Question about accounting for advertising costs...?

Question

Which companies or industries are most concerned with how to capitalize or amortize advertising costs?

Answer 1

I would guess you're talking about companies with large marketing outlays and advertising contracts over time.

Advertising is not capitalized, really. Normally what you do is pay as you go. You expense it in the month that pay it. (Cash basis)

When you start using credit and long-term contracts, you have to match the expense to the period you get the benefit. (Accrual basis)

The only way that advertising expenses can ever get onto the balance sheet is to have prepaid advertising if you're buying it and unearned revenue if you're selling it. Both of them are going to be in the current assets or current liabilities section, and for 99% of companies, they're going to be very small.

Advertising companies will naturally have very large portions of their revenues in the unearned section and will be very interested in tracking and disclosing this activity.

Companies that rely heavily on complex marketing and branding of their products will have large expenditures and will also be interested in controlling it a little closer, but it will never be as significant as their inventory, cash flows, sales, or fixed assets.

In the US, adding advertising to intangible assets is not allowed. I don't know about other countries. Many of our intangibles are valued when they're purchased from another company, and the ones that represent "capitalized" marketing would be trade names, trademarks and patented designs.

Answer 2

Advertising Information

http://www.r6k.net/advertising/