Most companies thrive on advertisement and need it every now and then to fuel their business. Promotions are needed either for new products, new services or just to keep people reminded about current ones. When simply buying a webpage slot or space on a newspaper or a magazine and putting up your advertisement there isn’t a long term project, television commercials usually need a bit more work. Do note here that similar approach may be used for all sorts of advertisement campaign preparation costs and essentially, if promoting your product let’s say on a magazine also has a longer and more expensive preparation period, the same approach should be used.

To fire off for an example a television campaign, you need actors, scenes with text etc. As all of them require quite a lot of money, your company is bearing significant costs just on preparation of the advertisement. Although those expenses incur in the period you seemingly receive the service, think a bit further. What is the actual service you’re buying? Essentially all those costs are done with one aim in mind, to get an advertisement campaign out to the public. This is the end result and eventually the service you are really buying.

All the expenses incurred during the preparation phase shall thus be treated as prepaid expenses or depending on the type of business (i.e. a company working in advertisement making industry for an example), even in inventory as work in progress up until the campaign is live and visible to the public. When the advertisement is out there, all those expenses should essentially be spread on the period of the campaign.

When expensing items, do make sure if the actual service is really happening in this same period. It may very well be that the real service you’re buying eventually happens in future.