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Analysis

Improvements to accounting for costs of films and license agreements for program materials

ASC 920 and ASC 926: License agreements for program materials

Film and television monetization and distribution methods are transforming. So, too, are film and television accounting methods. Know the key accounting issues, disclosure requirements, and transition considerations of accounting standards update (ASU) 2019-02 and how they might affect your company.

“Streaming and video-on-demand models have inspired an overhaul of decades-old film and television accounting standards. It’s critical for organizations to know and align to these changes now.”

Darren Wilson, Deloitte partner and Telecom, Media, and Entertainment leader

Changes ahead for media and entertainment accounting

On March 6, 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-02, which amends the accounting treatment of episodic television and film costs. In its wake, your media and entertainment company may face new accounting challenges.

Potential issues facing the industry

Disclosure requirements

ASU 2019-02 also amends and supersedes parts of the current disclosure guidance in ASC 926-20-50. Download our full report to see the updated disclosure requirements under the ASU.

Timing is everything

For public business entities (PBEs), the new ASU 2019-02 amendments went into effect for fiscal years beginning after December 15, 2019, and interim periods therein. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods therein. Early adoption of the new amendments to the television and film industry accounting standards is permitted, including early adoption in an interim period for:

  • PBEs for periods for which financial statements have not yet been issued
  • All other entities for periods for which financial statements have not yet been made available for issuance

Widespread impact

Many of the changes coming out of ASU 2019-02 may be pervasive across the media and entertainment industry’s production and distribution ecosystem. They’re expected to affect production companies, studios, broadcasters, streaming video on demand (SVOD), and content aggregator providers.

What you should be thinking about

The industrywide changes for film and television accounting might inspire your company’s leaders to make three key considerations.

What is your readiness level?

The film and television accounting changes in ASU 2019-02 are already in effect for public entities. And the December 2020 effective date for nonpublic entities is fast approaching. If you haven’t already, your media and entertainment company’s leaders should start carefully examining the ASU’s impact on television and film industry accounting standards in terms of costs of films and license agreements for program materials amendments, then assess the impact it may have on their accounting policies, procedures, systems, and processes.

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