Should a company that swaps website advertising with another company record advertising revenue and expense?
This issue, dealing with the question of gross versus net revenue display, was given a priority level of 1. It is a common practice for Internet companies to swap advertising on each others websites. If revenues and expenses are recognized in a barter transaction, the amounts would ordinarily be equal, as long as the bartered advertisements are of equal value; consequently, net income would not be affected. Nonetheless, revenues would be enhanced, possibly affecting market valuation. The EITF placed this issue on its technical agenda under EITF Issue No. 99-17, Accounting for Advertising Barter Transactions, and summarized it as follows: Some [Internet] entities record an equal amount of revenue and expense for the [advertising] space they sell and for the space they purchase resulting in no effect on net income or cash flows. To the extent that revenues include barter transactions for which there is no ultimate realization in cash and no effect on net income, the practice may lead to
