| Paragraph
Number |
Issued:
June, 1975
|
| 1 | Specifies guidelines for identifying an enterprise in the development stage and the standards of financial accounting and reporting applicable to such an enterprise. | |||||
| 2 | Problem: Some development stage enterprises have adopted special practices, including special forms of financial statement presentation... that are different from those used by established operating enterprises. Some of the special practices include: | |||||
| a. | deferral of all types of costs regardless of their recoverability | |||||
| b. | nonassignment of dollar amounts to shares of stock issued for consideration other than cash | |||||
| c. | offset of revenues against deferred costs. | |||||
| Special reporting formats have included statements of | ||||||
| a. | assets and unrecovered preoperating costs | |||||
| b. | liabilities | |||||
| c. | capital shares | |||||
| d. | cash receipts and cash disbursements | |||||
| Guidelines for Identifying a Development Stage Enterprise | ||||||
| 8 | An enterprise is in the development stage if it is devoting substantially all of its efforts to establishing a new business and either of the following conditions exist: | |||||
| a. | Planned principal operations have not commenced, or | |||||
| b. | Planned principal operations have commenced, but there has been no significant revenue therefrom. | |||||
| 9 | A development stage enterprise will typically be devoting most of its efforts to activities such as planning; raising capital; exploring for natural resources; developing natural resources; research and development; establishing sources of supply; acquiring property, plant and equipment or other operating assets, such as mineral rights; recruiting and training personnel; developing markets; and starting up production. | |||||
| 10 | Financial Accounting and Reporting | |||||
| Financial statements issued by a development stage enterprise shall present them in conformity with the generally accepted accounting principles that apply to established operating enterprises and shall include the additional information required in paragraphs 11-12. | ||||||
| Special
accounting
practices and reporting formats, such as those described in paragraph 2
of this statement are no longer acceptable.
Generally accepted accounting principles that apply to established operating enterprises shall govern the recognition of revenue be a development stage enterprise and shall determine whether a cost incurred by a development stage enterprise is to be charged to expense when incurred or is to be capitalized or deferred. |
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| 11 | A development stage enterprise shall disclose certain additional information along with the basic financial statements : | |||||
| a. | A balance sheet, including any cumulative net losses reported with a descriptive caption such as "deficit accumulated during the development stage" in the stockholders' equity section | |||||
| b. | An income statement, showing amounts of revenue and expenses for each period covered by the income statement and, in addition, cumulative amounts from the enterprise's inception | |||||
| c. | A statement of cash flow for each period for which an income statement is presented and , in addition, cumulative amounts since the enterprise's inception | |||||
| d. | A statement of stockholders' equity. . . | |||||
| 12 | The financial statements shall be identified as those of a development stage enterprise and shall include a description of the nature of the development stage activities in which the enterprise is engaged | |||||
| The financial
statements for
the first fiscal year in which an enterprise is no longer considered to
be in the development stage shall disclose that in prior years it had
been
in the development stage.
If financial statements for prior years are presented for comparative purposes, the cumulative amounts and other additional disclosures required by paragraphs 11-12 need not be shown. |
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| 15 | Effective Date and Transition | |||||
| This Statement shall be effective for fiscal years beginning on or after January 1, 1976; earlier application is encouraged. | ||||||