supplier
VYP buys-in many services such as studio time, film crews, and some special effects. The Board may become envious of the profit margins being made by these suppliers, or it may seek better access and a smoother service. Setting a requirement on exam day involving VYP buying a supplier, either by using equity or by cash, would provide your Examiner with an opportunity to assess your skills of financial evaluation and in addition your appreciation of the managerial issues involved. 4.
Investment in new kind of programme
Key topics in the real-world indie industry are High Definition TV (HDTV), 3D TV, Interactive TV (iTV) and multiplatform distribution (TV, handheld, internet, and so on). Several of these will require substantial investment in new cameras, processing and editing equipment by indies. The revenue benefits are less certain. You could be asked to evaluate an investment by VYP in one of these. 5.
Ethical issues
There are 10 marks available for proper analysis and recommendations around moral issues. In the past this Examiner has asked candidates to deal with the ethical issues of theft of stock, oppressive managers, victimisation of employees, unsafe products and working conditions, bribery and corruption between management and suppliers, misrepresentation of products, and granting compassionate leave-of-absence for personal problems. Consider how these might apply to VYP Some indies have found themselves in hot water over programmes that caused offence to viewers or to celebrities on them. One example was the Brass Eye productions that lampooned celebrities for being prepared to be identified as figureheads for social campaigns of which they understood little. Others have been accused of using dubious and exploitative means to reveal issues of popular concern. One MD of VYP has focused on child labour exploitation, and is ensuring VYP donates considerable sums to help put a stop to it. Whilst ceasing these donations would boost VYP’s
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T4 Part B Case Study Exam September and November 2010
profits it would leave VYP exposed to the accusation that it was also exploiting these children by selling films of them for profit and not using any of the money to actually help them. VYP has long-established relationships with suppliers, several of whom depend solely on VYP for work (page 9). Pushing down their rates or ceasing to use these in an attempt to cut costs would raise the ethical issue of fair treatment.
Getting ready for the exam I hope this article has given you a few pointers on where to start. You need to fully familiarise yourself with the pre-seen, the main facts and people in it. Try to spot potential issues. You need to get practice in answering full-length T4-Part B mock exams against the clock and, ideally, getting them marked with feedback on where you can improve. You also need to have a look at the real world of TV production, and not just by sitting on the couch and watching TV. This year the Cheeky Girls were back again, as hopefuls on Britain’s Got Talent (Freemantle Productions). They didn’t reach the semi-finals. Perhaps talent and production quality are not the only secrets of success. But you must admire their determination at least. This is your final CIMA exam so it’s worth you making a special effort too. And once you pass: S.O.S. it's a celebration S.O.S. cos it's party time S.O.S. it's a celebration S.O.S. and it's time for fun (Cheeky Girls: Celebration) Good luck with your exam.
Adrian Sims is an Editorial Director with responsibility the publications of BPP Learning Media towards the CIMA professional exams, including its T4 materials. He teaches towards the T4 – Part B Case Study Examination for BPP Professional Education in Dublin and in Milton Keynes. He does not consider himself to be a fan of the Cheeky Girls.
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