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Accounting for Crowdfunded Projects....

Startup Crowdfunding Pros & ConsHello, I am looking for some feedback as it relates to the accounting for crowd-funded projects. I am the only accountant at a small start-up in San Francisco that just completed a successful Kickstarter project, and I have limited experience in this area from a financial and tax reporting perspective. I was hoping that someone out there may have some feedback regarding the accounting for Kickstarter projects. In general on Kickstarter, companies list certain pledge items for a specified dollar amount - let's say $50. Is it reasonable to assume that sales tax, shipping/handling, and/or Kickstarter fees are included in the listed price? Or, does it have to be explicitly stated as such ("the listed price includes sales tax, fees, and shipping") for this to be valid? In other words, I am wondering if it is acceptable and legal to deduct the sales tax, shipping/handling, and certain fees from a revenue/sale tax perspective assuming that it is embedded in the $50 pledge amount (so of the $50, $40 would be considered revenue/sales and $10 divided between sales tax payable, the fees owed to Kickstarter, and possibly shipping/handling). Is there any specific guidance in the SEC or FASB rulings that dictate how to account for this? Does anyone have any examples? If anyone has any feedback or resources, it would be extremely helpful and much appreciated! Thank you!

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

In my opinion (without researching GAAP):

You can do it either way, but you need to be careful how the sales brochure was worded as well as the payment process, as well as the rules of Kickstarter, if any.

If you sold it for $50 inclusive of Tax, Shipping, etc. Then you'll need to net the sales amount, add shipping and tax.

Tax can be problematic. Are you charging Sales tax just for CA or elsewhere? If so, you'll have two or more net sale prices.

Anonymous
(Finance/Accounting Manager) |

Thanks so much for the feedback. I really appreciate it.

We are actually charging sales tax for different states. Is it a problem GAAP or otherwise to have different net sales prices (other than that it will distort some metrics)?

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