Public Company Ltd. is a large, publicly held company with shares actively traded on the Toronto Stock Exchange and that has earnings before tax of $300 million per year. Public Company has spent $45 million in the current year to improve basic literacy skills of its employees (i.e., reading, writing, and arithmetic) to allow the introduction of high-tech, computerized, automated equipment. Without this training, efficient and effective implementation of the new production process is unlikely to occur. Management of Public Company proposes that the entire amount be capitalized and amortized over the next 15 years (the estimated average remaining working life of the trained workers). The partner in charge of Public Company's external audit has approached you to prepare a memo for her on this matter. The memo should identify and discuss important theoretical and practical issues that might influence her, as the external auditor, as to whether she is prepared to accept the Public Company's proposal as appropriate accounting for this $45-million expenditure. If she rejects the proposal, the alternative is to expense the training costs. Requirement Identify important concepts, principles, and ideas that you should incorporate into your memo. Select six points which support the company's proposal to capitalize and amortize the entire amount over the next 15 years. Amortization over future years better matches expenses to revenues that will be recognized in future years. Management has the ability to direct employees to complete assigned tasks, this meets the criteria of control over future benefits. The amount of $45 million is definitively quantifiable. The future amortization period is quantifiable as the estimated average remaining service lives of the employees. The training program has future benefits since employees would be able to operate new high-tech machinery. Management has the ability to direct employees to complete assigned tasks, this meets the criteria of control over future benefits.