A forthcoming SOP will require many companies to change the accounting for start-up costs.
n April 22,1997, the AICPA released for public comments, a proposed Statement of Position (SOP) entitled Reporting 0 on the Costs ofstart-up Activities. It now appears as though the final SOP will be issued very soon and, upon adoption, will require many companies to change the accounting for start-up costs. The Accounting Standards Executive Committee (AcSEC) has been deliberating on a series of projects that address various issues related to soft assets. In particular, AcSEC has begun to investigate the accounting for costs such as start-up, training, customer acquisition, and similar activities that are incurred with the expectation that a future economic benefit is created.
PREVIOUS "SOFT ASSET" PROJECTS
The first of these AcSEC projects resulted in its issuance of SOP 93-7, Reporting on Advertising Costs. (For a discussion of the provisions of SOP 93-7, see Munter and Ratcliffe, "Accounting and Reporting of Advertising Costs," Ohio CPA Journal (December 1994).) When SOP 93-7 was issued, AcSEC stated its intention to use it as a guide in developing standards for reporting costs of other kinds of activities undertaken to create future economic benefits. The proposed SOP on start-up costs is the next step in the ongoing series ofAcSEC projects.
CURRENT ACCOUNTING FOR START-UP ACTMTIES
Currently, thereis asignificant amount ofdiversityin the accounting for start-up costs. Some companies capitalize start-up costs while others expense start-up costs as they are incurred. In addition, there is a wide range of amortization periods used among those who capitalize these costs-ranging from six months to five years.