Response to the following problem:
On 21 December 20X7, your client paid for € 10,000 an advertising campaign. The advertisements will be heard on local radio stations between 1 January and 31 January 20X8. Your client believes that, as a result, sales will increase by 60 per cent in 20X8 (over 20X7 levels) and by 40 per cent in 20X9 (over 20X7 levels). There will be no further benefits.
Write a memorandum to your client explaining your views on how this item should be treated in the year-end financial statements for each of the three years. Your answer should include explicit reference to relevant traditional accounting conventions, and to the requirements of users of published financial statements.