Wilford Brimley and Direct Response Advertising at PolyMedica Corporation Case Solution

Case Solution

With a particular final objective to legitimize endorsing the quick response advancing costs, the association should display to the SEC that these costs satisfy the necessities of being assets. Understanding of the differentiations amidst favorable circumstances and expenses is critical to this issue. Assets are described as resources with money related quality that are controlled by the association and are depended upon to yield future financial favorable circumstances. Expenses, on the other hand, are described as "money related costs realized by the association to get wage". Association has been endorsing the advancing costs in light of AICPA's statement of purpose (SOP) 93-7. This article communicates that if the advancing is of such a nature, to the point that costumers respond especially to the commercials, then the costs obtained in such way can be advanced in light of the fact that these costs help the association to win in future a possible future money related favorable position.

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Questions Covered

1. Will the SEC require Poly-Medica to change its method of accounting for direct response advertising? 

2. If the company restated its financial statements, what would the impact be on the company’s stock price?