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GUEST OPINION
In response to such corporate scandals as Enron, the government passed the Sarbanes-Oxley Act of 2002 as an antifraud measure designed to make business transactions transparent.
Essentially, it ensures that businesses reflect sales that actually occurred. And this November, your marketing department will face the challenge of bringing its documentation into compliance. But don't panic, because although this requires some additional paperwork and monitoring of systems, you can use the compliance to your advantage. First, let's take a closer look at how the new law will affect your company's marketing processes.
Sarbanes-Oxley hits the trade promotion area because it requires documentation of all marketing expenses, including where the transactions occurred, how many times, and how much the marketing services cost. It also requires businesses to implement internal systems for keeping track of this detailed information and for monitoring whether the contracted services actually occurred.
For example, say your company participates in co-op advertising, and you give a retailer $10,000 for marketing ($5,000 for the cost of the co-op ad, plus $5,000 designated for "marketing expenses"). The unspecified "marketing expenses" is where the problem lies. Before Sarbanes-Oxley, you could deduct the entire $10,000 as a business expense, regardless of how the retailer actually spent the unspecified $5,000. But now, to prevent companies from using marketing funds for other operations, everything has to be documented in detail to be eligible for subtraction from your revenue.
"In detail" means that when SarbanesOxley takes effect, your company's data warehouse must include the following information:
* A process that objectively identifies the value of any...