13 Sep Accounting Relief for Development Stage Companies Coming

This past Wednesday, the Financial Accounting Standards Board (FASB), which decides on what accounting rules should apply to public and private companies, announced that they are looking at easing the reporting requirements for “development stage” companies. They are working on a draft that should be issued in the coming weeks.

According to the FASB release, a development stage company is one which “devotes substantially all of its efforts to establishing a new business and for which (a) planned principal operations have not commenced or (b) planned principal operations have commenced, but have produced no significant revenue.” In recent years more and more companies, particularly in life sciences and technology, have stayed in the development stage for years. Some don’t even plan to sell products, but rather to sell the results of their R&D.

Yet these companies currently are required to give lots of information which many have said is not really relevant for these pre-revenue operations. FASB says their look at changing the rules will help reduce costs for these companies, many of which struggle to raise cash on an ongoing basis. This is good! We look forward to looking at their proposal.