Accounting for digitally distributed content

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Digital is transforming every facet of business for media and entertainment (M&E) companies. The rise of social media, widespread broadband availability, faster internet connections, and the popularity of smartphones and tablets have changed the demands and expectations of media audiences, and created an astounding variety of new digital products and services. Research suggests that the days of traditional television are waning due to a rise in online media streaming.

How should digital download and streaming service provider’s account for the licensing and production of movies and television shows?

As traditional distribution outlets continue to evolve, questions have arisen as to how digital download and streaming service providers should account for the licensing and production of movies and television shows. What these providers are doing isn’t very different from what traditional broadcasters and producers of films or television shows have always done, but rather they are distributing content in a different way.

We therefore believe that entities that license or produce content to be distributed to consumers on a digital service generally should follow the M&E industry-specific accounting guidance that has historically been applied by traditional broadcasters and producers of films or television shows.

Our new report, Accounting for digitally distributed content,” describes considerations under US GAAP for how entities should apply the M&E industry-specific accounting guidance that has historically been applied by traditional broadcasters and producers of films or television shows to digitally distributed content.

This report contains examples of different scenarios for accounting for the distribution of digital content. It is essential information for content producers, broadcasters and distributors with a presence in the digital space.

The following considerations are addressed throughout the paper:

  1. How should different types of digital content be amortized under ASC 920?
  2. How do windows of availability affect the amortization pattern to be used under ASC 920?
  3. How are costs incurred for production of content accounted for by entities that produce their own digital content under ASC 926?
  4. What are some of the considerations for a producer when assessing digital content for impairment under ASC 926?
  5. Are there any presentation and disclosure considerations producers of digital content should take into account?

“As content offerings and consumer consumption continue to evolve, companies are challenged to apply the traditional accounting standards to their new business models. This publication considers the application of ASC 920 and ASC 926 to the digital eco-system used by companies from an accounting and disclosure perspective and highlights key differences between the two standards.” 
- Ian Eddleston, EY Global Media & Entertainment Assurance Services Leader

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