Emerging Issues

Organization Costs

There has been a recent change in GAAP as they pertain to accounting for organization costs. SOP 98-5, "Reporting on the Costs of Start-Up Activities," now requires that organization costs be expensed as incurred, not capitalized and amortized. In most cases, initial application of SOP 98-5 should be reported as the cumulative effect of a change in accounting principle.

Chapter 10
On page 430, the description of Organization costs is still relevant. However, accounting for these costs has changed as described above.

Changes to end-of-chapter material
Problem 10-1, the $3,000 in organization costs must now be expensed, not capitalized as an intangible asset.

Problem 10-4, the $7,000 in organization costs must now be expensed, not capitalized as an intangible asset.

Revised Solutions (42.0K)

Chapter 11
Illustration 11-4 on page 488 must change. The $5,000 in organization costs must now be expensed, not capitalized as an intangible asset. No amortization is therefore necessary.

Changes to end-of-chapter material
Problem 11-8, the $22,000 in organization costs must now be expensed, not capitalized as an intangible asset. No amortization is therefore necessary.

Revised Solutions (34.0K)

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