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Discuss whether management decision and reasoning justified

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Question - Downey Ltd, a company located in Sydney, has been performing really well in recent years. The company is currently expanding its operations in other major cities in Australia and has just spent $800,000 on marketing and promotion in order to generate significant sales as early as possible in the new markets. Management decided that the $800,000 cost should be recorded as an asset because it ensures that the company's income statement is not affected.

Required - Discuss whether management's decision and reasoning are justified. Also, you need to explain your answer by referring to the Conceptual Framework for Financial Reporting.

Reference no: EM133169052

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