Film Accounting Glossary
GAAP
What is GAAP?
Also called generally accepted accounting principles.
GAAP is generally accepted accounting principles, the U.S. standards that govern how companies recognize revenue and cost in audited financial statements.
Film-specific GAAP guidance covers how production cost is capitalized and amortized against ultimate revenue, which is why studios spread negative cost over a title's earning life. Production-level cost reporting is a management tool and does not have to follow GAAP; company-level reporting does.
Example
A studio capitalizes a $140M negative cost and amortizes it against forecast ultimate revenue across the title's earning life. The production's own weekly cost report follows none of this: it is a management tool, and it does not have to.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Company-level audited statements. The dividing line worth remembering is that production reporting is internal, company reporting is regulated.
Common mistake
Expecting the weekly cost report to follow GAAP. Production reporting is a management tool; only company-level statements are held to the standard.
Related questions
- Does a film cost report have to follow GAAP?
- No. It is an internal management report. GAAP governs the company's audited financial statements, where production cost is capitalized and amortized.
- How does GAAP treat film production cost?
- As a capitalized asset amortized against forecast ultimate revenue over the title's earning life, rather than as an expense in the year it was spent.