RECENT ASSIGNMENT

Assignment question
(500 words)
The ABC company is currently growing and it is expected that in five years an additional factory will need to be built to meet product demand at a cost of $500 000. The directors wish to recognize an expense of $100 000 and a liability (provision for future expansion) for each of the next five years.

Applying the principles in the Conceptual Framework, explain whether:
- The definition of an expense is met.
- The recognition criteria for an expense are met.