Advertising costs can be BIG costs. An accrual basis company decided to spend BIG time in 2020 and hoped that the costs of the ad program would yield benefits for many, many years! New customers = higher revenues = higher profits for a long time. The company asks you – “We spent $100 million on advertising this year (last year we spent just $20 million) – how should we record the entry? All this year as an expense? Or should we capitalize the cost and amortize (expense) it over a number of years?

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In accounting the treatment of advertising costs depends on whether the costs meet certain criteria for capitalization or should be expensed immediate... View the full answer