Date of Completion

Spring 5-6-2012

Thesis Advisor(s)

Gim-Seong Seow

Honors Major

Accounting

Disciplines

Accounting | Business Administration, Management, and Operations

Abstract

Big actors, big effects, and big budgets all characterize today’s movies. Companies that produce these films have continued to increase spending to create better pictures and attract more people to the theatre. As part of the media and entertainment industry, film companies are subject to several specific accounting rules that govern the reporting of revenues and the classification of film expenses. However, many of these rules issued by the Financial Accounting Standards Board (FASB) are subject to a good deal of interpretation. These ambiguities can make it difficult to correctly report earnings in an industry that spends billions of dollars per year, which may also be affecting how firms make strategic decisions. This paper examines how the accounting for revenues and expenses for firms in the film industry affects aspects of their economic decision-making. The actual accounting principles are examined first, followed by a discussion of the changes that have affected studios in the industry. Finally, Time Warner and Walt Disney are analyzed as two of the major film studios in the business. The findings of this analysis help show that accounting principles do affect the strategic decision-making of film studios, which has an impact on both users of financial statements and moviegoers everywhere.

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