During a recent management meeting, David Bryce, director of marketing, proposed that the company begin capitalizing its marketing expenditures as goodwill. In his words, “Marketing expenditures create goodwill for the company which benefits the company for multiple periods. Therefore it doesn’t make good sense to have to expense it as it is incurred.

Besides, if we capitalize it as goodwill, we won’t have to amortize it, and this will boost reported income.”

Discuss the merits of David’s proposal.

AppendixLO1