QUESTION $3(25$ marks$)$

Chefswarehouse Limited is a large, listed retail business that sells gourmet ingredients

to a health$-$conscious target market. The company has a June $2023$ financial yearend. The board of directors decided to expand their business by opening a new store

in Cape Town, City Centre. Management implemented an expansion strategy with

immediate effect.

The management of Chefswarehouse Limited contracted the services of a well$-$known

advertising agency, Splash Advertising $($Pty$)$ Ltd$,$ to assist with its expansion strategy.

On $1$ April $2023,$ the company paid R$650000$ to Splash Advertising $($Pty$)$ Ltd for the

design and production of a digital advert where the visuals will be displayed in the

three largest shopping centres across Cape Town. The advertisement was completed

and reviewed by management on the $30$th of April $2023.$ The digital advert will be

displayed between $1$ July $2023$ to $31$ December $2023,$ and will not be used thereafter.

In addition, Chefswarehouse Limited paid each of the three shopping centres an

amount of R$40000$ for renting the advertising space between $1$ July $2023$ and $31$

December $2023.$ The payments to the three shopping centres were made on the $25$th

of April $2023.$

REQUIRED:

Separately for Splash Advertising $($Pty$)$ Ltd and the three shopping centres, discuss,

in terms of The Conceptual Framework for Financial Reporting, whether the payment

of:

$$ R$650000$ to Splash Advertising $($Pty$)$ Ltd; and $(11$ marks$)$

$$ R$40000$ each to the three shopping centres $(14$ marks$)$

should be accounted for as an asset in the annual financial statements of

Chefswarehouse Limited $30$ June $2023$ financial year$-$end.

$8$ HFAC$231-1-$Jan$-$June$2024-$SuppSA$1-$TD$-$V$3-20102023$

Your response should include the following aspects according to The Conceptual

Framework for Financial Reporting

$$ Definition of the relevant financial statement element

$$ Recognition criteria

$(25$ marks$)$

Competency Framework Reference:

B$1\mathrm{.}1$ Fundamental reporting concepts

b$)$ Apply the qualitative characteristics and principles of useful information

d$)$ Identify, define, and evaluate the different elements in reporting

frameworks

e$)$ Apply the recognition and de$-$recognition criteria to an element.