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Presentation and disclosure requirements for prepaid assets and other current and noncurrent assets vary depending on the nature of the asset and the underlying guidance. Prepaid assets are required to separately stated on the balance sheet or in a footnote in accordance with S-X 5-02(7). For all other current assets, S-X 5-02(8) requires any amounts in excess of 5% of total current assets to be separately disclosed on the balance sheet or in a footnote. For noncurrent assets, S-X 5-02(17) requires any noncurrent asset that is in excess of 5% of total assets to be disclosed separately on the balance sheet or in a footnote. In addition, any significant increase or decrease in that asset should be explained in the footnotes. With respect to any significant deferred charges, the policy for deferral and amortization should also be provided in the footnotes.
There are also specific disclosure requirements related to foreclosed or repossessed assets. ASC 310-10-45-3 requires foreclosed or repossessed assets to be identified either on the face of the balance sheet or in the footnotes unless such assets will be utilized by the reporting entities in operations (e.g., returned inventory that will be resold). In addition, in accordance with ASC 310-10-50-11, reporting entities should disclose the carrying amount of foreclosed residential real estate properties held at the reporting date as a result of obtaining physical possession.

8.5.1 Accounting and disclosure for advertising costs

ASC 720-35-05-4 defines advertising.

Excerpt from ASC 720-35-05-4

The promotion of an industry, an entity, a brand, a product name, or specific products or services so as to create or stimulate a positive entity image or to create or stimulate a desire to buy the entity's products or services.

Advertising generally uses a form of media, such as the internet, mail, television, radio, telephone, facsimile machine, newspaper, magazine, coupon, or billboards, to communicate with potential customers.
Advertising costs have two primary components: (1) the costs of producing, such as idea development, writing advertising copy, artwork, printing, audio and video crews, actors, and (2) the costs of communicating advertisements that have been produced, such as magazine space, television airtime, billboard space, and distribution (for example, postage stamps).
The costs of premiums, contest prizes, gifts, and similar promotions, as well as discounts or rebates, including those resulting from the redemption of coupons, are not considered advertising costs for purposes of applying the guidance in ASC 720-35. Refer to RR 4 for additional guidance on accounting for discounts, rebates, and coupons.
Additionally, ASC 705-20 addresses accounting by a customer (including a reseller) for certain cash consideration received from a vendor. Cooperative advertising arrangements generally fall within the scope of ASC 705-20-25-3. Refer to FSP 3.6.14 for guidance on cooperative advertising.
The costs of advertising within the scope of ASC 720-35 should be either: (1) expensed as incurred or (2) deferred and then expensed the first time the advertising takes place. This is an accounting policy decision and the method selected should be applied consistently to similar types of advertising activities. For example, individual components of the production costs of a television commercial expected to air throughout a six-month campaign (e.g., the costs of hiring an actor for filming) should be expensed as incurred or deferred until the first time the commercial is shown, depending on the accounting policy selected. If an entity has a policy of deferring incurred costs until the first time the advertising takes place, and facts and circumstances change such that it is no longer probable that the advertising for which costs were deferred will ever be shown, the costs being deferred should be expensed immediately.
Costs of advertising are not incurred until the item or service has been received. For example, if an entity paid $5 million to purchase daily television airtime for five months, the entity should expense this cost when the television airtime is utilized. Therefore, the $5 million should be expensed as the commercials air over the five month period (as incurred), as opposed to expensing the $5 million in its entirety the first time the commercial airs. No advertising costs should be expensed prior to being incurred.
Some advertising payments occur after recognizing revenues related to those costs. For example, some entities assume an obligation to reimburse their customers for some or all of the customers’ advertising costs. Revenues related to the transactions creating those obligations might be recognized before the payments are made. In those circumstances, obligations should be accrued and the advertising costs expensed when the related revenues are recognized.
ASC 720-35-50 requires reporting entities to disclose information related to advertising costs.

ASC 720-35-50-1

The notes to financial statements shall disclose both of the following:
  1. The accounting policy selected from the two alternatives in paragraph 720-35-25-1 for reporting advertising, indicating whether such costs are expensed as incurred or the first time the advertising takes place
  2. The total amount charged to advertising expense for each income statement presented.

8.5.1.1 Interim financial reporting for advertising costs

ASC 720-35 only applies to annual financial statements. ASC 270, Interim Reporting, specifically ASC 270-10-45-9, provides guidance specific to advertising costs. Refer to FSP 29 for additional details related to interim financial reporting.

8.5.1.2 Tangible assets used for advertising

Tangible assets, such as blimps or billboards (but not the production costs of the image being displayed), may be used for several advertising campaigns. The costs of these assets should be capitalized and depreciated or amortized over their expected useful life. That depreciation or amortization is a cost of advertising. Management should have plans to support their assertion as to the expected useful life of these tangible assets.
Point of sale materials, such as brochures and catalogues, may be accounted for as prepaid supplies until they no longer are owned or expected to be used, in which case their cost would be a cost of advertising accounted for in conformity with the guidance in ASC 720-35.
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