Brilliant Brushes (Pty) Ltd is an elite art studio that engages in the showcasing and auctioning of high-end art pieces. Due to the nature of the studio and its inventory, Brilliant Brushes (Pty) Ltd has to ensure that the studio is frequently fumigated and professionally cleaned. As a result of this, Brilliant Brushes (Pty) Ltd signed a contract with Pester Me (Pty) Ltd on 31 July 2020. Pester Me (Pty) Ltd would fumigate and professionally clean the studio at a price of R80 000 on completion of the contract. On 1 January 2021, Pester Me (Pty) Ltd completed 30% of the fumigation (based on costs incurred to date to total expected costs). On 31 October 2021, the remaining portion of the contract was completed by Pester Me (Pty) Ltd. After inspection of the completed fumigation, Brilliant Brushes (Pty) Ltd issued a cheque on 4 November 2021 for the work completed. The fumigation expense has been recorded in the accounting records of Brilliant Brushes (Pty) Ltd according to the requirements of International Financial Reporting Standards.

Required: With reference to the Conceptual Framework, motivate with reasons for whether the fumigation of the warehouses should be recognized as an expense in the Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021.

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Regarding your question fumigation of the warehouses should indeed be recognized as an expense in the Statement of Profit or Loss and Other Comprehens... View the full answer