On September 1, 2003, The Financial Times reported that China Unicom, leading Chinese telecom company, had capitalized to its balance sheet cost of customer handset subsidies (difference between cost of the handset and price charged to retain customers). Observers suggested that subsidies must have been charged against income at time customer bought handset rather than capitalized to company's balance sheet.
Required:
If China Unicom switched from capitalizing and amortizing handset subsidies to immediately expensing them (for reporting to shareholders only), point to how the following financial statement items would be affected:
1: Operating expenses
2: Assets
3: Cash flow from operations
4: Liabilities
5: Operating revenue