The FASB has issued ASU 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.
In the past, movies and episodic television series (shows) were easily identifiable as different products, and were thus capitalized differently. Under previous guidance, producers of a television series were limited to contractual revenues in regards to how much of their costs they were able to capitalize (with additional amounts available as they prove there is a secondary market for the product). Movies, on the other hand, have been able to fully capitalize their costs. In the current environment, however, a television series might have all their episodes released all at one time, similar to how a movie would be released.
As a result of changes in production and release, some have questioned if the constraint on capitalization for shows was still relevant, and the FASB responded by issuing ASU 2019-02 to align the accounting for a television series with that of a movie. Presentation and disclosure requirements also increase the transparency of the information provided through the financial statements. The FASB also reached additional conclusions around impairment, amortization, and transition guidance.
The amendments are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted.
The full text of ASU 2019-02 is available here.
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