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Good Morning Hewitt,

Curious as to how you would handle the following:

Playing around with Home Depot. They guys have an interesting advertising expense phenomenon, in that they get back from vendors, most, if not more, than what they spend.

Example:

FY2002 FY2001 FY2000
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Gross Advertising Expense $ 895 $ 817 $ 722
Vendor Advertising Allowance ( 925) ( 848) ( 784)
----------------------------------------------------------------
Net Advertising Expense ($ 30) ($ 31) ($ 62)

This net amount is then applied to reduce COGS. It looks like the most recent FY has a new accounting pronouncement on how to handle this, so I'll look into that too.

I'm thinking of how to apply to the enterprising statement. Thought process as follows:

1) Capitalize Gross Advertising Expense
2) Reverse both the intangibles charge on the accrual statement for advertising, and reverse the
vendor allowances.

Any other thoughts? Anyone else a similar experience?

Cheers,

Jim
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