ADVERTISING EXPENDITURE

Wanganui Chronicle, Volume 80, Issue 265, 8 November 1937, Page 8

ADVERTISING EXPENDITURE

A MATTER OF ASSET VALUE “An interesting problem in the treatment of advertising expenditure occurs in the accounts of Pharmaceutical Products, Ltd.,” remarks “The Accountant” (London). “As a general rule, it can be presumed that successful advertising creates goodwill, the permanence of which will probably depend on the persistency of the advertising campaign. Some poii'.on- ci the expenditure may, therefore, be carried forward as an asset, which as an intangible, however, will wisely be written off over a reasonable period of years. In this case, we have a company formed in 1933 and controlled by Savory and Moore, Ltd., the well-known chemists, having as one of its original objects the raising of capital for the development by advertising of business in a number of proprietary articles. In last year’s report the directors stated that ‘publicity expenditure was the main object for which the capital was subscribed.’ The question arose when the auditors expressed their opinion in a proportion of the publicity expenditure to date.’ The directors duly noted this comment, but having stressed the fact that the capital was mainly subscribed for advertising, went on to state that they experienced difficulty in deciding the amount of the publicity expenditure which should be charged each year to profit and loss account. Legal advice was taken and it was decided to leave the whole amount of the expenditure in the bal-ance-sheet and to allow the balance on the profit and loss account to accumulate. The auditors express their opinion to the same effect this year.”