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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.


FY2002 FY2001 FY2000
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?


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