Resolved: start-up costs are not assets.

Summary

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AICPA accounting standard SOP 98-5, Reporting on the Costs of Start-up Activities, requires start-up costs to be expensed when they are incurred. The standard applies to private entities and its broad definition of what constitutes start-up activities has led to some confusion. Reference to standards regarding fixed assets and accounting policy should help to clarify what may be capitalized.

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Resolved: start-up costs are not assets.

Entities should expense start-up costs as they are incurred.

The conclusion seems simple enough: The costs of start-up activities, including organization costs, should be expensed as they are incurred. But how easy will entities find it to apply this new rule by the AICPA's AcSEC? In April 1998, AcSEC issued SOP 98-5, Reporting on the Costs of Start-Up Activities, which...

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