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Peony co
There is scenario about including 0.7m as current asset..What exactly is that in current asset ? Cash ?
Is it allowed to recognise it if there was evidence that advertisement will generate sales
Cash can only ever be cash (in the bank, in hand or intransit) so no.
That you can’t really identify what it is is perhaps telling you that it cannot be recognised – what it is suggesting is a current asset equivalent of an intangible asset. As you should know an internally-generated intangible asset spent on brand enhancement etc cannot be recognised as an asset (either non-current or current) and must be expensed as incurred (IAS 38).
The scenario has avoided describing it as a prepayment because a prepayment of advertising expense should be recognised as a current asset (accrual accounting). In this case there cannot be any prepayment because the last advertisement is shown before the reporting date. But suppose instead that a company pays $0.5m to run a TV advertising campaign over 5 months – 3 before the y/e and 2 after – $0.2 would be a prepayment at the reporting date.
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