What is Advertising Costs?
Advertising costs are expenses incurred by a business to promote its products, services, or brand through media — digital, print, broadcast, outdoor — with the goal of increasing awareness, traffic, or sales.
How It Works
- Plan campaigns and approve budgets by channel and period.
- Record advertising expenses in the period the services are rendered, not when the campaign is paid for.
- Recognise prepaid advertising as an asset when payment precedes service.
- Reconcile media plans to invoices and recognise the matching expense.
- Disclose material advertising costs in the notes if separately required.
Saudi Context
Under IFRS as adopted by SOCPA, advertising costs are generally expensed as incurred. ZATCA allows them as deductible for income tax with supporting documentation, and Saudi VAT applies on agency invoices at the standard 15% rate.
Example
A company pays SAR 600K in January for a 6-month campaign starting in February. SAR 100K is recognised each month from February to July; the unspent balance sits in prepaid advertising.