Accounting for Advertising Expense.

[HugeAccountant]

Example. A company has an ongoing TV ad campaign. All production costs have already been expensed. The company pays $3 million dollars in April for 3 months of air time which starts in May. The $3 million is strictly for media buy and the cost of delivering the campaign to the consumer and the air time is equal for all 3 months. What is the appropriate accounting treatment under GAAP?

 

[ColinCPA]

This looks like a simple accrual entry.

You would book this in April:

Dr. Prepaid expenses 3M

Cr. Cash 3M​

You would book this in May, June, and July:

Dr. Advertising expense 1M

Cr. Prepaid expenses 1M​

 

[bklynboy]

ColinCPA has it right. GAAP guidance is specific on this and requires R&D expensed upfront with costs of media and sponsorships over period benefited.