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Treatment of Accounting Issues - Case Study Example

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Case Study
Finance & Accounting
Pages 2 (502 words)


Treatment of Accounting Issues Thank you Mr. Rafael for your inquiry in relation to some of the accounting issues which are creating uncertainty regarding their correct treatment. According to the information provided in the given situation, it seems as if Mr…

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Treatment of Accounting Issues

It is strongly advised to you to take a closer look at every issue along with its relevant treatment and feel free to consult me, had you require any further assistance. Marketing and Advertising Expenses According to the International Financial Reporting Standards, the marketing and advertising expenses should be charged to Income Statements the year which these marketing and advertising expenses incur. In the light of above criteria, the policy adopted by Mr. Julian to expense out 50% of the marketing and advertising expenditures in the profit and loss account while capitalizing the rest of 50% of the expense in the balance sheet and amortizing over the period of 5 years, seems as a deviation from the IFRS. Since, Mr. Julian is mainly interested in presenting the financial statements more profitable, that is why Mr. Julian has adopted this strategy. In this way, he could have avoided the 50% expenditures incurred the current year which would eventually have increased the profits substantially. Therefore, Mr. Rafael should disregard this policy of Mr. Julian and should instruct him to rectify the financial statements and charge out the capitalized amount of marketing and advertising expenses for the current year. Slow Moving Inventory The older policy of writing off the slow moving inventory was a bit conservative approach. ...
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