The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2019-02, Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials. ASU 2019-02 helps organizations align their accounting for production costs for films and episodic content produced for television and streaming services.
Accounting for Series Television
In recent years, the entertainment industry experienced a significant change in production and distribution models. For example, online streaming services have introduced subscription-based revenue models. However, current accounting guidance provides organizations in the entertainment industry with differing capitalization requirements for content production:
- For films, production costs are capitalized.
- For episodic content (e.g., a TV series that airs a new episode each week), production costs are capitalized subject to a constraint based on contracted revenues in the initial and secondary markets.
Aligned Accounting for Production Costs
The standard addresses when an organization should assess films and license agreements for program material for impairment at the film-group level.
The ASU 2019-02 amendments also:
- Revise presentation requirements;
- Require that an organization provide new disclosures about content that is either produced or licensed; and
- Address cash flow classification for license agreements.
For public companies, the standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other organizations, the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted.
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