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Advertising should we expense or capitalize the costs

Advertising should we expense or capitalize the costs

Who won the ad game during Super Bowl 2014?

Millions gathered around television sets Sunday evening to watch the Seattle Seahawks take down the Denver Broncos in an easy 43-8 victory, but for many of those revellers the outcome of the game was secondary to the annual crop of splashy, big-budget Super Bowl ads.

Commanding up to $4 million for 30 seconds of airtime during The National Football League’s premiere event, Super Bowl ads have taken on a life of their own in terms of cultural significance – and with the rise of social media factoring into their release and production, Super Bowl commercials have become more elaborate than ever.

 

Many of this year’s most buzz worthy commercials premiered well in advance of Sunday’s big game online, garnering plenty of attention from the internet peanut gallery and mainstream media alike.

Because almost every ad is available for repeat viewing after the game on video sharing sites like YouTube, Canadian audiences now have the option of seeing the same ads as their American counterparts – and they’re eating them up by the millions.

Accounting for Advertising Costs:

Marketing, General and Administrative Expenses  : Information obtained from the Molson-Coors annual report click on link

Our Marketing, general and administrative expenses include media advertising (television, radio, print), tactical advertising (signs, banners, point-of-sale

materials) and promotion costs on both local and national levels within our operating segments. The creative portion of our advertising activities is

expensed as incurred. Production costs of advertising and promotional materials are expensed when the advertising is first run. Advertising expense was

$423.5 million, $398.8 million, and $361.6 million for fiscal years 2012, 2011, and 2010, respectively. Prepaid advertising costs of $23.9 million and

$21.6 million, were included in other current assets in the consolidated balance sheets at December 29, 2012, and December 31, 2011, respectively.

 Here are a two of the 2014 Popular Commercials

Discussion Questions:

1. Advertising is an expense when incurred, should we not capitalize the cost of Advertising?

2. Do you agree to capitalize production costs and only expense the costs when the commercial is aired?

3. How would you account for promotional items? When distributed or  when  the promotional item is purchased?

To read the complete article , see Lauren O’Neal CBC article

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