SOP 98-5 brings uniformity to reporting start-up costs

The American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) No. 98-5, Reporting on the Costs of Start-Up Activities, in April 1998 to provide organizations with guidance on how to report start-up and organization costs. Because some companies were expensing start-up costs while other companies were capitalizing start-up costs with a variety of periods over which to amortize costs, it was difficult to compare companies' financial statements. SOP No. 98-5 will bring uniformity to the treatment of start-up and organization costs by dictating that these costs be expensed as incurred. AICPA's Accounting Standards Executive Committee adopted an intentionally broad definition of start-up costs to capture the vast majority of costs associated with starting up an organization. SOP No. 98-5 takes effect for financial statements for fiscal years beginning after December 15, 1998, but can be applied earlier for fiscal years for which financial statements have not been issued.