Start-up costs refers to the enterprise in the enterprise approval of the date of construction, to start production, operation (including trial production, trial operation) of the day of the end of the period (that is, during the preparatory period) incurred costs and expenditures. Including the preparatory period personnel wages, office expenses, training fees, travel expenses, printing costs, registration fees, as well as not included in the acquisition and construction costs of fixed assets and intangible assets, exchange gains and losses and interest expenses.

The preparatory period refers to the period from the date the enterprise is approved for preparatory work to the date of commencement of production and operation (including trial production and trial operation).

Two, the scope of the start-up costs

(a) the specific content of the start-up costs

1, the expenses of the preparatory personnel

(1) the labor costs of the preparatory personnel: specifically including the preparatory personnel of the wages and bonuses and other payroll expenses, as well as should be subject to a variety of social insurance. During the preparatory period, such as medical expenses and other welfare costs, if the preparatory period is relatively short can actually be expensed, the preparatory period is longer, can be based on 14% of the total wage bill to be resolved by the accrual of employee welfare costs.

(2) travel expenses: including in-town transportation and out-of-town travel.

(3) board of directors' fees and joint committee fees

2, the cost of business registration and notarization: mainly including registration fees, capital verification fees, tax registration fees, notarization fees and so on.

3, the cost of raising capital: mainly refers to the handling fees paid for fund-raising, as well as exchange gains and losses not included in fixed assets and intangible assets and interest, etc..

4, personnel training costs: the following two cases

(1) the introduction of equipment and technology needs to be digested and absorbed, and selected some workers in the preparation of the period of further study and learning costs.

(2) the hiring of experts for technical guidance and training of labor and related costs.

5, amortization, scrapping and destruction of business assets

6, other costs

(1) office expenses, advertising costs, socializing and entertainment costs incurred during the preparatory period.

(2) Stamp duty

(3) Feasibility study expenses confirmed by the investor to be borne by the company

(4) Other expenses related to the preparation of the construction, such as information research, litigation costs, printing costs, communication costs, and celebration gift costs and other expenses.

(2) Expenses not included in the scope of start-up costs

1, expenses incurred in the acquisition of various assets. Including the purchase and construction of fixed assets and intangible assets is to pay for the transportation costs, installation costs, insurance costs and related labor costs incurred in the purchase and construction.

2, the provision should be borne by the investing parties. Such as the investment parties for the preparation of the establishment of the enterprise has carried out investigations, negotiation of travel expenses, consulting fees, hospitality and other expenditures incurred. Our government also stipulates that when the Sino-foreign equity joint venture negotiations, foreign businessmen are required to negotiate business hospitality expenses incurred shall not be listed as the start-up costs of the enterprise, and shall be borne by the enterprise that made the invitation.

3, fixed assets, intangible assets and other expenditures for the training of employees shall not be included as start-up costs.

4, the interest paid by the investor for the capital invested to raise money on its own shall not be included in the start-up costs and shall be borne by the investor itself.

5, cash deposited in foreign currencies and the handling fees paid by the bank, the cost shall be borne by the investor.

Three, the determination of the preparatory period

The determination of the preparatory period of the enterprise in China by the tax law has a greater impact. For example, the Implementation Rules of the Foreign Income Tax Law, "foreign-funded enterprises for the preparation period for the enterprise was approved for the date of preparation for the start of production, operation (including trial production) of the date of the end of the period". The "date of approval for preparatory work" referred to above specifically refers to the date when the investment agreement and contract signed by the enterprise are approved by the government of China. The "date of commencement of production and operation (including trial production)" refers to the end of the preparatory period from the date on which the equipment of the enterprise starts to operate, and the enterprise starts to supply materials for the manufacture of products or sells the same first item of merchandise. Other enterprises may refer to this provision.

(d) start-up costs are generally amortized over five years (800 years ago), the new enterprise accounting system provides that start-up costs are amortized once, the tax law provides that expenditures are directly expensed during the period of expenditure, and the new standard provides that expenditures are directly expensed during the period of expenditure.

Four, the accounting treatment of start-up costs

(a) Enterprise Accounting System

"Enterprise Accounting System" (Caihui [2000] No. 25) made significant adjustments to the amortization period of the start-up costs. The original industry accounting system stipulates that start-up costs incurred by an enterprise should be amortized in equal installments over a period of no more than five years from the month of production and operation. Article 50 of the Accounting System for Enterprises stipulates that: "Except for the purchase and construction of fixed assets, all expenses incurred during the preparatory period shall be firstly summarized in long-term amortized expenses, and then charged to profit or loss in the month of commencement of production and operation at one time from the month of commencement of production and operation. If an enterprise's long-term amortized expenses cannot be benefited in the subsequent accounting period, the amortized value of the item that has not yet been amortized shall be fully transferred to the profit and loss of the current period." Thus, it can be seen that the accounting treatment of start-up costs, whether from the accounting account set up or amortization period with the original industry financial system has changed significantly.

(B) Accounting treatment of start-up costs under the new standard

From January 1, 2007, the new accounting standard system (hereinafter referred to as the new standard) in China's listed companies to implement, and many enterprises (securities companies, insurance companies, the central state-owned enterprises, Shenzhen City, enterprises, etc.) have also implemented the new standard. The accounting treatment of start-up costs under the new standard has changed relative to the industry accounting system and the enterprise accounting system.

From the appendix of "Enterprise Accounting Standards - Application Guidelines" - "Accounting Items and Major Accounts Treatment" ("Caihui [ 2006] No. 18") on the "administrative expenses" accounting content and the main accounting treatment can be seen, the accounting treatment of start-up costs have the following characteristics:

1, changed the past start-up costs as an asset treatment. Start-up costs are no longer "long-term amortized expenses" or "deferred assets", but will be directly expensed.

2. The new balance sheet does not reflect a line item for "start-up costs", which means that start-up costs are no longer disclosed.

3. The new balance sheet does not reflect the item "start-up costs", which means that start-up costs are no longer disclosed.

4. The scope of accounting for start-up costs has been unified, i.e., start-up costs include the remuneration of preparatory staff, office costs, training costs, travel costs, printing costs, registration costs, and borrowing costs that are not included in the cost of fixed assets.

5, standardized the start-up costs of the accounting procedures, that is, the start-up costs are first accounted for in the "administrative expenses" account, and then charged to current profit and loss, and no longer in accordance with the amortization process.

After the implementation of the new standards, the newly established real estate development enterprises should be strictly in accordance with the provisions of the new standards for the start-up costs of the accounts. This not only simplifies the accounting, but also accurately reflects the accounting information. The definition of the preparatory period, real estate enterprises should be approved from the date of preparations for the establishment of the business license until the date of establishment of the more appropriate.

(C) Tax treatment of start-up costs under the new tax law

The People's Republic of China Enterprise Income Tax Law and its Implementing Regulations (hereinafter referred to as the new tax law) came into effect on January 1, 2008 in China. The new tax law not only unifies the income tax law applicable to both domestic and foreign capital and reduces the income tax rate, but also makes significant changes and breakthroughs in many aspects closely related to accounting, such as asset treatment and pre-tax deduction.

Article 34 of the Implementing Rules of the Provisional Regulations on Enterprise Income Tax stipulates that start-up costs incurred by an enterprise during the preparatory period shall be deducted in installments over a period of not less than five years from the month following the month in which production or operation commences.

And the new tax law does not say anything about pre-tax deduction of start-up expenses, does it mean that there is no limitation on pre-tax deduction of start-up expenses?

Article 13 of the Enterprise Income Tax Law stipulates that when calculating taxable income, enterprises are allowed to deduct the following expenditures as long-term amortized expenses if they are amortized in accordance with the provisions of the law (Article 70 of the Regulations for the Implementation of the Enterprise Income Tax Law explicitly stipulates that the period of amortization shall not be less than three years):

(1) Expenditures for the remodeling of fixed assets which have been fully depreciated;

(ii) Expenditure on alteration of leased-in fixed assets;

(iii) Expenditure on overhaul of fixed assets;

(iv) Other expenditures that should be treated as long-term amortized expenses.

From the above, it can be seen that in the "long-term amortized expenses" does not include start-up costs.

Article 68 of the Regulations for the Implementation of the Enterprise Income Tax Law is an explanation of Article 13 of the Enterprise Income Tax Law, from which there is no mention of pre-tax deduction of start-up costs. This shows that there is no restriction on the pre-tax deduction of start-up costs under the new tax law.