Accounting for start-up costs - UITF 24
UITF 24, Accounting for start up costs, is a potentially controversial analysis and ruling which will affect any business which has previously carried forward any operating expenses of a new venture that it attributes to pre-opening or early trading costs until that venture is fully operational.
This practice was widespread (but not universal) in sectors such as retail, pubs, restaurants, hotels and nursing homes. Costs such as staff costs, rent, redecoration and training, which are normally treated as expenses when they are incurred, were often deferred until "opening day" and then amortised over a subsequent period of one to three years.
This accounting treatment flatters the current profit and loss account in a way that is now considered unacceptable. The reasoning is that such a collection of deferred costs cannot really be said to be "a right or other access to future economic benefits" and accordingly does not meet the definition of an asset and may not be carried forward in the balance sheet. UITF 24 is in force, so all start up costs that are in fact normal operating costs must now be written off to the profit and loss as incurred.
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