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ACCA Applied Knowledge · Management Accounting · Performance measurement - overview

A hospital board argues that relying only on financial indicators to assess performance can be harmful. Which of the following is the strongest reason for also using non-financial performance indicators?

The strongest reason is that non-financial indicators give early warning of future financial results and cover quality, customer satisfaction and similar areas that money-based figures miss. They complement rather than replace budgets, and IFRS does not require them in the statement of profit or loss.

  1. AThey give early signals of future financial results and cover areas such as quality and customer satisfactionCorrect
  2. BThey are always more precise than financial measures because they are expressed in units
  3. CThey remove the need for budgets and variance analysis
  4. DThey are required by IFRS to be shown in the statement of profit or loss

Explanation

NFPIs are often leading indicators of future financial performance and capture quality, satisfaction and innovation that financial figures miss. They are not necessarily more precise, do not replace budgets, and IFRS does not require them in the statement of profit or loss.

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