CPAs who serve as advisors for start-up companies face many challenges. A major responsibility for CPAs is deciding how to value stock issued by development-stage firms. Start-up costs should be capitalized, and these costs should not be amortized for more than 40 years. Accountants should use Generally Accepted Accounting Principles when accounting for revenues. Auditors must be careful not to place too high a value on start-up companies. Related-party transactions should be disclosed, and research and development costs should be expensed in the period in which they occurred. Auditors can help improve the quality of financial reports by clarifying the definition of significant revenues and providing information about the organization's development stage and any uncertainties.
Entrepreneurial spirit is alive and well in this country. Technological advances have led to the birth of new and exciting industries. With this activity has come the opportunity for CPAs to provide accounting, audit, and management advisory services to start-up ventures. There is also increased risk because a CPA's reports are often used to raise capital, and start-up ventures often have a considerable chance of failure.
In 1975, SFAS 7, "Accounting and Reporting by Development Stage Enterprises," was issued to clarify and standardize reporting practices of development stage companies. Several publications on this topic appeared shortly thereafter. However, the literature has been sparse since then.
THE NATURE OF A DEVELOPMENT STAGE ENTERPRISE
SFAS 7 defines a development stage enterprise as a company that:
* Devotes substantially all its efforts to establishing a new business and has not begun planned principal operations; or
* Has begun operations, but has not generated significant revenue.
A development stage enterprise devotes most of its efforts to financial planning; raising capital; exploring for natural resources; developing natural resources; research and development; establishing sources of supply; acquiring property, plant, equipment, or other operating assets, such as mineral rights; recruiting and training personnel; developing markets; and starting up production.
A company that is e xpanding or developing a new product line would not qualify as a development stage company because it is not devoting most of its efforts to establishing the business. However, a subsidiary of an established firm could be so considered if it issues separate financial statements. The consolidated financial statements would follow reporting practices of an established enterprise.
Before SFAS 7, many development stage companies capitalized their start-up losses and amortized the cumulative losses against revenues of later periods. SFAS 7 acknowledges that development stage companies are involved in different activities than other enterprises, but requires that they issue the same basic financial statements as an established operating enterprise following GAAP; see Exhibit 1 for additional requirements. SFAS 7 does not change industry standards that are considered GAAP. In certain industries, such as oil and gas, sttart-up costs related to exploration and drilling are capitalized. There is little written in accounting literature on start-up costs, and the FASB has not addressed the issue. One Board member saw the need to dissent on the matter of start-up costs.
Investor and creditor needs are different for a development stage company. While its statements reporting cumulative information give an investor a summary of activity to date, users also need information about future prospects. In addition, while GAAP provide guidance on non-cash asset valuation and reporting of current and potential obligations, these transactions usually are more prevalent, material, and harder for the development stage company to value.
We’ve got nothing but sympathy for Ashley Dupre - after all, who hasn’t performed sexual acts on a high-ranking politician for cash these days?
And if a scandal about you being a massive whore with a slightly gross-looking New York governor isn’t bad enough, the inevitable follow-up story about the way you took your clothes off for a teen-exploiting series of softcore videos is just utterly degrading.
That’s why we’re fully behind Ashley Alexandra’s decision to sue Girls Gone Wild founder Joe Francis for $10 million because he quickly released a 2003 video of her flashing her breasts in the wake of the scandal as a money-making enterprise. She’s completely correct - if she didn’t chase Joe Francis for cash, then what kind of filthy prostitute would Ashley Dupre be? A shit one, that’s what.
Britain’s Got Talent, American Idol, that rubbishy Graham Norton thing about Oliver Twist - all those contestants are deluding themselves. All they want is fame, and they’re going about it the wrong way. Statistically, the chances of you winning X Factor are minuscule - you stand a much better chance of becoming famous if you fuck a politician for cash, everyone knows that.
Ashley Dupre knows that, anyway. Every since she was uncovered as the prostitute at the centre of the Eliot Spitzer scandal, she’s been everywhere. Her face has been in newspapers constantly, the songs on her MySpace page have been thoroughly analysed - play them backwards and we’re told you hear “$500 for straight sex, or $1,000 to put it up my bumhole” - she’s been approached to appear in porn magazines and even Donald Trump’s got his eye on her.
So if Ashley Dupre plays her cards right, she might become the most successful prostitute since those women who Jack The Ripper stabbed to death. Especially if that $10 million lawsuit against Girls Gone Wild founder Joe Francis comes off.
You see, back in 2003, Ashley Dupre was filmed by Girls Gone Wild dancing around and flashing her breasts a lot. Nothing wrong with that, you might think - even sleazy overlords of morally-suspect softcore porn empires have to put dinner on their tables - but now Ashley Dupre says that she was filmed when she was just 17. And everyone knows that 17-year-olds don’t know anything about contracts. Especially, as the New York Post reports, when they’re blasted off their minds on booze:
Ashley Alexandra Dupre filed a lawsuit Monday in Miami federal court claiming she never gave “Girls Gone Wild” founder Joe Francis permission to use her name and likeness to advertise the videos. Dupre contends she was 17 and not old enough to sign a contract when the videos were taken in 2003 in Miami Beach. People.com said the lawsuit is for $10 million, and alleges that reps from the nudey video empire plied her with alcohol before getting to flash her breasts when she was only 17.
But who knows what the outcome of this lawsuit will be. Maybe Ashley Dupre will win, maybe the judge will rule in favour of Girls Gone Wild and maybe, just maybe, we’ll get to write an article about something other than underage nudity sometime soon. That way it wouldn’t take as long to scrub the shame from our skin at the end of the day. Some days we think we’ll never get clean.
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