Practice prompt · Q:financial-reporting-environment-and-framework/expense-matching-boundary-001

Can matching create an advertising asset?

Test a proposed deferral by identifying the resource and applicable accounting requirements.

Updated Sep 10, 2026 Review due Dec 10, 2026

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Linden Peak pays for a broad advertising campaign in December. Management expects the campaign to support sales next year and wants to record an asset so the cost will match those sales. The facts do not identify a separate right or resource. What should the accountant do first?

Choose the best answer. a Identify the rights obtained and apply the relevant guidance before deciding whether any recognized asset remains. b Record an asset because management expects the campaign to support next year's sales. c Record an asset whenever immediate expense recognition would make profit uneven. d Record an expense solely because cash was paid this year.

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Answer: a

Choice a. Establish what rights the company obtained and apply the relevant transaction guidance. Do not create an asset from an expected sales benefit or a desire to smooth profit.