Page 24 - MCS August Day 2 Tasks

CIMA AUGUST 2018 – MANAGEMENT CASE STUDY

TASK 2 – INVESTMENT OPPORTUNITY AND LEASE OF ASSETS

Trigger and task
You receive the following e‐mail

From: Endo Karsa, Finance Director

To: Finance Manager

Subject: Potential investment opportunity and lease of assets

The Board of Directors (‘the Board’) has become aware of a potential investment opportunity in
Farland which would help to extend Montel’s market share in the DSLR market, provided that the
purchase price and terms were acceptable to both parties. The identity of the potential
investment opportunity cannot be disclosed at present – refer to it as VentureCo.

For the benefit of other members of the Board, please prepare a memorandum that:

 summarises the characteristics and accounting requirements of an investment in a joint
arrangement
 summarises the characteristics and accounting requirements of an investment in an
associate

In addition, your memorandum should include guidance on the accounting treatment of assets
acquired under lease agreements. Currently, Montel does not lease assets, but if a significant
capital investment is required in VentureCo, it may be appropriate to lease, rather than buy,
assets.

The memorandum will be circulated at the forthcoming Board meeting as not all Board members
may be fully aware of the accounting requirements relating to investing in other entities or the
accounting requirements relating to leasing assets for use in the business.

Please have the memorandum available for my review by Friday 2.00pm.

Endo

Prepare a memorandum in response to Endo’s email. (45 minutes)

40 KAPLAN PUBLISHING