Accounting for Media Companies

Accounting for Media Companies 

By

–Saiteja & Divyanshu

Accounting for the acquired programming rights?

 

Sources :
• Revenue in the media sector can arise from the sale of goods or rendering of services in areas as diverse as books, newspapers, magazines, music, film, television, video games, and more.

Program rights – Over the period

• Programmes purchased and the cost of programs produced in-house is expensed off based on the number of episodes telecasted during
the period. The cost of news/ current affairs/one-time events is fully expensed on the first telecast.
• For example “ABC” ltd., sold a television show of 500 episodes for 5,00,000 rupees on oct1 to “XYZ” ltd., where it is possible to telecast 100 episodes a year now in the books of XYZ ltd.,
• Now for the first year it can only telecast only 50 episodes so XYZ ltd can only capitalize 50,000 rupees and the rest will be an intangible asset to the company.

Program rights – Single time

• If in the other scenario “ABC” ltd., sold news for 5,00,000 rupees where it can be telecasted only once mentioned in the contract or it will be not useful after one telecast (like news related to market it will be keep on changing / updated)
• In this scenario “XYZ” ltd., will be capitalizing the entire 5,00,000 rupees in a single go.

Satellite rights

• Satellite rights of movies are sometimes sold even before the release date with a condition that the broadcaster can recognize the revenue only after a certain time period after the theatrical release date.
• The amount that he paid will be considered as advance payments and once he can utilize the asset it will be recorded as an Intangible asset and will be periodically amortized.

 

Scenario 1:

• A author “Teja” sold a copy rights to “ABC” ltd., for 10 rupees a copy sold now for every copy sold is recorded and it may be settled either monthly, Quarterly, half yearly or annually in according to the agreement.

Scenario 2:

• A author “Teja” sold a copy right to “ABC” LTD., for a period of 5 year for a lumpsum of 10,00,000 and ABC ltd., can sale any number of copies in this period now initially total 10 lakh will be as Advance payment in the books of Abc ltd., and amortised 2 lakhs a year to profit and loss statement.
• In the books of Author initially total 10 lakhs will be as advance received a periodically 2 lakhs a year will be moving to Profit and loss a/c.

Scenario 3:

• A author “Teja” sold a book copy right to “ABC” ltd., for 10 rupees a copy up on sale and by keeping a clause what ever be the sale in the year I need 1,00,000 rupees as a lumpsum and the short working’s can be recouped only for the next 2 years.

Inventory

• Abc ltd., produces movies and sells to Prime, Netflix, Hotstar,…..
• In this situation the amount spent on movie production is recorded as Capital work-in progress
• Once the movie/series is completed it will be recorded as Inventory.
• Once it is sold it will be recorded in Revenue.

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