Motion Picture Accounting and Disclosure of FASB Standard ASC926:Improvements based on the changes in the media and entertainment industry related to the distribution of content.

In light of significant changes in the media and entertainment industry’s production and distribution model, the Financial Accounting Standards Board (FASB) added a project to the Urgent Issues Task Force agenda to review the accounting of motion picture production costs and licensing agreements for programming content. Subsequently, in March 2019, the FASB issued Accounting Standards Update No. 2019-02 (ASU 2019-02).
While providing discussion, this paper confirms the position and key concepts of the guidance on accounting for motion picture production costs in the U.S. media and entertainment industry (ASC 926-20). It also examines the issues revised in ASU 2019-02 and the revision trend using actual disclosure examples.
ASC 926-20 incorporates the analyst’s perspective and requires management judgment in (1) the distinction between produced and licensed content; (2) the estimation of projected total revenue in the allocation process; (3) the process of calculating a fair value for impairment; and (4) the monetization plan at the beginning of capitalization.
The above requirements are to provide useful information for the decision-making of financial statement users. The objective of ASC 926-20 is to respond to content characteristics, such as the revenue-earning structure based on multiple uses and the diversity of lifecycles, and to appropriately reflect the economics of the financial statement content. Therefore, ASC926-20 emphasizes providing quantitative and qualitative explanations to support the validity of judgments and the appropriateness of the process for estimating projected revenues.
ASU 2019-02 improves ASC 926-20 to better reflect the economics of the content in light of the media and entertainment industry’s changing business model. Notably, the revision aims to improve the existing accounting guidance by expanding disclosures such as notes, rather than narrowing the choices of accounting policies.