5240
Selling & Marketing Expenses
ASC 720: Other Expenses
📖 Overview
This standard addresses accounting treatment for other expenses, including advertising and marketing costs, research and development costs, and start-up costs.
🎯 Scope
This standard applies to the accounting treatment for other expenses, including:
- Advertising costs.
- Research and Development Costs (R&D).
- Start-Up Costs.
- Training Costs.
⚙️ Key Principles
1. **Advertising Costs**:
- Can be expensed when incurred.
- Or when advertising first takes place.
- Direct-Response Advertising Costs: Can be deferred if future benefits can be demonstrated.
2. **Research and Development Costs (R&D)**:
- **Research**: Expensed when incurred.
- **Development**: Expensed when incurred (unlike IFRS).
- Exception: Internal-Use Software development costs are capitalized.
3. **Start-Up Costs**:
- Include costs of opening a new facility, new product line, or new activity.
- Expensed when incurred.
4. **Training Costs**:
- Expensed when incurred.
- Not capitalized as an asset.
✅ Recognition
**Advertising Costs:**
- **Immediate Expensing Method**: Expense recognized when incurred.
- **Deferral Method**: Cost deferred and recognized when advertising first takes place.
**Research and Development Costs (R&D):**
- Expense recognized when incurred.
- Development costs are not capitalized (except for internal-use software).
**Start-Up Costs:**
- Expense recognized when incurred.
**Training Costs:**
- Expense recognized when incurred.
📏 Measurement
**Advertising Costs:**
- Measured at the actual amount paid or payable.
- Direct-Response Advertising Costs:
- Deferred and amortized over the period expected to generate benefits.
- Requires demonstrable future benefits.
**Research and Development Costs (R&D):**
- Measured at the actual amount paid or payable.
- Internal-Use Software Development Costs:
- Capitalized during the development phase (after technical feasibility is established).
- Amortized over the software's useful life.
**Start-Up Costs:**
- Measured at the actual amount paid or payable.
- Fully expensed in the period incurred.
📊 Presentation
**On the Income Statement:**
- Advertising costs appear within operating expenses (typically under SG&A).
- Research and Development costs appear within operating expenses (as a separate line or within SG&A).
- Start-Up costs appear within operating expenses.
- Training costs appear within operating expenses.
**On the Balance Sheet:**
- Deferred advertising costs appear as a current asset (intangible asset).
- Capitalized internal-use software development costs appear within intangible assets.
**Note Disclosures:**
- Accounting policies for other expenses.
- Amount of Research and Development costs expensed.
- Amount of deferred advertising costs and amortization method.
📝 Disclosure Requirements
Disclosures required:
- Accounting policies for other expenses:
- Method for recognizing advertising costs.
- Treatment of research and development costs.
- Amount of advertising costs recognized as expense.
- Amount of research and development costs recognized as expense.
- If advertising costs are deferred:
- Amount of deferred assets.
- Amortization method.
- Period over which costs are amortized.
- Amount of start-up costs recognized as expense.
- Amount of training costs recognized as expense.
🔗 Related Standards
ASC 350 (Intangibles), ASC 730 (Research and Development Costs)
📁 Related Accounts in the Chart of Accounts
Explore accounts commonly associated with this accounting standard.