The New CPA and the Film Industry
July 27, 2013 Leave a comment
The new CPA is fully aware of expanding markets and breaking the mold of tradition. The outbreak of videos used to promote CPA firms is witness to an interest in reaching new public. As a result, there is a growing interest in the business of filmmaking. Where are the film companies? What sort of audit services do they need? What are the film accounting principles and practices unique to the industry?
THE MAJORS AND THE INDEPENDENTS:
The film industry is generally viewed as Hollywood in America. It’s true that Hollywood drives a big part of the machine, but over the past several years the production of feature films and television programming has branched out dramatically.
There are three primary divisions of the industry:
1. The “Majors”: the Majors both produce and distribute a substantial amount of their own products. They are generally defined as “The Big Six”: Sony Pictures (Columbia), Disney, Warner Bros, Universal/NBC, Paramount, and 20th Century Fox.
2. The “Mini-Majors”: There are always companies that are striving to join the Big Six – such as Lionsgate, Dreamworks and The Weinstein Company. There is also the example of MGM, which has fallen from a Major status to a Mini-Major status.
3. The Independents (“Indies”): The status of “Indie” is a general umbrella of all other film and television production companies. The Indies often approach the Majors and Mini-Majors to land distribution deals, or some form of financing/participation of their projects (usually referred to as “Pick-Ups”.) Successful Indies often make distribution deals with, or even bought outright by, one of the majors or mini-majors. For example, Tyler Perry Studios, an Independent based out of Georgia, has a great deal with Lionsgate, who in turn, has distribution deals with the Majors.
ALL OF THESE DIVISIONS REQUIRE AUDITS FOR FILM TAX INCENTIVES:
Almost all of the States that offer film tax incentives require some form of audit BY A STATE LICENSED CPA. So, regardless of the relationship of the production company, big or small or in-between, every film or television production requires your services as an auditor in your State (the only exception that comes to me right now is New York State).
The legislation which requires the State licensed CPA very often has the following quote taken from the State of Connecticut (almost exactly the same wording exists for California, Louisiana, Michigan, etc):
“… the auditor must have sufficient knowledge of accounting principles and practices generally recognized in the film, television, commercial and digital media industry.“
The State of Connecticut was at a loss as to how to address this conundrum (i.e. the auditor must have exposure, but has never had exposure before). So, the State administrator, Ed Ruggerio, requires that only those CPA’s who have done my course, “Film Accounting and Auditing” are permitted to be listed on the State web site as qualified auditors for State Film Tax Credits. As much as I was honored by this acknowledgement, it was hard for me to break off my commitments, travel to Connecticut, and deliver a live workshop.
FILM ACCOUNTING PRINCIPLES AND PRACTICES:
As a result, I have taken much time and effort to break the live workshop into four online self-study courses which are AICPA compliant for CPE. I have taken the material and broken it into the following categories:
Film Accounting and Auditing – 1. An Overview, 2. The Basics, 3. Intermediate/Supervisory Level and 4. Advanced – Film Tax Incentives.
I have worked in the film industry for almost 30 years, in 6 different countries, on every size of film and television production. As a result, I have made every effort to keep the courses from being pedantic or ponderous. From the testimonials I can say that it has been worth the effort.
To find out more visit: http://www.filmaccounting.com/filmaccounting-cpe.htm
Cheers / John