FASB proposal addresses accounting for TV series

By Ken Tysiac

FASB proposed a standard Wednesday that would align the accounting for production costs of an episodic television series with the accounting for production of costs of films.

The proposal is described in Proposed Accounting Standards Update, 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.

This alignment would be accomplished by allowing all production costs as specified in FASB ASC Subtopic 926-20 to be capitalized for episodic television series, as they are for films. Under current GAAP, production costs specified in Subtopic 926-20 for an episodic television series are capitalized up to the amount of revenue contracted for each episode in the initial market until persuasive evidence exists that revenue from secondary markets will occur or an entity can demonstrate a history of earning such revenue in that market.

The proposal also would require that an entity reassess estimates of the use of a film for a film in a film group and account for any changes prospectively.

Under the proposal, an entity would be required to test films and license agreements for program material within the scope of Subtopic 920-350 for impairment at a film group level when the film or license agreement is predominantly monetized with other films and license agreements. A film group is the lowest level at which identifiable cash flows are largely independent of the cash flows of other films and license agreements. The proposal also would:

  • Add examples of events or changes in circumstances that indicate that an entity should assess a film group for impairment.
  • Add examples of events or changes in circumstances that indicate that an entity should assess an individual film for impairment after its release.
  • Align the impairment model in Subtopic 920-350 with the fair value model in Subtopic 926-20.

Under the proposal, an entity would be required to provide new disclosures about content that is produced or licensed.

Comments on the proposal can be submitted through Dec. 7 at FASB’s website.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

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