Marketing fund accounting

Marketing fund accounting

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A business partner (supplier) provides marketing funds periodically to our business.  It is left to the discretion of our business how these funds are used.

 We have been treating these funds as a Balance Sheet item, and marketing expenses are debited to the fund account, thus often leaving a surplus in the fund account.

 Should these funds be credited to revenue, and marketing expenses debited to P&L instead?

What if the funds received are non-discretionary, and specific marketing expenses are to be incurred from these?  Would a "Balance Sheet" treatment be more appropriate then?  Or, even then, both funds and expenses should still be transferred to P&L?

Replies (4)

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By johngroganjga
08th Apr 2014 07:51

Is your "business" a company?

Is your "business" a company?  If so where in the balance sheet format are you showing the unspent balance of the fund?  Does the company not have a accountant?

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Replying to MrsG:
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By abanerji
08th Apr 2014 08:54

Yes, we are a limited company, following IFRS.  This is an existing practice, and even one of the Big 4 accounting firm audits the accounts.  So far, they have not had any issue with this practice.  We are just reviewing this.

In the Balance Sheet, the unspent balance of the fund gets carried over to the next financial year.  It is shown as part of Current liabilities.

In sum, is it proper to follow the Balance Sheet treatment, or credit Profit and Loss Account?  As mentioned in my original post, if P&L treatment is more appropriate, presumably marketing expenses would appear in the expenses section, and not set-off against funds received.

The second part of my query was : "What if the funds received are non-discretionary, and specific marketing expenses are to be incurred from these?  Would a "Balance Sheet" treatment be more appropriate then?  Or, even then, both funds and expenses should still be transferred to P&L?"

Thanks for further clarification expected.

 

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By johngroganjga
08th Apr 2014 09:04

Why don't you discuss the options with your existing advisers?  Is that not what you pay them for?

But - marketing expenses are expenses and should be in the profit and loss account.  The supplier's contribution should be credited to your P&L on a systematic basis, with the uncredited balance at any point in time being included in deferred income.

What the systematic basis for taking credit for the supplier's contribution should be is what you should discuss with your advisers.

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Replying to lionofludesch:
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By abanerji
09th Apr 2014 07:07

Thanks for your opinion.

Yes, we shall certainly discuss with our Auditors.

But, we wanted to get a view from the Accounting world on the net.

 

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