Prepress Expenses & Inventory
May 26, 2008
Publishers frequently ask how should prepress expenses be handled?
Prepress expenses are the prepartory work that goes into preparing a manuscript for the printer. Typesetting, design, proofreading, editing and art work are examples of prepress expenses.
Publishers of medical books, educational texts and large reference works usually capitalize prepress expenses and amortize the expense over the expected life of the title - usually two to three years.
Publishers of trade books usually include prepress expenses as part of the inventoriable cost (printing, paper and binding). This expenses all of the prepress expenses over the sales of the first printing.
From the perspective of GAAP (Generally Accepted Accounting Principlies) both methods are correct.
The educational textbook publisher expects his books to have a life of three years and go through several printings. By amortizing prepress expenses over time these expenses are allocated accross all printings.
The trade book publisher expects that his books will “most likely” have a life of one year and thus including the cost of prepress expenses in his inventoriable cost is proper.
