Best Accounting Practices when Considering a Rebrand

While a firm’s brand is made up of more than just a logo, the visual identity does play a huge role overall in the process of branding. Simply put, your brand’s visual identity should positively distinguish your firm from the competition.

While you are planning your next year’s budget, think about the investment you could be making in your brand. With the costs associated, you should know how it impacts the deductibility on your tax return, maximizing your ROI, and how to categorize the costs. There are costs that are deductible immediately, and other costs deductible over a number of years.

Capital Expense (CAPEX) vs. Operating Expense (OPEX)

A Capital Expense is an expense incurred that has future benefit of more than 1 year and typically involves an investment in the company. It is recorded as an Asset on the Balance Sheet and then amortized or depreciated over multiple years (the life of the asset), OR in some cases, it may be eligible for a Section 179 expense deduction and depreciated in full in that same year the expense incurred. Section 179 of the U.S. internal revenue code is an immediate expense deduction, lowers your tax liability, and allows for writing off 100% of the expense in the same year, rather than depreciating the asset over several years. Ask your tax advisor to see if you qualify.

An Operating Expense is a short-term expense incurred in the daily operations of a business. It is recorded as an expense and reduces profit on a company’s income statement in the period in which it was incurred.

Rebranding Costs and Identification of CAPEX vs. OPEX

In most instances, and accordance with GAAP (Generally Accepted Accounting Principles), rebranding costs such as design concepts, artwork, logos, and branding are not considered CAPEX and are not depreciable because they do not have a long-term life and do not decline in value. However, when adding new signage to your building or space, the associated costs could be classified as Capital Expenses (CAPEX) and depreciated over the lifetime of asset.

Specifically, costs associated with printing of re-branded materials would be treated as an Operating Expense (OPEX). These are recurring type of expenses and would be expensed at the time of occurrence and hit your Profit & Loss in the current year.

These are general rules and as such, require a deeper dive on a case-by-case basis to distinguish the long term vs. short term deductibility of rebranding

Please consult your tax advisor for your company’s specific use cases and how the expenses should be classified.