Question $2(10$ Marks$)$

Eairate Limited, a leading manufacturer specializing in explosives, has encountered a series of

difficulties in recent years due to a combination of factors including the disruptive effects of the

Covid$-19$ pandemic, subsequent recovery efforts, and the downsizing of the mining and

construction sectors in the Namibian economy. As a result, the company's profitability has

consistently declined over the past three years.

In a bid to rejuvenate its financial performance, the company's board of directors made a

strategic decision during the financial period ending on $31$ August $2023.$ The choice involved

designating $N$$$1850000$ for an extensive advertising campaign aimed at stimulating increased

sales in the upcoming years.

The advertising initiative was effectively carried out, and the associated costs were settled in

August $2023.$ The company's accountant is advocating for the recognition of the full N$$1850$

$000$ payment as an asset on the statement of financial position as of $31$ August $2023.$

The rationale for this recommendation stems from the anticipation that the advertising

endeavour will drive an expansion of the customer base, leading to higher sales volumes. This

belief rests on the notion that the campaign's influence will extend beyond the current reporting

period, yielding sustainable future economic advantages for the company.

REQUIRED:

Discuss whether you agree with the accountant, making$\_$reference to the conceptual framework.

Suggest an alternative treatment if you do not agree with the accountant's opinion.