Volume 6, No. 7

 

Ending Start-Up Costs:  For years, there have been disparities in the way firms treat their start-up costs. These are the one-time costs related to say, opening a new restaurant or retail outlet; they're the costs an entity must incur to get a property to a state where it will reach a normal level of operating activity. Some companies have always expensed these kinds of expenditures. Some have capitalized them, and amortized the costs over a number of years. Consequently, the treatment chosen will have an effect on a firm's profitability. The American Institute of CPAs has issued an exposure draft that, if approved, would settle once and for all the accounting treatment given to these expenditures. For some companies, that may mean more earnings volatility.

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