Page 27 - CIMA MCS Workbook February 2019 - Day 2 Tasks

CIMA FEBRUARY 2019 – MANAGEMENT CASE STUDY

TASK 3 – INTANGIBLE ASSETS

Trigger and task

You receive the following email

From: Alison Broll (Marketing Director)
To: Financial Manager
Subject: Brands and training

I’ve just had a conversation with Libby Maatouk (HR director) regarding the amounts that
Crowncare spends on recruitment and training of all staff, plus the importance we place on
ensuring that the Crowncare’s reputation and brand is as good as it could possibly be.

Libby and I don’t really understand financial accounting issues in any detail, although we are
aware that there are technical standards that must be complied with when preparing financial
statements.

Crowncare spends a lots of time and money promoting its brand, including the molar logo, which
is now easily recognised and associated with the business. The logo was designed by one of
Morrison Togora’s children as few years ago as part of their university marketing design course.
Can the costs of any of the advertising and promotional costs Crowncare incurs be accounted for
as an asset, as it is surely worth something to us and I guess that it provides benefits for a number
of years? Is the value of the brand included in the financial statements? If it is not, then I think it
should be. If it’s any help, I can contact an old university friend, Laurie Long, who now works for a
consultancy dealing with valuing brands.

In a similar way, Libby Maatouk would like information relating to the recruitment and training
costs incurred by Crowncare. She advised me that, for a dentist, the recruitment and selection
process is quite rigorous and time consuming, including paying an outside consultant to conduct a
psychometric test (costV$1,000), time taken by her (and another director to review applications,
interview selected applicants and then hold an induction course for new employees.

I’m sure that Libby could provide information based upon payroll information to estimate the cost
incurred in the recruitment process and the cost of holding an induction course. In the case of
recruitment of a dentist, Libby estimates that, on average, they work for Crowncare for at least
five years (often longer). Can the cost of recruitment and induction training of each employee be
recognised as an asset and then written off when they leave Crowncare?

In a similar manner, all employees (practice managers and admin and reception staff along with
clinical workers) receive training to ensure that they are competent to do the work required of
them. Some of the training is delivered internally, such as a practice manager updating reception
staff on best practice when registering a new patient. Other courses, particularly for clinical staff,
are courses delivered by external providers. How are the costs of internally‐provided and
externally‐provided training treated in the financial statements?

46 KAPLAN PUBLISHING