Sundown Chiefs FC has recently implemented a major maintenance project to prepare its grounds for the new season. The project took four months to complete and cost the club R2 000 000 and this was paid upon completion. The managing director has suggested that this expenditure be recognised as an asset, so that the expense can be deferred until income is earned from ticket sales in an upcoming season.

Required:

2.1 Discuss, with reference to the Framework, whether or not the managing directors suggestion is an appropriate treatment of this expenditure. (20)

2.2 One of the most important characteristics that a set of financial statements should have is reliability. Explain in terms of the framework, how to ensure that a set of financial statements is reliable.