Quick Fix Ltd is a manufacturing company engaged in the production of adhesives. The company has not performed well over the past three financial years.
So as to improve on the poor past profits, the Board approved a C2 000 000 advertising promotion during the year ended 31December 20X8 in order to generate increased sales in the future. The advertising promotion took place (and was paid for) during December 20X8. The accountant insists on recognizing the C2 000 000 payment as an asset at 31December 20X8. His reasoning is that future sales will increase as the number of customers grow due to the advertising campaign.
Discuss whether you agree with the accountant, making reference to the Framework. Suggest an alternative treatment if you disagree.