In US GAAP, expenditures for advertising and research and development (R&D) are recorded as expenses. However, it can be argued that spending on advertising and R&D are actually investments that are expected to lead to future products and sales revenue. From that perspective, such expenditures should be recorded as assets.

Required:

Using terms from the FASBs Conceptual Framework, briefly discuss whether the accounting for advertising and R&D are consistent with the Conceptual Framework or not. You are welcome to adopt either position. The most important part of your answer is how you demonstrate your understanding of the Conceptual Framework through the argument that you make to support your position.