accounting treatment for capitalizing the accumulated consultancy charges

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Golden Gate & Associates, CPA 99 Biscuit Lane, Suite 800 San Francisco, CA 94108 May 14, 2014 Grace Lau, Chairman ABC-VC 536 Mission Street, Suite 500 San Francisco, CA 94105 Dear Ms. Lau, Thank you for CAA for accounting treatment in regards to your venture capital stake in WesternGraphics (Western). In our introductory meeting, you requested this firm to research on the accounting treatment for capitalizing the accumulated MediaBlitz marketing consultancy charges ncurred and the staff salaries. I am able to confirm that the marketing consultancy charges and the staff salaries can be capitalized and amortized over more than one tax year. In reaching this conclusion, I referred to relevant authority from codifications…show more content…
Codification paragraph 720-15-55-3: The following costs that might be incurred in conjunction with start-up activities are subject to the provisions of this Subtopic a. Travel costs, employee salary-related costs, and consulting costs related to feasibility studies, accounting, legal, tax, and governmental affairs. Codification paragraph 720-15-45-1: Because amortization expense of capitalized software costs relates to a software product that is marketed to others, the expense shall be charged to cost of sales or a similar expense category. Codification paragraph 720-15-45-2: In an entity's balance sheet, capitalized software costs having a life of more than one year or one operating cycle shall be presented as another asset because the costs are an amortizable intangible asset. Analysis Based on the provided facts of your venture stake in Western, it is clear that charges incurred through a consultancy contract with MediaBlitz is a part of the product development under the implementation guidance paragraph. In addition, the staff salary is also a part of the implementation guidance paragraph as well. Recommendation Due to the shortness of time to turn this research project around, I suggest that we see the more detailed invoices from MediaBlitz along with the billable hours of the staff salaries allocated to working on the marketing development of a catchy slogan. Please call me at (415) 297-8060 , if you have any

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