During Intel's (NASDAQ:INTC) most recent earnings call, company CFO Robert Swan explained that the company made a change to its Intel Inside co-marketing program that led to some changes in how the company reports its business results to investors. That change, Swan said, led to revenue reductions of 2% and 0.5% in the company's client computing group and data-center group businesses, respectively.

Offsetting those revenue declines, however, were reductions in the company's marketing spending to make this whole deal operating income-neutral. Put another way, it didn't change how much money Intel ultimately made. 

A mobile Intel Core processor.

Image source: Intel.

During the call on its earnings presentation, the company didn't go into much detail on what exactly this marketing change entails, although management did say the change would "drive efficiencies. But it did explain what's going on in its quarterly regulatory filing.

Let's go over it.

How things worked before

In its latest quarterly filing, Intel explained how its "cooperative advertising programs" work: 

Through cooperative advertising programs, such as our Intel Inside program, we reimburse customers for marketing activities for certain of our
products. We accrue cooperative advertising obligations and record the costs at the same time that the related revenue is recognized. We record
cooperative advertising costs as marketing, general, and administrative (MG&A) expenses to the extent that an advertising benefit separate from the
revenue transaction can be identified and the fair value of that advertising benefit received is determinable. We record any excess in cash paid to
customers over the fair value of the advertising benefit we receive as a reduction in revenue.

I'll try to put this somewhat confusing text into a concrete example. 

Let's suppose Intel has such a co-marketing deal with XYZ Computers. XYZ Computers spends $5,000 as part of this agreement trying to market computers based on Intel's latest eighth-generation Core processors. When Intel recognizes the revenue for the components that are being sold under this agreement, it also adds the $5,000 that it plans to reimburse XYZ Computers to its marketing, general, and administrative (MG&A) operating-expense line item. 

Now, based on Intel's explanation, if it decides to pay XYZ Computers $6,000 under this deal, which would be $1,000 more than what the marketing work XYZ Computers did is worth, according to how the parties involved value the work, then the excess $1,000 paid to XYZ Computers won't be added to Intel's MG&A expenses but will instead show up as a $1,000 reduction in the revenue Intel received from selling the products in the first place. 

How things work now

After explaining in its 10-Q filing how things previously worked, Intel went over how things will now work. The company says it's moving is customers to "cooperative advertising offerings more tailored to customers and their marketing audiences." It also explained that during the second half of this year, it will record such cooperative advertising expenses "as a reduction of revenue as we no longer meet the criteria for recording these expenses within MG&A." 

That's why Intel said that even though these changes to its co-marketing programs led to revenue reductions but that its overall operating income wasn't affected, meaning the fundamental business performance is unchanged. 

Using the preceding example, instead of recording the full value of the product sales and then also adding the rebated amount of $5,000 to MG&A, Intel is just reducing the revenue that it sees from the transaction by $5,000. 

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.