Considering a Corporate Facelift? Here’s One Way to Maximize Potential Profit…
(Whitehouse, NJ, September 8, 2010) According to the U.S. Bureau of Economic Analysis (BEA), U.S. corporations are currently sitting on a record $1.6 trillion in cash reserves. Reasons for this are obvious – even to the most casual observer – reaction to the economic crisis, a marked decrease in consumer spending and a tightening of credit lending standards.
Because all this cash “on the books” is not being used either to expand human capital (i.e., reduce the jobless rate) or to increase dividends, many shareholders want to see sizeable efforts that contribute to future financial growth through capital investments. Investors are looking for top-line growth initiatives, without any corresponding impact on overhead expenses that would adversely influence net profit. While this might sound challenging, it’s far from impossible – especially if you’re looking for heightened brand awareness or perhaps a more profitable website presence.
Brand development, or the establishment of a unique corporate identity, is regarded as an intangible asset that provides value to future operations (i.e., revenue). Financial Accounting Standards Board (FASB) statement No. 142 provides authoritative text related to the capitalization of costs incurred for the establishment, or purchase, of identifiable intangible assets. If these assets can provide distinct future cash flows, they can be capitalized. One can only surmise that developing and establishing a brand presence will lead to enhanced exposure in the marketplace and subsequent deposits into corporate coffers.
In terms of website development, American Institute of Certified Public Accountants (AICPA) Statement of Position 98-1, and subsequent Issue 00-2 developed by FASB’s Emerging Issues Task Force (EITF), establish that certain tasks can be capitalized for financial reporting purposes. Costs related to the planning and operating stages of website development must be expensed as they are incurred. However, the costs related to actual infrastructure development (i.e., domain name registration, software development, acquiring or developing database software or customized code for web applications, graphical user interface, content creation, etc.) can be capitalized and amortized as of the website “go live” date.
According to Steven L. Levine, CPA, of Levine Jacobs and Company LLC, “Companies who are sitting on some cash can more affordably enhance their corporate image and web presence today. They can treat the cost of brand development and website development as intangible assets and amortize their costs over future periods to match the anticipated economic benefit. There’s no time like the present to make that kind of investment in your business.”
Ed Delia, president of Delia Associates, a digital brand communications firm in Whitehouse, NJ, stated, “We’ve worked with a number of clients who have realized the benefits of re-powering their brand presence with the ability to capitalize their branding and web development costs. While many other marketing initiatives have to be expensed as incurred, there is a distinct advantage in engaging in marketing activities of this size and scope from a financial reporting perspective.”
You’ve often heard, “you have to spend money to make money.” Now you can spend money to raise awareness of your brand, capitalize the expense to mitigate negative bottom line impact and all but ensure top line growth. Sometimes it just doesn’t get any better than that…but remember always to seek the advice of your accounting professional to determine the best financial strategy for your company.
About Delia Associates
In its 46th year, Delia Associates is a digital brand communications firm that offers a suite of unique solutions, especially for small to mid-sized organizations in packaging, pharma/health, tech/engineering, trades, professional services, and financial/banking services, to help companies establish distinction, generate leads, and close sales. Ed Delia, president of Delia Associates, is a Professional Certified Marketer (PCM) and a frequent speaker on the topics of branding and technology-driven marketing. For more information, please visit: www.delianet.com.