Page 15 - CIMA OCS August 2018 Day 1 Tasks

MANSAKO FAMILIARISATION

F1
Working capital
There are few references within the pre-seen to the working capital cycle (F1) but ratio analysis of
the financial statements indicates some concerns over high levels of receivables. While we are not
told how the level of tea leaves is set, we do know that inventories of finished tea bags are very
low as they are made in response to orders. This suggests that some variants of the real exam will
have tasks that look at Thomas Fine Teas’ working capital policies. In particular, make sure you
feel comfortable discussing how receivables could be reduced and whether the company could
change its inventory policies, say switching to just-in-time or using the EOQ model.

Non-current assets
The financial reporting (F1) 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 needs to expand its
product range, especially as the production line for green teas lacks capacity. Given this, there
may be a need for additional investment 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 the extent to which intangible assets can be created
focussing, say, on whether the brand could be capitalised, or whether marketing costs incurred to
boost the brand could be capitalised or how much of additional investments in IT and computer
systems could be recognised as an asset.

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