When establishing your company, incorporating it by all relevant regulations etc., paying registration and whatnot fees, you encounter expenses.

Something that seems natural is to capitalize those expenses into your intangible assets and then amortize them into expenses over a period in time. Another method I’ve noticed is capitalizing them and bluntly leaving them there with an indefinite life. 

Incorporation expenses are something every business encounters purely because they are all established at some point and there are some minimum registration fees you just have to pay. Fact of the matter is however that nobody knows in the beginning for how long this business or company is going to run for. Capitalizing such expenses with a determined useful life is very forceful approach and so would be choosing an indefinite useful life for such expenses.

As it is, neither of those methods is appropriate for treating incorporation expenses. It may sound unfair or even not making any sense, but those expenses are your current period’s expenses. They are just shoved into your income statement as expenses of the period they relate to and that’s it.

When you think about it, are they really your assets? Are they part of generating future economic benefits? Not really if you think about it. They are expenses in nature you encountered when in a nutshell getting services and paying regular fees.