Cut Off Time for Pre-Opening Expense

Objective：

To define the cut-off time for expenses which can be classified as pre-opening expenses for the hotel operation, subject to any tax legislation or PIC / Owners direction to the contrary:

Procedure：

CUT-OFF TIME 

Normally the cut-off time for accounting pre-opening expenses will be as follows:

1. Newly opened hotels – date of soft opening (subject to apportionment of some expenses incurred after the date, detailed below).

2. Newly opened Food & Beverage outlet or operating department – date of opening of the outlet or department.

NEWLY OPENED HOTELS 

For hotels newly opened, the undernoted expenses incurred after the date of the soft opening of the hotel can be classified as pre-opening expenses:

1. Labor costs of Housekeeping and Front Office are to be apportioned based on the number of rooms’ delivered and available for sale to the total number of rooms finally available after completion.

2. Labor costs of operational staff of Food & Beverage outlets or operating departments incurred before the respective dates of operations.

3. Any interest and finance costs paid are to be apportioned on the basis of 1 above or on the basis of total gross floor area delivered ready for operation to the total gross floor area of the hotel.

4. Any direct costs incurred solely for the pre-opening of the hotel, Food & Beverage outlets or operating departments.

5. Utility expenses incurred after the soft opening of the hotel for Food & Beverage outlets or operating departments which are not yet ready for occupation and operation should be capitalized as part of the hotel project cost （Pre-opening Expense）. It is advisable to co-ordinate with the project office to install separate meters to keep track of these expenses or rely on technical estimates to support such apportionment.