Polymedica

PROBLEM STATEMENT:

During the relevant time period, it has been reported that PolyMedica overstated earnings by capitalizing direct response advertising costs related to the acquisition of new customers rather than expensing them as incurred. Consequently, PolyMedica recorded such advertising cost as assets rather than as expenses. By accounting for these expenses as assets, PolyMedica could spread the cost over a two to four year period rather than accounting for the expenses in the quarter in which they were incurred.

Health system marketing is a specialized field that deals with connecting patients, physicians, and hospitals in mutual relationships. We believe that marketing a health care system is no difference than “marketing” in any other non-profit or for profit business. There are audiences, there are needs, and there is a mission. Historically medicine in America has always been a business. In today’s insurance and reimbursement environment, health care marketing we feel is more needed than ever to ensure continuing viability of American medicine on the local level and to provide the high quality of individual health care that many Americans have come to demand.

According to Marketers direct response advertising or marketing is that which encourages a direct action from a person. Typically, you want someone to request additional information or to make a purchase and by this type of advertisement many companies expect consumers to do it now. Many marketers call this type of marketing, (advertising that makes the phone ring) and state that it is advertisement that get’s results. Unlike branding direct response advertisement is designed to create traffic now.

By accounting for the direct response advertisement expenses as assets, PolyMedica could spread the cost over a two to four year period rather than accounting for the expenses in the quarter in which they were incurred. According to the American Institute of Certified...