Frequently Asked Questions on Organization and Offering Costs
- (1) What are some of the expenses treated as organization costs under FASB ASC 720-15? (AAG 8.23)
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- Legal fees related to organization and incorporation of the business, drafting bylaws, administration, custody and transfer agent agreements and research and consultation services in connection with initial directors meeting
- Incorporation fees
- Audit fees related to initial registration and seed capital audit
- (2) What is the accounting treatment of organization costs?
- According to FASB ASC 720-15-25-1, organization costs should be expensed as incurred.
- (3) What are some of the expenses treated as offering costs (AAG 8.23)?
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- Legal fees related to preparation of the initial registration statement
- Expenses related to typesetting and printing the prospectus
- Registration fees
- (4) What is the accounting treatment of offering costs incurred by funds?
- An investment partnership that continually offers its interests should defer offering costs incurred prior to the commencement of operations and then amortize them to expense over the period that it continually offers its interest, up to a maximum of 12 months. The straight-line method of amortization should generally be used. If the offering period terminates earlier than expected, the remaining balance should be charged to expense. (TIS Section 6910.23)
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