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6.10 Advertising costs
Publication date: 30 Nov 2020
us IFRS & US GAAP guide
Under IFRS, advertising costs may need to be expensed sooner.
US GAAP | IFRS |
The costs of other than direct response advertising should be either expensed as incurred or deferred and then expensed the first time the advertising takes place. This is an accounting policy election and should be applied consistently to similar types of advertising activities.
Certain direct response advertising costs are eligible for capitalization if, among other requirements, probable future economic benefits exist. Direct response advertising costs that have been capitalized are then amortized over the period of future benefits (subject to impairment considerations).
| Costs of advertising are expensed as incurred. The guidance does not provide for deferrals until the first time the advertising takes place, nor is there an exception related to the capitalization of direct response advertising costs or programs.
Prepayment for advertising may be recorded as an asset only when payment for the goods or services is made in advance of the entity’s having the right to access the goods or receive the services.
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Aside from direct response advertising-related costs, sales materials such as brochures and catalogs 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.
| The cost of materials, such as sales brochures and catalogues, is recognized as an expense when the entity has the right to access those goods.
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