USA Expensing of Product Samples

[cec311]

Product Samples (very large $ amount) will be provided free of charge to a customer who will then create their own sample book. Sample book will be owned/controlled by the customer. Future customer orders over the next 2-3 years should be generated from these customer created sample books, but no orders are guaranteed nor is their a contract specifying minimum order requirements.

In my opinion the samples should be expensed in the month in which they are provided as no specific future revenue can be matched to the specific sample expense. Client is pushing to expense the cost evenly over the next several years which I don't believe is the proper US GAAP handling of the expense.

Your thoughts?

 

[kirby]

“So I can spread the cost evenly” per the client is not GAAP. Principle of conservatism holds here. Says if unknown if there is a future benefit then expense it now.

 

[bklynboy]

I kind of see these samples as sales materials no different than brochures. may be a stretch but if viewed that way - meaning they are prepared for salespeople to use to solicit sales - then there is gaap guidance I thought that allows these to be hung on the balance sheet when costs are incurred to develop the sample. Once they are given to the agent they should then be expensed. Practically it is easier just to expense right away instead of keeping track of what is on hand but depends on how much these cost. did not spend the time but look up gaap guidance for marketing costs and I think it will jive with what I have explained.