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In April 1997, the AICPA's Accounting Standards Executive Committee (AcSEC) exposed for public comment a proposed statement of position (SOP) to provide guidance to all nongovernmental entities on financial reporting of costs of start-up activities. The proposed SOP, Reporting on the Costs of Start-Up Activities, would require such costs to be expensed as incurred instead of being capitalized and amortized. It would apply to start-up activities of both development stage and established operating entities, and it would change existing practice for those entities in the casino, airline, and construction industries.

The proposed SOP broadly defines start-up activities as those one-time activities that relate to the opening of a new facility, introduction of a new product or service, doing business in a new territory, initiating a new process in an existing facility, doing business with a new class of customer or beneficiary, or commencing some new operation. The SOP would become effective for financial statements for fiscal years beginning after December 15, 1997.

In considering the appropriate accounting for start-up costs, AcSEC could not identify any evidence that demonstrates any direct relationship between start-up costs and future economic benefits.

This is another instance where AcSEC has stepped forward to deal with a major accounting issue that FASB, for whatever reason, has chosen not to deal with. This joins the ranks of risks and uncertainties and software costs for internal use as areas where AcSEC has issued or proposed new standards.

A copy of the exposure draft can be obtained, free of charge, by calling the AICPA order department at 1 (800) 862-4272 and requesting Product No. 800113.

The exposure draft also can be downloaded from the AICPA's website (www.aicpa.org). Comments on the exposure draft should be sent by July 22, l997, to Daniel Noll, technical manager accounting standards, File 4323, American Institute of Certified Public Accountants, 1211 Avenue of the Americas, New York NY 10036-8775. Responses may also be sent by electronic mail over the Internet to dnoll@aicpa.org. *

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