Page 12 - CIMA OCS Workbook May 2019 - Day 1 Tasks

CIMA MAY 2019 – OPERATIONAL CASE STUDY

Product recalls
The industry has seen product recalls in the past, presumably as some supplements are shown
either to be harmful or (less likely) simply ineffective. Make sure you can deal with the accounting
implications of this, both in terms of the potential need to recognise additional liabilities /
provisions and also any additional inventory write-offs.
Group accounting

While no specific targets have been identified, we are told that there is likely to be an increase in
mergers and acquisitions activity within the industry. Given this, be prepared to explain the
accounting treatment of such a move, linking this to the percentage of shares acquired, if
required.
Non-current assets

The financial reporting aspects of NCAs are a common exam theme, so make sure you revise the
different angles a question could take. It is clear that the company is planning to invest in new
products. Given this, there may be a need for additional investment in NCAs with associated
implications for the financial statements, which costs can be capitalised, establishing a
depreciation policy, the impact of grants and so on.

Alternatively, you could be asked to discuss aspects of accounting for intangible assets, such as
whether or not it could capitalise research and development into new products or, indeed clinical
trials to establish the efficacy of products.

8 KAPLAN PUBLISHING