FAR 1-7: Development-Stage Enterprises

Question 1

Define development stage enterprise

Answer 1

Enterprise that devotes substantially all of its efforts to establishing a new business & either planned principal operations have not commenced or no significant revenue has been generated therefrom

Question 2

Indicate any special accounting treatment for developmental stage enterprises

Answer 2

Same generally accepted accounting principles as established operating enterprises with additional disclosures:

• Identify statements as those of development stage enterprise
• Accumulated losses identified as “deficit accumulated during development stage”
• In the Income Statement, show revenue & expenses & cumulative total of both amounts from company’s inception
• In the SCF, include cumulative amounts of cash inflows & outflows from enterprise’s inception & current amounts of cash inflows & outflows for each period presented
• Issue a separate statement of stockholders’ equity, indicating shares issued, date of issuance, dollar amounts assigned, noncash consideration, if any