ACCA Applied Knowledge · Management Accounting · Performance measurement - overview
Which of the following is the main reason a company might use non-financial performance indicators alongside financial ones?
Non-financial indicators are used alongside financial ones because they show the underlying drivers of future financial performance, such as quality, customer satisfaction and efficiency, and can give earlier warning than financial results. They still need targets and are not mandated by IFRS.
- AThey are always easier to audit than financial measures
- BThey give early indications of drivers of future financial results, such as quality and customer satisfactionCorrect
- CThey remove the need to set targets
- DThey are required by IFRS for all published accounts
Explanation
Non-financial indicators capture operational drivers such as quality, service and innovation that influence future profits, and they can be reported sooner than financial results. They are not necessarily easier to audit, still need targets, and are not an IFRS requirement for performance measurement.
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