I'm not talking about the tragic events of last September. I'm talking about a simple accounting rule change that will have a major effect on the entire field of sales, marketing and marketing communications. The changes go under the formal names of EITF/FASB Regulations 0014 and 0025, which sound innocuous enough, but here's the story:

EITF is the Emerging Issues Task Force, a committee of the Financial Accounting Standards Board (FASB). That group is charged with identifying activities and events that can or will have an effect on the accounting standards used in the United States. Over the past couple of years, EITF has been looking at how marketing organizations treat marketing and communications investments. Part of the reason for the examination is the-ahem-creative ways dot-com companies treated marketing investments on the balance sheet. The other part was simply that no formal standards existed on how to treat sales costs and marketing and communications investments across businesses and industries. Thus, the EITF and FASB determined some standardization was needed-- and it likely was.

EITF proposed, and FASB agreed to, a new set of regulations that went into effect on Dec. 15, 2001. They are formally titled EITF Issue 00-14-Accounting for Certain Sales Incentives-and EITF Issue 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products." (There are some others wending their way through the process but I won't bore you with what is to come.)

In essence, EITF/FASB 0014 and 0025 were focused on internal accounting issues and therefore have received little attention from marketing and promotion people, as they have no effect on the bottom line.

But, they do have an effect on the top line. Based on these new regulations, many of the traditional sales and promotional costs that marketing organizations have taken as an expense must now be taken as a reduction in sales. The regulations apply to such widely used tools as slotting allowances, buy-backs, off-invoice allowances, couponing and frequent-purchaser programs.

In other words, if your organization has sales of $10 million and you have provided promotional allowances or paid promotional fees of $1 million-or 10% of sales-you don't take those costs as an expense anymore. Instead, you take them as a reduction in topline sales. So your company, in one fell swoop of the accountant's pen, changed from a $10 million firm into a $9 million firm. This is no real change for the accountants, but it's a major change for the sales, marketing and communications people.

Traditionally, in many product categories, the sales force has been charged with selling units, or volume of something. All sales were booked at list price to determine total sales and then the discounts were taken as an expense, creating a high top line and a small bottom line with lots of accounting legerdemain in between. No more: When you give a discount, deal or promotion covered under 0014 or 0025, you take it off the top line.

No big deal, the accountants argue: It's an internal accounting issue only. But it should and will matter big-time to the sales, marketing and communications people.

Now, the sales force must manage both volume and dollars. They must be able to estimate or predict what type of impact a promotion will have: Will it really generate longer-term brand growth or is it just a short-- term activity to move excess volume?

Think what it will do to new products: Most of those have been sold through various promotional deals such as slotting allowances and buy-backs. When you reduce the top line by the promotional allowances, that will make the introduction look that much worse.

The list goes on and on. Sales and marketing people must rethink many of their traditional promotional activities and become not just volume but financial managers.

Think of what it does to the communications people. For years, they have argued that promotion devalues the brand, hurts long-term brand equity and reduces the amount of money available for advertising and other brand-building activities. With the new EITF/FASB rules, there should be more pressure on them to prove that a shift of funds from promotion to communications can pay off. In other words, the communications people must demonstrate that what they are doing is actually generating top-line sales along with bottom-line profits. That's not something most have been accustomed to doing.

Most of all, EITF/FASB 0014 and 1125 are really going to put pressure on every sales, marketing and communications manager to become accountable for the investments they make in various activities. While many have argued the impossibility of measuring the return on advertising or sales promotion, it is now not just a desirable management goal but a mandatory management requirement.

Interestingly enough, though, the marketing and communications world was not changed by the sales, marketing and communications people, but by the accountants, and that's the sad part. We in the marketing community never stepped up to the responsibility of accounting for what we did, spent or gave away until we had to. And, that is the most grievous situation of all.

Sales, marketing and communications departments are being forced to grow up. That is probably the most difficult challenge of all.

-- By Don E. Schultz