Situation Amre Inc. capitalized its marketing costs, such as the cost of purchasing mailing lists, instead of treating the costs as expenses. Inspeech capitalized estimated selling, general, and administrative costs of various acquired companies’ accounting and billing activities for a period of three months following the acquisition. Similarly, the company capitalized search costs to hire new management employees, salaries of individuals involved with the integration of newly acquired companies, and fees for studies by outside consultants. Management justified capitalizing these expenses because they were required to implement the company’s expansion strategy and would benefit future periods.
Among the costs Chambers deferred were portions of executives’ salaries for time spent on developing projects such as new landfills. In addition, the company delayed recognizing some public relations and legal costs, as well as executive travel expenses.
Directions
Research the generally accepted accounting principles and prepare a short memo that summarizes how to report advertising costs. Cite your reference(s) and applicable paragraph numbers.