On 21 December 20X7, your client paid A10,000 for an advertising campaign. The
advertisements will be heard on local radio stations between 1 January and 31 January
20X8. Your client believes that, as a result, sales will increase by 60 per cent in 20X8
(over 20X7 levels) and by 40 per cent in 20X9 (over 20X7 levels). There will be no
further benefits.
Write a memorandum to your client explaining your views on how this item should
be treated in the year-end financial statements for each of the three years. Your
answer should include explicit reference to relevant traditional accounting conventions,
and to the requirements of users of published financial statements.
