PWC Entertainment and media - Revenue from contracts with customers

PWC Entertainment and media – Revenue from contracts with customers

 KPMG Entertainment and media - Accounting and auditing update

KPMG Entertainment and media – Accounting and auditing update

Deloitte Entertainment and media - Revenue from contracts with customers

Deloitte Entertainment and media – Revenue from contracts with customers

 

 

 

 

 

 

 

 

 

 

Revenue recognition for Entertainment and Media

Efficient recognition and measurement of revenue is essential for the well being, progress and prosperity of any company or individual engaging in business transactions. As the financial markets have become more and more globalized, the need for standardized procedures has increased. That is why the new standard guidelines have been developed with the aim of streamlining the process of keeping accurate financial records and preparing financial statements.

The Five Step Principle

The main principle of measuring and recognizing revenue and cash flows is that an entity receives and records the appropriate amount from customers as a result of the services or goods the entity provides. The following five steps can be applied in order to achieve this principle:

  1. Establish an agreement or contract with a customer
  2. Agree on the exact outcomes that are identified in the contract
  3. Determine the amount that will be paid by the customer
  4. Assign the amount to the outcomes in the contract
  5. Recognize the revenue when the entity achieves the outcomes

The entertainment and media industry is a vast one spanning a variety of sectors including among others television, internet, radio, films, music, publishing and videogames to name a few. The principles of the new revenue standard would need to be applied accordingly to these various sectors using significant judgement.

Due to the fact that there are not industry-specific revenue guidelines in the new standard, entertainment and media entities are likely to be affected mostly in the area of accounting for licenses. Changes may be required which either accelerate or defer certain types of licenses. The first step would be to establish whether a license is distinct from other goods and services or not and then the appropriate revenue recognition pattern can be followed.

The assessment of intellectual property licenses may prove somewhat demanding in that clarity needs to be reached regarding whether the license refers to a certain point in time or extends over time. Intellectual property licenses need to be confined to the state of the property at the time of the contract and does not include rights to ongoing changes which may occur. The ‘right to access’ criteria need to be spelled out clearly for both parties.

In some cases, licenses in the entertainment and media industries do not follow clear cut fact patterns and this is where entities will need to apply discretion and judgement when determining how the rights of clients would be affected.

 

 

 

Comments are closed.

Set your Twitter account name in your settings to use the TwitterBar Section.