One of the more common questions we get from sponsors in the early stages of trial planning isn't about enrollment strategy or site selection, it's about accounting. Specifically: when should we start accruing for site startup costs?
It sounds like a simple question, but under ASC 730, the accounting standard governing research and development expenses, the answer isn't always clear-cut.
ASC 730 establishes that R&D costs should be expensed as services are received or as the obligation is incurred, not when invoices are issued or payments are made. For most clinical trial expenses, this creates a straightforward principle. But for site startup costs, the trigger event is where it gets complicated.
There's no single prescribed answer in the codification. And that ambiguity has real financial implications.
In our work with sponsors, we typically see three interpretations of when the clock starts:
1. CTA Execution Date
The most widely adopted approach. Once a Clinical Trial Agreement is signed, sponsors begin accruing startup costs — admin fees, pharmacy startup costs, and other site-specific line items — from that date. The legal logic is clean: the agreement is in effect, the obligation exists.
2. Site Initiation Visit (SIV)
A CTA can be executed months before a site is actually ready to operate. Some sponsors prefer to wait until the site initiation visit — the on-site check confirming equipment, systems, and readiness to recruit — as the true activation point. This can meaningfully defer accrual, especially across a large site network.
3. IRB Approval
For sponsors who want to capture early-stage work, like IRB prep, pharmacy setup, and budget negotiations, IRB approval represents the point at which real site work has begun, even if patient enrollment isn't yet authorized.
The Stakes Are Real
Consider a trial with 100 sites, each carrying a $30,000 startup fee. The choice of methodology determines whether $3,000,000 hits the books in Q1 or Q2. Multiply that across a complex, multi-region study, and the timing differences become material, particularly for smaller sponsors where accrued expenses have a direct impact on how financials are perceived.
There's also a natural tension at play: CROs and sites are incentivized to invoice as early as possible, while sponsors generally prefer to defer accruals. Neither position is inherently wrong,
it's a matter of when in the timeline the obligation is most accurately recognized.
Consistency Is Everything
When we help sponsors think through this decision, our guidance comes down to one non-negotiable: pick a methodology and apply it uniformly. You can't use IRB approval for some sites and SIV for others. Mixed methodologies raise red flags during audits and undermine the integrity of your financial reporting.
We'll walk through the three options, share what we've seen across the sponsors we work with, and advise customers to consult their own legal and accounting teams before formalizing a policy. But once that decision is made, it needs to be documented and consistently applied, trial to trial, period to period.
Why It Matters Now
ASC 730 isn't new, but the questions around it tend to resurface whenever a sponsor is spinning up a new trial, especially companies running their first in-house study without a CRO handling the financial complexity. As clinical operations and finance teams get closer together, these early-stage accounting decisions deserve the same rigor as any other part of trial planning.
Getting it right from the start is a lot easier than correcting it under audit.
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