Case: Neel Cosmetics Ltd incurs a large advertising campaign cost in the first quarter, although the benefits are expected through the year. In its interim financial report prepared under AS 25, the cost should be:

Correct answer: A) Recognised as an expense in the first quarter when incurred, since deferral would not be appropriate at the financial year end

Explanation

AS 25 requires costs incurred unevenly during the year to be anticipated or deferred for interim reporting only if it would be appropriate to anticipate or defer that type of cost at the end of the financial year. Advertising costs cannot be deferred at year end, so they are expensed in the interim period in which they are incurred.