Policy Consultation on Revenue Recognition and Accounting Treatment Involved in Marketing Activities
The company plans to conduct marketing activities that include product sales, potentially involving co-branded products or deeply discounted regular products, aiming to enhance brand awareness through influencer collaborations. Consultation is sought on whether sales and costs can be netted into marketing expenses (below gross profit line) rather than through revenue/cost accounts, and inquiries are made regarding GAAP compliance and the placement of such statements in the accounting policy documentation.
Our company plans to conduct a series of marketing activities, which may include product sales—products may be co-branded or regular products sold at deep discounts. The core objective of such marketing activities is to enhance brand awareness through collaboration with influencers. In terms of financial results, we may achieve break-even (net) or even incur a certain loss. The real value to the company lies in the number of "eyeballs" (i.e., impressions) reached through the influencers' social media platforms.
We wish not to record the aforementioned sales and corresponding cost of goods sold (COGS) in the regular revenue/cost accounts, but instead to record all costs (net of any gross profit contribution) as a net amount in marketing expenses below the gross margin (GM) line. Question: Does this treatment comply with U.S. Generally Accepted Accounting Principles (GAAP)? If so, how should we position and describe this treatment in my accounting policy document?
Thank you in advance for your response.