FASB ASC 920 - Entertainment - Broadcasters


The Financial Accounting Standards Board (FASB) released Accounting Standards Codification 920 (ASC 920) to address topics related to television broadcasters. Often times the network affiliation of these companies can require special attention from accountants as it defines the amount of compensation they receive for advertising as well as costs of network programming.

Licensing Agreements in Broadcasting under ASC 920

One of the two major components of broadcasting include the licensing rights to broadcast the material.  These represent the legal right to broadcast the material over their broadcasting networks, which can include radio or television.  These rights come in various forms and typically last for a finite time period, and can either be a finite or infinite number of showings during this time period.

The accounting for these rights are recorded as an asset and liability at the point in which the purchase is made.  In order to be able to record these, the broadcaster must do all of the following:

  1. Know the cost of the rights
  2. Accept the contractual licensing agreement
  3. Have access to the material to show
These can be either recorded at cost or the fair value of the liability, depending on the terms of the agreement.  The fair value can be calculated using present value techniques if they are disclosed appropriately.  This can become complex when there are multiple programs included in the licensing agreement, because the broadcaster must calculate the relative value of each of these program balances.

Amortizing Capitalized Licensed Assets

Under ASC 920, as these assets are used up they must be amortized accordingly.  This means that if a license is based on the finite amount of viewings, a calculation should be performed to proportionately amortize the assets each time the program is shown.  In the case of a license agreement which allows for unlimited viewings, but over a finite time period, the asset should be amortized based on the appropriate time of the contract.

Some of the interesting caveats of this include when a program series is acquired.  It is possible to amortize these assets based on relative values, as the initial viewing of the program is typically the highest valued showing, and reruns will be valued at lower rates.  Present value calculations are typically used in order to appropriately account for these.

Check out more high level explanations of the FASB ASC in our Guide to the Accounting Standards Codification!



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