The Company Logo—an asset or expense?
As the title of this essay suggests, it must first be decided whether the company symbol or logo should be recognized as an asset or an expense. An asset is defined as something of value, such as cash, equipment, inventory, or buildings, while expense is defined as something that has a negative effect on the value of the practice, such as accounts payable. The simple question that needs to be answered is “Does the company logo contributes to or takes away from the value of the business”? Since the company has to pay for the consultant company, the logo could be considered an expense, however, the logo contribute to the revenue of the business in many ways like build the image of the company, establish reputation and attract the attention of potential consumers. Given the above options, the company’s logo recognized as asset outweigh expense.
On the one hand, Real to Reel Company can recognize the expenditure on the company’s logo as an asset since it satisfied the recognition criteria of asset. According to Deegan (2010), asset can be defined as ‘a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity’. In other word, for the investment in the logo to be recorded as an asset it should meet the requirements that there must be future economic benefits derived from the asset, the entity control the future benefits and the control over the future benefits rise from a past transaction or event. Real to Reel spend $300,000 to purchase the logo for the company, which can be used in many aspects to positively contribute to the revenue of the company such as advertising the products, increasing brand awareness and introduce products to potential customers. (Hand & Lev 2003) The logo used in promoting or advertising company’s products and services can increase sales and profits for the business in a short-term. From a long-term perspective, the...
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