Question

Assume that DDS can convince their auditors that an advertising campaign will increase the economic benefits of their brand name. Should DDS expense or capitalize the costs of the campaign (3 points)?

Answer 1

An advertisement cost can be recorded as an asset only if the following criteria satisfies:

1.The primary purpose of advertising is to generate sales from customers who can be shown to have responded specifically to the advertising. In this case the documentation of cutomer responses is must.

2.The advertising activity results in probable future revenues that exceeds future costs incurred to realize the revenue.

So per the information given in the question, we can assume that both the conditions might have satisfied so DDS cost can be capitalized.