What Is Corporate Barter?
Corporate barterThe creation of value by exchanging a client's unwanted or undervalued asset for the promise to purchase over a period of time from the corporate-barter company a defined set of goods and/or services, called fulfillment. (Sometimes mistakenly referred to as Corporate Trade.) restores value to underperforming assets by exchanging them for media placements or other business purchases over a span of time.
Every organization has assets – the items on the left-hand side of the balance sheet. Some of those assets appreciate in value. Others depreciate. Still others simply become unwanted for a variety of reasons.
Every organization also has expenses – the items on the bottom half of the P&L report. These are the goods and services needed to manufacture products, promote their wares and conduct routine, day-to-day business.
Companies that employ corporate barter have simply learned that their routine expenses are actually levers that can restore value to assets that have lost their value or their desirability.
How Corporate Barter Works
Typically, our clients come to us because one or more of their assets have lost some (or, in some cases, nearly all) of their market valueThe price at which both willing buyers and sellers will transact business, the highest value being full market value.. ICON acquires such assets, often paying substantially more than the market would. In exchange, the client buys goods and/or services over time from ICON at the rates they would normally pay.
Here’s how the process typically works:
1. Company identifies an unwanted asset or an expense that needs funding Read more.
Over time, one or more of a company’s assets can become undesirable, or a situation arises that requires funding. Either of these can form the basis of a corporate barter transaction.
Unwanted Assets: These can be anything that once had value. Over the years, ICON has acquired or disposed of assets such as:
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Business Expenses: In some cases, ICON simply provides cashU.S. federal banknotes; one of ICON's financial options. outright to fund a business expense or opportunity. Since 1986, ICON has helped clients fund:
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2. ICON buys the asset (or funds the opportunity) and creates the right transaction Read more.
ICON helps clients determine which of three transaction variations best meets their situation and organizational goals. Within each transaction, value is provided to the client, and a counter commitment is made by the client to purchase goods and services through ICON.
- Trade CreditAn alternative currency used in the corporate barter industry; one of ICON's financial options. (Note that this term is properly used only in the singular, i.e., never trade credits.): The client is issued trade credit as a form of payment. The credit is applied to future purchases from ICON, typically media such as TV spots or magazine pages. This type of transaction is preferred by clients that need flexibility within their spending commitments – such as a company that lives with unpredictable business cycles.
- Cash: ICON simply provides cash to fund a legitimate business expense. In exchange, the client purchases a predetermined amount of goods and services through ICON over a scheduled period.
- A BlendThe ratio of cash to trade credit used as payment for fulfillment services purchased through ICON. of Trade Credit and Cash: Sometimes, a client will exchange an underperforming asset for trade credit but will need cash, too. In such cases, ICON works with the client and its various departments to create the right mix of both.
3. ICON remarkets (or retires) the asset Read more.
When an asset is purchased by ICON, it is remarketed without harming the client’s brand value or pricing. ICON works with its clients to develop acceptable remarketing parameters. This usually means employing one or more separate and discrete sales channels approved by the client.
4. ICON delivers goods and services Read more.
FulfillmentThe process through which ICON delivers the goods and services clients have purchased from ICON using trade credit or cash or both. Also referred to as the back end of a corporate barter transaction. is the term used to encompass the many services ICON offers to fulfill a transaction. Clients realize an economic benefit when they purchase planned media or other services through ICON. If the fulfillment is media, ICON defers to the client’s advertising agency of record for plans, specifications and rates – and any existing commission procedures are honored. For other goods and services, ICON also delivers the same quality, price, delivery and timing as the client normally receives – in other words, business as usual. Learn more about ICON’s fulfillment services by clicking here.
5. ICON acquires inventory of business goods and services Read more.
Working with its media and corporate trading partners, ICON is constantly building inventory and increasing access to goods and services – media space and time, travel services, shipping capacity, etc. ICON acquires inventory in several ways. Many times, a large quantity is purchased far into the future in exchange for a reduced price. Other times, a trade is transacted for another item or service.
Barter Accounting
Authoritative accounting guidance in the United States for corporate-barter or trade-credit transactions is established within Emerging Issues Task Force Abstract 93-11 (EITF 93-11) and Accounting Principle Board Opinion No. 29 (APB 29) Please see the white papers in our CFO Corner for accounting practices and sample entries related to corporate barter.
