In March 2019, the Financial Accounting Standards Board (FASB) 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.
Essentially, ASU 2019-02 helps organizations align their accounting for production costs for films and episodic content produced for television and streaming services. The updated guidance aligns the capitalization for film and episodic television (TV) series production costs. In addition, the standard also addresses impairment, amortization and presentation/disclosure considerations for both traditional and non-traditional media entities.
Key changes include:
- Entities are expected to capitalize more production costs than under legacy
guidance because they are no longer required to have persuasive evidence
that a secondary market exists for episodic television series to do so.
- Under the new guidance, entities are required to apply judgment to
determine the predominant monetization strategy for their content and to
identify film groups.
- Entities may need to make system changes to gather the data necessary to
comply with the new disclosure requirement.
These changes have been driven largely by the dramatic shifting in the entertainment space toward more episodic content and new delivery models in the streaming and television space.
While the changes in ASU 2019-02 provide significant opportunities for media companies to improve their alignment of TV shows and streaming content with traditional film production, it will be important to understand the technical accounting aspects of implementation in order to both comply and to derive optimal benefits.
To help with these changes, Bramasol is taking a lead role in providing detailed information on implementing ASU 2019-02 and our technical accounting experts stand ready to answer your specific questions.