Film Accounting Glossary
Capitalized cost
What is a capitalized cost?
A capitalized cost is spending recorded as an asset on the balance sheet rather than expensed immediately, because it produces value over time.
Production cost is capitalized into the negative cost of the film and then amortized against revenue as the title earns. This is why a studio's financial statements do not show a hundred-million-dollar loss in the year a picture is shot.
Example
A studio spends $140M producing a picture and does not book a $140M loss that year. The cost is capitalized as a film asset and amortized against revenue as the title earns, which is why the release year rather than the shooting year carries the result.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Company-level financial statements under film-specific accounting rules. Never a line on the production's weekly cost report.
Common mistake
Expecting production spend to hit the profit and loss account in the year it was spent. It is capitalized as a film asset and released against revenue as the title earns.
Related questions
- Why is film production cost capitalized?
- Because the spend creates an asset that earns over years. Expensing it immediately would report a vast loss in the shooting year and pure profit afterwards.
- When does a studio recognize the cost of a film?
- Progressively, as the title earns, by amortizing the capitalized negative cost against forecast ultimate revenue rather than against the year the money was spent.