FASB alters accounting for episodic TV series

By Ken Tysiac

FASB issued new accounting guidance Wednesday that is designed to align the accounting for episodic television series and streaming services with the guidance for production costs for films.

The new standard responds to a shift in production and distribution models in the entertainment industry as online streaming services with subscription-based revenues have become popular.

Under current accounting guidance, production costs for films are capitalized, while production costs for episodic content — such as a TV series with a new episode each week — are capitalized subject to a constraint based on contracted revenues in the initial and secondary markets.

Under the new standard, the content distinction for capitalization is removed. The standard also addresses when an organization should assess films and license agreements for program material for impairment at the film-group level.

“Stakeholders told us that the current capitalization guidance doesn’t enable organizations that use subscription-based revenue models to provide relevant information to investors,” FASB Chairman Russell Golden said in a news release. “The new standard converges the guidance for films and episodic content. This better reflects the economics of an episodic television series and improves the information provided to investors about the various types of produced and licensed content.”

The standard also:

  • Amends presentation requirements.
  • Requires that an organization provide new disclosures about content that is either produced or licensed.
  • Addresses cash flow classification for license agreements.

The standard takes effect for public companies for fiscal years beginning after Dec. 15, 2019, and interim periods within those fiscal years. For all other organizations, the standard takes effect for fiscal years beginning after Dec. 15, 2020, and interim periods within those fiscal years. Early adoption is permitted.

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

Where to find February’s flipbook issue

The Journal of Accountancy is now completely digital. 

 

 

 

SPONSORED REPORT

Get Clients Ready for Tax Season

This comprehensive report looks at the changes to the child tax credit, earned income tax credit, and child and dependent care credit caused by the expiration of provisions in the American Rescue Plan Act; the ability e-file more returns in the Form 1040 series; automobile mileage deductions; the alternative minimum tax; gift tax exemptions; strategies for accelerating or postponing income and deductions; and retirement and estate planning.