Reporting on Advertising Costs

By Tanenbaum, Joel; Volkert, Linda A. | Journal of Accountancy, June 1993 | Go to article overview

Reporting on Advertising Costs


Tanenbaum, Joel, Volkert, Linda A., Journal of Accountancy


Statement on Auditing Standards no. 69, The Meaning of "Present Fairly in Conformity With Generally Accepted Accounting Principles" in the Independent Auditor's Report, identifies American Institute of CPAs statements of position as sources of established GAAP. This month's column summarizes a proposed SOP on advertising costs that was approved by the accounting standards executive committee (AcSEC) subject to Financial Accounting Standards Board review.

The proposed SOP titled Reporting on Advertising Costs applies to all entities and all advertising except that for which guidance is provided in FASB statements, interpretations and technical bulletins; Accounting Principles Board opinions; and AICPA accounting research bulletins. The proposed SOP would replace the advertising guidance contained in existing audit and accounting guides and SOPs.

The proposed SOP is the first step in a multistep AcSEC project on reporting the costs of advertising activities and certain other activities to create future economic benefits through the development of intangible assets (for example, preopening and startup costs). The project was initiated in 1986 with the expectation it would result in guidance and a conceptual framework for resolving issues concerning financial reporting on the costs of such activities.

The guidance in the proposed SOP is based on the premise that most advertising may result in future economic benefits that meet the definition of an asset in FASB Concepts Statement no. 6, Elements of Financial Statements. However, AcSEC concluded advertising assets other than those resulting from certain direct-response advertising do not meet the recognition criteria of reliability in FASB Concepts Statement no. 5, Recognition and Measurement in Financial Statements of Business Enterprises, which says that in order to be reliable, the information must be representationally faithful, verifiable and neutral.

AcSEC concluded the future economic benefits of most advertising cannot be measured with the degree of precision required to report an asset in the financial statements. These measurement difficulties were underscored by a recent Wall Street Journal article citing a study that measured sales gains by Super Bowl advertisers during the six-week periods following the January 1992 and 1991 games, respectively. The gains varied widely, and advertisers themselves admitted the difficulty of attributing sales gains directly to advertising efforts.

The proposed SOP requires the accounting treatment described as follows.

EXPENSING OR CAPITALIZING ADVERTISING COSTS

All advertising costs must be expensed in the periods they are incurred or the first time the advertising takes place, unless it is direct-response advertising that results in probable future economic benefits (future benefits).

Future benefits. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Reporting on Advertising Costs
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.