Should they be expensed as incurred on the income statement or capitalized on the balance sheet and amortized?
One popular answer is that digital marketing expenses are a form of advertising and should be expensed as incurred.
However, if we look at IFRS 15 Revenue, there is a case for recognizing the costs as an asset.
The incremental costs of obtaining a contract must be recognized as an asset if the entity expects to recover those costs. [IFRS 15:91-94]
If the digital marketing cost can be directly linked to a specific sales contract then the cost should be capitalized. Examples that could potentially be capitalized would be a sales commission or affiliate marketing fee.
On the other hand, with digital marketing expenses like paid search, blog and social media, SEO/SEM, content marketing, and email marketing it is much harder to attribute these costs to a specific sales contract. They should be expensed as incurred.
