Pending Accounting Changes Could Cost Studios Millions

By Melody Petersen N. Y. Times News Service | THE JOURNAL RECORD, September 22, 1998 | Go to article overview

Pending Accounting Changes Could Cost Studios Millions


Melody Petersen N. Y. Times News Service, THE JOURNAL RECORD


The nation's accounting rule makers have tentatively approved new financial reporting standards for the film industry that could cost some Hollywood studios hundreds of millions of dollars.

For more than a decade, movie studios have been able to use the current accounting rules to create their own special effects. Almost like magic, the rules have allowed some studios to show profits even when films flop. Often, they do this by postponing the recognition of advertising or film production costs far into the future.

The new rules -- still subject to final approval from the Financial Accounting Standards Board and from the American Institute of Certified Public Accountants -- would have the biggest impact on studios that have been most aggressive in their interpretations of the accounting rules. Those studios include Columbia Pictures, which is owned by Sony; Paramount Pictures, owned by Viacom; 20th Century Fox, owned by News Corp., and Metro-Goldwyn-Mayer, owned by the billionaire Kirk Kerkorian.

The rules would also apply to the producers of television shows, but not to cable companies or broadcasters, which follow other rules.

Most companies would not have to adopt the new rules until 2000. But David Londoner, an entertainment industry analyst at Schroder Inc. and a member of the group that wrote the new rules, said he expected many studios to begin following them next year.

The rules "will essentially place all film companies on an equal footing," said Londoner, who has been pushing for the changes for a decade. The present rules have frustrated analysts because one movie studio cannot easily be compared with another and because the studios have been able to use the accounting to accelerate revenues and delay expenses -- practices not allowed in other industries.

"The suspicions about film accounting will finally be eliminated," Londoner said.

Most studio executives said they could not yet comment in detail about the proposed rules, which the Financial Accounting Standards Board gave preliminary approval to on Friday. But some executives disputed Londoner's estimates that the movie industry as a whole would be forced to write off $2 billion and each major studio would write off $150 million to $450 million when the new rules are in place.

"Any estimates of the impact are inaccurate, premature and very speculative," a spokesman for Paramount Pictures said.

Now, movie studios, unlike almost all other businesses, can spend millions of dollars on advertising and spread those costs over a number of years, avoiding an immediate dent in their bottom lines. The studios have been often able to argue that the films have useful lives of many years, even if the movies bomb at box offices in the United States. After all, they argue, foreign audiences are bound to love the film and there is always money to be made selling home videos or the syndication rights to television.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Pending Accounting Changes Could Cost Studios Millions
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.