Case Title: The Website Launch
Your Company, MedDevice, Inc., has just received FDA 510(k) clearance of its new, cutting edge medical device which paves the way for the official product launch in a few short months. Your marketing team is tasked with the creation of all sorts of brochures, pamphlets advertising initiatives, commercials and, most importantly, the development of a new website showcasing your Company's new product. Your Company's marketing team decides to go high-end and hires the most prominent and comprehensive website developers in the space today - Less 4 More Design. Everything is humming along fine until the first invoice comes in and lands on your CFO's desk for payment approval:
Less 4 More Design
Itemized Invoice
Line Item 1: Determine Website Functionality (Order Placement, Order Shipment) $ 15,000.00
Line Item 2: Conceptual Formulation of Graphics and Content $ 22,500.00
Line Item 3: Obtain and Register Internet Domain Name (www.MedDevice.com) $ 5,000.00
Line Item 4: Registering the Website with Internet Search Engines (Google, Yahoo!, Bing) $ 7,500.00
Line Item 5: Training the Company's Website Support Staff (16 Hours) $ 10,000.00
Total: $ 60,000.00
Your Chief Financial Officer has never dealt with a product launch this big, so the price tag for the website costs is a little surprising. Frankly, he does not really want all this expense running through his income statement. He asks you to see if there is any relevant guidance specific to these types of activities that would allow some of the costs he is seeing on the invoice to perhaps be capitalized.
Draft a single accounting memo discussing the accounting treatment of each of the five line items on the invoice. Specifically, should the cost be expensed as incurred or capitalized? Cite the FASB ASC guidance used in arriving at your conclusions (there are very definitive answers).
Additionally, take the comments you received in preparing your first memo into consideration when drafting your current memo. Grammar, sentence structure, format, professionalism and correct citations matter as much as your final answers!
True and False
Determine if each statement below is either "True" or "False". Indicate your choice by writing "True" or "False" in the answer field provided. Additionally, if you believe the statement to be "False," please provide a one or two sentence explanation as to why the statement is "False." If you choose to do the extra credit questions, please copy and paste the three questions and answers at the end of your memo below your conclusion. Each correct answer will net you one bonus point on the assignment!
Question 1: According to 17 CFR §210.10-01(a)(4), the statement of cash flows may be abbreviated starting with a single figure of net cash flows from operating activities.
Question 2: According to the "Instructions to the Exhibit Table" found within 17 CFR §229.601, a Company's Code of Ethics, when filed as part of a Company's Form 10-K, must be filed as an exhibit beginning with the number "10".
Question 2: According to 17 CFR §210.3-04, an analysis of the changes in each caption of stockholders' equity and noncontrolling interests presented in the balance sheets shall be given in a separate statement only.