Question

Where in the codification do you find mention of start-up costs? How did you arrive at your answer? Absolutely focused on ASC 720 for start-up costs.

Answer 1

New businesses which are vital to a healthy economy usually incur costs before they begin active conduct of their intended business operations. These costs are frequently generically referred to as startup costs of a business. Costs that are financial accounting start up costs may be required to be further subdivided in to smaller more specific categories each of which is treated differently. Start up costs are costs of a business incurs in its activities in preparing to begin its active conduct. Under ASC section 720 startup activities include. a. Opening a new facility b. Introducing a new product or service C. Conducting business in a new territory Conducting business with an entirely new class of customers or beneficiary Initiating a new process in a existing facility Financial accounting standards also treat the cists of organizing a corporation or partnership as startup costs rather than separate costs. Although companies refer to start up costs using varying terms, including preopening costs,preoperating costs, organization costs and start up Costa Start up expense A/C. dr Cash The treatment of preoperational startup costs is potentially much more complex for tax purposes than financial accounting purposes. Costs that are startup costs for financial accounting purposes must ne analyzed and possibly subdivided in to smaller categories each of which is treated differently for tax purposes The company expenses all costs incurred in connection with the start up and organization of the company