Advertising Campaign Costs

Today, social networks are not only platforms for communication but also a very effective means of promoting any type of product or service. Advertising on social networks is a popular tool. By creating and developing your brand's page, you can make yourself known and your company recognizable among millions of network users.

From a marketing perspective, such advertising of goods or services is very convenient and effective; from an accounting perspective, it's not so simple. The main problem is that for the advertising services provided, social networks usually do not provide properly issued invoices and acts of services rendered, based on which an accountant typically records the company's expenses. How should one act in such a case? Let's consider everything in order.

Advertising can be placed through an official reseller (a reseller is a company that resells hosting services from a primary hosting provider) or an SMM agency. In this case, you will receive properly executed "closing" accounting documents (and, accordingly, confirmed expenses) and will be able to pay for the advertising services provided through the company's current account. However, this option has several nuances: the advertising campaign budget must be within the agency's criteria, and an additional commission for the services provided will need to be paid to the intermediary. Therefore, some companies choose to pay for social media advertising independently.

Currently, advertising on foreign social networks can be paid for through international banking systems (Visa, Master Card). Unfortunately, payment through a current bank account is not available to Ukrainian companies.

To pay for social media advertising, a company can use:
1. A corporate card.
2. An employee's personal card (by issuing funds to them as an advance).

Regarding documentation, the situation here is very complex. In some cases, an invoice can be obtained, but more often than not, a payment invoice is absent. How then should these expenses be reflected in accounting?

Let's start by noting that social media advertising is nothing more than selling expenses, which are accounted for under the debit of account 93 "Selling Expenses". Since advertising expenses cannot be tied to specific revenue, they are reflected in accounting in the period of actual incurrence of these expenses, as period expenses (para. 7 P(S)BU 16).

If the expense account is clear, then a question arises regarding the primary document on the basis of which advertising expenses can be reflected. After all, all business transactions in accounting are reflected based on primary documents (part 1, Art. 9 of the Law on Accounting), and such documents must also have mandatory requisites listed in part 2, Art. 9 of this law, namely: they must contain the name of the document, date of compilation, name of the enterprise that compiled the document, content and scope of the business transaction.

If the social network allows generating an invoice or an act of completed works (provided they contain the necessary requisites listed above), then such documents can be considered primary, and this means that advertising expenses can be reflected in accounting based on them. The "possibility" of reflecting expenses in accounting based on an invoice is discussed in the letter of the Ministry of Finance of Ukraine dated 16.02.2017 No. 31-11410-06-5 / 4339. The absence of an invoice and an act of completed works significantly complicates the matter. However, the absence of an invoice or an act of services rendered does not allow concluding that there was no business transaction, because in reality, the enterprise incurred expenses and achieved a certain result during the advertising campaign (transitions to the social media page, purchase of goods by customers).

As we know, a business transaction is an action or event that causes changes in the structure of assets and liabilities, and the equity of an enterprise (Art. 1 of the Law on Accounting). That is, if the actions of the enterprise led to the aforementioned changes, they must be reflected in accounting. We believe that the fact of a business transaction is important, not which package of documents gives the right to reflect it in accounting. After all, a primary document is a document that contains information about a business transaction. But, unfortunately, in most cases, regulatory bodies adhere to the position that to confirm advertising expenses on social networks, primary documents must be provided – invoices, acts of completed works, and in the acts of acceptance and transfer of marketing services (advertising services), the types of work, their price, volume, as well as additional documents confirming the fact of providing advertising services, must be specified and detailed.

How can a business transaction be confirmed in the absence of primary documents for advertising conducted on social networks? When placing ads on social networks, the company has other documents:

• bank statement on the transfer of funds;
• statement from the advertising account, showing what funds were spent and where;
• screenshots of the advertising campaign page and its results;
• screenshots of the advertising message;
• contracts with contractors for banner development, writing ad texts, producing an advertising video, etc.

In our opinion, all the above-mentioned documents confirm the fact of the business transaction and fully reflect all information about the service received. Among other things, based on these documents, a bookkeeping certificate can be drawn up, which will serve as a primary document and a basis for reflecting advertising expenses in accounting.

To summarize, we can conclude that in the absence of an invoice and an act of acceptance and transfer of works, a bookkeeping certificate, together with other documents reflecting information about the service received, will be the basis for reflecting social media advertising expenses in accounting.

Accountant-Expert
Skrypniuk Yuliia