After you’ve passed both Core 1 and Core 2, you’ll be at the point in your CPA Canada PEP journey where you have to choose your first elective. There is no right or wrong on which elective to take, but depending on your strengths, weaknesses, desired CFE role and career goals, you may choose one elective over the other.
While there are several pros and cons to each elective, having just finished Core 2, there are several advantages to taking Performance Management (PM) as your next elective. Here’s why.
PM has similar quants (calculations)
Both Core 2 and PM blueprints focus on Management Accounting (MA), Strategy and Finance competencies. You can smoothly transition your knowledge and studying techniques from Core 2 to PM because most of PM’s technicals are like Core 2 and still fresh in your mind.
For example, here’s the exam blueprint for Core 2:
And here’s the exam blueprint for PM:
You can see that MA, Strategy and Finance are the key competencies in both. (Note: You’ll notice above that Finance is not tested in PM’s objective-format portion (MCQs). This is misleading because MCQs are a small part of the PM exam while Finance plays a big role of the case portion. Ensure you study Finance well for the PM exam.)
Some common calculations (quants) that show up both in Core 2 and PM include:
- CVP (break-even, contribution margin analysis)
- Product mix
- Variance analysis (price, usage/quantity)
- Sensitivity analysis
- Sourcing (inhouse, outsource)
- Constraints (scarce resources)
- Relevant costing
- Activity-based costing (ABC)
- Transfer pricing (TP)
- NPV and IRR
- Ratio analysis (profitability, liquidity, efficiency)
- Valuations
- Payback period
The biggest challenge with quants for candidates is being able to identify the most appropriate analysis (“quants tool”) to choose when answering an AO. This is a skill you would have developed and strengthened during Core 2 that will help contribute to success in PM with a similar calculation structure. The MA Templates toolkit will help you refine and master these calculations.
PM has similar qual
PM and Core 2 have qualitative components on similar subject matters. While studying for Core 2, you would not have studied much Financial Reporting (FR), Assurance, or Tax criteria. Because of this, taking a different elective would require you to shift focus and start reviewing these topics again from scratch. For example, if you take PM and Assurance as your electives, and you take Assurance right after Core 2, it will require you to re-learn Assurance and FR concepts you’ve already forgotten from Core 1.
Additionally, Strategy & Governance takes up about 50% of the PM exam. Using the approach of being concise and specific with explanations, as well as integrating case facts, is critical for getting C in PM qual. This is a skill you would be familiar with from Core 2. You would also be in the habit of being “big-picture” focused, in aligning the company’s values or user objectives to the overall strategy. This is again prevalent in PM.
Managing your time effectively while balancing various quant and qual analyses was critical during your Core 2 studying. This time management skill is equally important during the PM exam and will make transitioning your study techniques efficient and give you an advantage when prepping as well.
Some common qualitative assessments (qual) between Core 2 and PM include:
- Integrating mission, vision and values (M/V/V)
- Addressing strategic decision making (use of SWOT, Porter’s 5 Forces, PESTEL)
- Responsibility centers (evaluating performance)
- Decision pros vs cons (outsourcing, capital investment, acquisition)
- Pricing strategies (demand-based, cost-based, bundling)
- Risk management (using RIM format)
- Governance structure (i.e. evaluating current board of director’s structure and provide recommendations using WIR format)
- Balanced Scorecards (BSC)
- KPIs
- Financing Sources
The Core 2 and PM supplemental practice cases and MCQs provide good practice on above concepts.
Extra resources
Because much of what you have learned and successfully demonstrated in Core 2 is necessary for being successful in PM, I suggest to take PM directly after Core 2 for a seamless study transition. From both qualitative and quantitative perspective, there are several overlaps in subject material that you will already have an understanding on that could be tested again in PM. This will also advance your knowledge in key concepts that will be tested during Capstone 1 and Day 1 of the CFE. Extra study resources can be found in the Core 2 and PM Review courses.