Academic journal article Journal of Accountancy

AICPA Issues New Rules for Film Industry

Academic journal article Journal of Accountancy

AICPA Issues New Rules for Film Industry

Article excerpt

The AICPA issued new accounting guidance for the film industry in June. Statement of Position 00-2, Accounting by Producers or Distributors of Films replaced the requirements in FASB Statement no. 53, Financial Reporting by Producers and Distributors of Motion Picture Films.

Since FASB issued Statement no. 53 nineteen years ago, the film industry has changed significantly: new media, such as video, cable, laser discs and pay-per-view television, have contributed to its revenues and required concomitant changes in accounting rules.

Although FASB knew Statement no. 53 was outdated and new standards for motion pictures were needed, it already had a full agenda. So the board referred the project to the AICPA's AcSEC, which deals with industry-specific items.

Among the changes from Statement no. 53 were (1) advertising expense for films will no longer be capitalized, (2) film studios will have a maximum of 10 years to amortize films and (3) abandoned projects and excess overhead must be shown as an expense.

SOP no. 00-2 defines "films" as feature films that include live action and animated segments, television specials, television series and similar products that are sold, licensed or exhibited, whether produced on film, videotape or digital or other video recording format.

Louis W. Matusiak of Olive LLP, Indianapolis, who serves on the AcSEC and who, until recently, chaired the motion picture task force said, "The new rules will definitely affect Hollywood in a substantive way." Asked if SOP 00-2 would have an effect on Wall Street, Matusiak said, "When Sony analyzed the effects of this SOP, it predicted it would have to take a charge of several hundred million dollars to its financial statements in view of the drastic changes. …

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