what should be the accounting treatment of payment made to brand ambassador
2 Replies
CA SURENDRA KUMAR RAKHECHA
(Practising CA at Surat)
(26263 Points)
Replied 14 August 2010
It is to be debited to Advertisement Account.
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 14 August 2010
Dear jitender,
First of all refer to the contract between company and brand ambessador and note down the period of contrcat and amount of fees to be payable.
If payment made to brand ambessador for the period exceeding the current financial year, then it should be treated as deffered revenue expenditure and should be amortised over the period of contract term. Amortised amount should debited to advertisement a/c.
If u charge all the payments to advertisement in the initial year itself, it would not show a currect view of financial statement. E.g. fees say 50 lakhs to be payable for the contract period of 3 years, thus if u charged 50 lakhs in the intial year itself, there would not be any charge in P&L in the later 2 years even though u r utilising the services of brand ambessador and would distort the matching concept of accountancy.
Regards,
Manoj
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