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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.
Question Set #656
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