Statements of Position



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This proposed statement of position (SOP) provides guidance on financial reporting on advertising costs. The proposed SOP requires the following: 1. Reporting the costs of all advertising as expenses in the periods in which those costs are incurred, or the first time the advertising takes place, unless the advertising is direct-response advertising that results in probable future economic benefits (future benefits); 2. Reporting the costs of the future benefits of direct-response advertising as assets; 3. Amortizing the amounts reported as assets over the estimated period of the benefits. Also, this proposed SOP requires disclosure of certain information if the future benefits of direct-response advertising are reported as assets. This proposed SOP would amend the following AICPA statements of position: 1. SOP 88-1, Accounting for Developmental and Preoperating Costs, Purchases and Exchanges of Take-off and Landing Slots, and Airframe Modifications, paragraph 22; 2. SOP 89-5, Financial Accounting and Reporting by Providers of Prepaid Health Care Services, paragraph 55; 3. SOP 90-8, Financial Accounting and Reporting by Continuing Care Retirement Communities This proposed SOP would be effective for financial statements for years beginning approximately one year after its issuance date. Earlier application would be encouraged in fiscal years for which financial statements have not previously been issued. Costs incurred before initial application of this SOP, regardless of whether or not they are reported as assets, should not be adjusted to the amounts that would have been reported as assets had this SOP been in effect when those costs were incurred. However, the concepts included in the provisions of paragraphs 40 and 41 (amortization), paragraph 42 (net-realizable-value test), and paragraphs 43 and 44 (disclosures) should be applied to any unamortized costs reported as assets before initial application of this proposed SOP that continue to be reported as assets after the effective date. In the year in which this proposed SOP is first applied, the financial statements should disclose the nature of the accounting changes adopted to conform to the provisions of this proposed SOP, and their effect on income before extraordinary items, net income, and related per share amounts.

Publication Date


Relational Format



Advertising -- Costs; Advertising -- Accountants


Accounting | Taxation


Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants.

Proposed statement of position : Reporting on advertising costs;Reporting on advertising costs; Exposure draft (American Institute of Certified Public Accountants), 1992, Jun. 22



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