Film/Television Production – Are There Opportunities For CPA’s?

Above-The-Line Budget

Above-The-Line Budget

FILM & TELEVISION PRODUCTION – ARE THERE OPPORTUNITIES FOR CPAs?

The purpose of this article is to point the CPA towards the film, television and commercial production industry. Is it worth learning more about this intriguing industry? Are there opportunities for CPA’s? Read on and you’ll discover for yourself if it’s worthwhile pursuing this industry. From that point you can start to learn more about the specific practices and terminology of Film Accounting.

MEDIA PRODUCTION – DETERMINING THE VALUE OF THE GDP IN AMERICA

For starters, is it worth looking at “Media Production”? From a total dollar value of Gross Domestic Product, I’d have to answer a resounding, Yes! Back in Dec of 2013 the Bureau of Economic Analysis published the first ever analysis of the value of Arts and Culture. They reckoned that Arts and Culture accounted for $504Billion, or 3.2%, of the Gross Domestic Product in 2011. That 3.2% encompasses everything from advertising to arts education to cable distribution and movie production. To give you some idea of how the 3.2% compares to other industries, the Motion Picture Association of America stated that all of Travel and Tourism at that time accounted for 2.8% of the GDP.

I sifted through the published numbers and came up with an approximate value of $273Billion due to various media “production”: cable, network, feature and advertising/commercial production. See my notations on the table below:

BEA-13-58 Media Production

BEA-13-58 Media Production

 

MEDIA PRODUCTION – PER BEA ARTS/CULTURE CONTINUED TO INCREASE IN 2013

On February 6, 2016 the Bureau of Economic Analysis published statistics for 2013 in their document #BEA 16-07.  Here is a quote from the bottom of the second page of that report: “… total inflation-adjusted spending on all arts and cultural commodities reached $1.1 trillion in 2013. That figure was up 2.7 percent from the year before.”

Here’s another shocker for you. It’s a quote from the top of page 4 of the same report: “Employment for all arts and cultural industries totaled 4.74 million in 2013.”

Enough said. There’s plenty of energy in them ‘thar hills!

FILM ACCOUNTING & AUDITING – A NEW SERIES OF SELF-STUDY CPE COURSES

What is the the cycle of the film industry? How does it go from point A to point B? What really is a film producer and how does he/she need help from CPA’s? What are the common accounting practices and terminology used in film and television production?

The “Overview” course is a 2 hour self-study course which has been very well received, as has been the other courses for those wanting to dig deeper into the nitty gritty (Basic, Intermediate and Advanced).

Watch the video above to see how the course works and it’s content.

VALIDATED MATERIAL AND DELIVERY BY TESTIMONIAL AND CERTIFICATION

The courses have been validated by 4 years of workshops, CPE Sponsor licensing, and numerous testimonials. For more info  SEE THIS LINK.

Some Testimonials:

“We have not worked much in the film industry or film tax credits so thought it would be prudent to get a good foundation. Quite frankly, I did not realize how important it was until I took the first of John’s (self-study) courses. We have a wonderful audit department and plan to look into film auditing to add to our services. I am intrigued and enjoy the nuances of film accounting.” E.E.

The film cycle was especially helpful it IS unique to the industry.” T.S.

The course is a great presentation for an overview.” Z.K.

“I felt the objectives of the class provided good insight into the state film tax incentives and the requirements varying by state, and what the qualifying expenses incurred were.” J.B.

Cheers,

John


ABOUT JOHN

The courses are designed and delivered by a film production veteran, John Gaskin, with experience on over 50 film and television productions in 6 different countries over the past 30+ years, as well as 6 years experience as an instructor in film accounting & auditing,  and managing film budgets. John Gaskin has worked with such greats as Ron Howard (twice), David Valdes (Open Range, Green Mile, Unforgiven), George Clooney (Confessions of A Dangerous Mind) and Gulliermo del Torro (Mama).

For more information, 3 minute videos, course samples, etc. SEE THIS LINK.

The CPA and the Film Industry

There are several interesting ways that a CPA can service the Film Industry … IF you can get past the general distrust that the Film Industry has of outsiders.

RESEARCH WHAT INTERESTS YOU ABOUT THE FILM INDUSTRY

Do some research. What sort of accounting services does the Film Industry require from a CPA? What are the industry specific practices, reports and terminology? I hear about the Film Tax Incentives in some States. How does that open the door to new business for my practice? What software is used during a film or television production? I think you’ll find that there is very little, if any, information available online – and most of what you’ll find is authored by me.

WHAT PRODUCERS EXPECT FROM A CPA

Producers and Studio Execs have high expectations of anyone they contract with, especially a CPA who charges out at an hourly rate. They will expect the CPA to be familiar with their everyday terminology and to contribute to solutions. Just a few terms considered common are:

  • Inventory (the current cost of developing and producing “product”),
  • Fringes (government and union benefits),
  • Back-End (final equity available),
  • IATSE Turnaround (penalties assessed by crew when not enough given enough overnight rest),
  • SAG residuals,
  • etc

If you are interested in servicing the Film Industry there are a couple of ways you can learn more.

LEARN THROUGH WEEKEND WORKSHOPS – 23 HRS of CPE

Workshops are always the most fun way to learn. I have another one coming up on May 2nd and 3rd in Tampa Bay, Florida.

For more info see http://www.filmaccounting.com/filmworkshops3.htm

LEARN THROUGH ONLINE COURSES – 2 HRS of CPE PER COURSE

However, getting to the workshop location, and breaking away from the office, aren’t always possible – for you or for me. At the end of each online course qualifying for CPE I ask the student if the “stated objectives of the course” were met. There has never been a “No” yet…. that’s 100% of the time every student has said that the stated objectives were met.

For more detailed information about the online courses see http://www.filmaccounting.com/filmaccounting-cpe.htm

If you would like to see the additional comments made by students who have completed the courses of the courses I have listed them below, along with links to short YouTube videos describing each of the course’s content.

Cheers / John


 

 

Several students also had other good things to say.

A SAMPLE OF ADDITIONAL COMMENTS MADE BY STUDENTS

Course #1. Film Accounting and Auditing – An Overview

  • “Yes. Great introduction of the role the production accountant will play within the overall film production life-cycle.”
  • “Yes – it was pretty much an overview. I feel I have a much better understanding of film accounting now.”
  • “Yes! Very easy to follow. An excellent intro to the industry.”
  • See this short video reviewing the content of this course.

Course #2. Film Accounting and Auditing – The Basics

  • “Yes, great to see the various sample forms. The workflow charts are also very helpful.”
  • “Yes, the detailed explanations of the various forms, as well as the general ledger software, were very helpful.”
  • “Yes, very useful. I now have a sound understanding of the basic principles of production accounting.”
  • See this short video reviewing the content of this course.

Course 3. Film Accounting and Auditing – Intermediate

  • “Yes. Great explanation of the inter-relationships between the various reports and overview of the audit plan.”
  • “Yes. Enjoyed the course and learned a great deal about auditing productions.”
  • See this short video reviewing the content of this course.

For more detailed information about the online courses see http://www.filmaccounting.com/filmaccounting-cpe.htm

 

Crossing Over to Film Accounting – “The Cost Report”

As in most businesses there is a particular report which is considered “vital” to investors of any film or television production. As you may expect, the industry has developed its own very distinct financial report for any production.  The income statement, balance sheet and profitability/ liquidity ratios are all ignored. The primary, and very confidential, report goes by the innocuous name of “The Cost Report”.

costreportTHE COST REPORT IS CONSIDERED CONFIDENTIAL

Seriously, I wish that more creativity had gone into the name; something which reflected the career breaker-maker nature of the report. Within the ‘Biz it’s so protected, and kept so secure, that not even Variety Magazine nor the Hollywood Reporter even refer to it.

COST OVERRUNS ARE LEARNED VIA THE COST REPORT

It’s not uncommon to hear in the news about a wildly Over-Budget movie like ‘Titanic’ or ‘Water World’.  In reality, there aren’t many films that get that far out of hand.  With only two or three exceptions, most of the films that I’ve worked on have been produced for amounts in close proximity to the Approved Budget. Indeed, it’s a career breaker not to have foreseen those Over-Budget costs, regardless of very good reasons offered up by the Director, Producer, Production Accountant, Department Head, etc. why they didn’t know.

The whole reason for a Weekly Cost Report is to give the Studio Execs, Producers, Bonding Company, etc. enough time to correct for any projected over-budget costs (that is, to find ways to cut the costs in the remaining time of shooting, or to find more money, etc).

DETAILS OF A COST REPORT

Now let’s get down to the nitty-gritty of this little known, but key, film production report.

The first thing to understand is the simple arithmetic of the report. First, have a look at the picture above , or click here to see a clear pdf page, and then follow each of the columns as described in the next paragraph.

When examining the 10 columns, keep in mind the following simple arithmetic:

Col. 1 and 2: are the account number and description of the account.

Col. 3: The numbers here represent the costs PAID THIS WEEK only.

Col. 4: The numbers here represent the costs PAID from inception to the current date.

Col. 5: The commitments are Purchase Orders committed but not yet paid.

Col. 6: Total Costs = Col. 4 (Cumulative Costs PAID) + Col. 5 (PO’s not yet paid)

Col. 7: Estimate-To-Complete = Amount of money needed to complete the production.

Col. 8:Estimated-Final-Costs = Col. 6 (Total Costs Paid/Committed) + Col. 5 (ETC’s)

Col. 9: The Final Approved Budget (sometimes called the ‘locked’ budget).

Col.10:Variance: the difference between Col. 7 (Budget) and Col.6 (EFC’s)

TRICKS OF THE TRADE
A working knowledge of costs reports and the data behind them is a prerequisite for any CPA to be able to audit the Cost Report for State tax credits; it’s also vital that any emerging producer have a working understanding of Cost Reports.

There are several ‘tricks of the trade’ in reading a Weekly Cost Report. They’re available in my book,“Walk The Talk”.

Visit http://www.filmaccounting.com for more info on the book, week-end workshops, self-study courses and live webinars.

Cheers / John

PS – If you are curious about film production accounting as a career see this article.

New Orleans -Film Accounting and Auditing For Professional Accts

This workshop introduces the professional accountant to the film industry specific standards, terminology and methodology as used throughout the industry. Before servicing this industry, or planning an audit of a film or television production for State tax credits, it is essential to understand the processes, industry standards and the ethics of not only the film accounting, but also of the producers and financiers of this very insular industry.

The workshop counts as 8 hours of CPE. The workshop will be held on Monday, May 23rd in New Orleans.

In addition to the Major Topics listed (see the link below) you will also compare the Louisiana State Tax Credit with other State tax credits – to gain a better understanding of why the Louisiana State Tax Credit is working so well.

The workshop is delivered by John Gaskin, a production accountant who has 25 years experience working on over 45 film and television productions of every size, in 5 different countries. John is also an engineer, an instructor, and an author of a book used in the mentoring program at the American Film Institute, the U. of S. California’s producer program, and the U. of Tampa’s producer program.

There are many testimonials on John’s home page. For more information on the “Film Accounting & Auditing for Professionals” workshop see http://www.talkfilm.biz/filmworkshops2.htm

#6 of 7 – The Film Production Report Card

The game of Cost Reporting is the game of honestly offsetting the projected ‘Over-Budget’ costs with the projected ‘Under-Budget’ costs.  It’s not unlike ‘Directing’, only you’re ‘Directing’ the money.

If there are no ‘Under-Budget’ costs projected anywhere, then it is up to you as Producer, Director, Department Head, general crew member, etc. to come up with proposed changes to the shooting direction that will result in real projected cost savings. 

Of course, it is the prerogative of the Financier/Studio to approve the ‘Over-Budget’ costs.  The additional costs may be thought to enhance the revenue earning capacity of the film to a greater degree than the total additional costs.

It’s not uncommon to hear in the news about a wildly Over-Budget movie like ‘Titanic’ or ‘Water World’.  In reality, there aren’t many films that get that far out of hand.  With only two or three exceptions, most of the films that I’ve worked on have been produced for amounts in close proximity to the Approved Budget. 

In my world, it certainly is a career breaker to fail to report Over-Budget costs when they are occurring, or, if not yet occurred, are predicted to be over-budget (based on a sensible projection of the cost trends to that time). Even more to the point, it’s a career breaker to have not foreseen those Over-Budget costs, regardless of very good reasons offered up by the Director, Producer, Accountant, Department Head, etc. why they didn’t know.

The whole reason for a Weekly Cost Report is to give the Studio Execs, Producers, Bonding Company, etc. enough time to correct for any projected over-budget costs (that is, to find ways to cut the costs in the remaining time of shooting, or to find more money, etc). 

Now let’s get down to the nitty-gritty of this little known, but key, film production report.

The first thing to understand is the simple arithmetic of the report. First, have a look at the table below , orclick here to see a clear pdf page, and then follow each of the columns as described in the next paragraph.

When examining the 10 columns below, keep in mind the following simple arithmetic:

Col. 1 and 2: are the account number and description of the account.

Col. 3: The numbers here represent the costs PAID THIS WEEK only.

Col. 4: The numbers here represent the costs PAID from inception to the current date.

Col. 5: The commitments are largely Purchase Orders committed but not yet paid.

Col. 6: Total Costs = Col. 4(Cumulative Costs PAID) + Col. 5(PO’s not yet paid)

Col. 7: Estimate-To-Complete = Amount of money needed to complete the production.

Col. 8:Estimated-Final-Costs = Col. 6(Total Costs Paid/Committed) + Col. 5(ETC’s)

Col. 9: The Final Approved Budget (sometimes called the ‘locked’ budget.

Col.10:Variance is the difference between Col. 7(Budget) and the Col.6 (EFC’s)

The columns are more fully described in my book, with more examples; however, this description is enough for you to get a very good understanding of the mechanics involved with the Weekly Cost Report.Let’s not get too complicated about it all. If you can add and subtract you can make your way through a cost report.
Review the three balloon comments and see for yourself.
What’s more important than the mechanics is the reason why you should know how to go through a Cost Report—any understanding and control that you can place over your sphere of the film production costs is that much more understanding and control over your career than you ever had before.

 

Here’s a rule:

            The best way to ‘Direct the Money’ is to have a general understanding of the costs and how best to present those costs as compared to budget.

 

Your motivation for adopting this rule for your own may simply be a matter of survival—that is, if you go over budget too many times nobody will hire you. Or, you may just find it more rewarding to make sure that the money allocated to your film production is being spent in such a way as to make your film the best it can be.

In any case, the principle is to ‘Direct the Money’. Once the budget has been approved, you then need to be familiar with the trend of spending as compared to that approved budget – IT HAS AN IMPACT ON YOUR CAREER.

 As you start shooting, and one day follows the next, the budgeted costs get consumed to some degree.  The Final Approved Budget is a fixed number.  You now need to put your attention on the Estimates-To-Complete.

 

The budgeted costs that were approved before you started shooting is now only meaningful when compared to:

 

-the amount spent to date (Column 6, Total Costs), and 

-the amount allowed for finishing the production (Column 7, Estimates To Complete).

 

 The most important column is the ‘Estimate-To-Complete’ column.  This column is usually referred to as the ETC’s.

Most of your attention should go there—that’s where the treasures are buried, or the reputations ruined.  I know one well-known producer who starts out a Cost Report meeting by drawing a highlighter vertically down that one column.  Then, as we go through the Cost Report, her attention is drawn primarily to the ETC’s.

The ETC is the column that tells you how much is left to spend on that particular line item.   In our table above, look at the line for account #807-30 ‘TRAVEL & LIVING’.

As you can see, the Estimate-To-Complete is $39,635. That’s the annual income for a lot of families.  It can also hold a story or two:

 

            1) It might look like such a large amount that no one would think to question it; but, on further detailed study turn out to be woefully short of the needed amount, or           

            2) It might have $20,000 too much that won’t be noticed without a detailed study. That $20,000 could be the deciding factor on committing to your favorite crane shot, a SPFX trick, a rough-and-tumble stunt, etc.

 As a Producer or Director you want to know if it’s 1. or 2. above.  The only way to do that is to ask someone (probably the Line Producer, UPM or Accountant) to project the remaining cost of travel & living person by person to see if the ETC’s will be enough, too little or more than enough. 

 

There are several ‘tricks of the trade’ in reading a Weekly Cost Report. They’re available in my book,“Walk The Talk”.

 Get a good book, that’s easy to read, that lays it out for you. As of July 27/08 both the University of Southern California Masters of Fine Arts (Peter Stark Program) and the University of Tampa Film Program have ordered my book, “Walk The Talk” as required reading for their students.

They’re available in my book – see my web site here “Walk The Talk”. All of them are simple but effective.

Film Accounting – Training

The person wanting to break-in to Film Accounting as a profession has a very hard time of it. The film producers don’t budget for “training” – they want somebody to walk into the position and GO-GO-GO. Meanwhile, there are several States, like Louisiana, Michigan, Georgia, etc that have a plethora of productions but need to bring in film accountants, and their assistants from out-of-State (primarily Los Angeles and New York).

Is Film Accounting That Different?

It’s not that film accounting is particularly difficult. It’s the same principles as other industries, like construction for instance. The big three functions of Bookkeeping, Auditing and Reporting are true for film accounting just as they are for other industries. The biggest difference is rooted in the old “apprenticeship” mind-set of the film industry. Most film accountants aren’t certified accountants in any other field. They are simply smart people, not allergic to fast pace and long hours, who have apprenticed into that position. The apprenticeship system still works, but when more and more demand is put on film producers to produce faster, cheaper, better, there’s less and less room for an apprentice.

Who Can Apprentice?

Any accountant or bookkeeper would find it a fast rise to the top, provided they can fit in with the industry – that is, their personalities don’t clash with the rough and tumble scene of filmmaking – long-ish hours, good pay, contract work, some travel, etc.

How To Solve This Quandary?

The only way I know of is to train film assistant accountants in the film industry specific practices, terminology and systems in a controlled environment where practice at a slow pace is permitted and then more practice brings the pace up to a standard acceptable by film producers. Do an intensive workshop, like the one I’m doing next in Louisiana on May 15/16, 2010.

See my website at http://www.talkfilm.biz for more details and when/where. I have done workshops in Los Angeles, New York, Detroit and Florida.

Link with me on LinkedIn for workshop announcements in your area.

Regards to all,

John Gaskin

Veteran of 45 film and television productions in 5 different countries. See IMDb for credits.

Public Accountants and Film Accounting and Auditing

The various State and Provincial Film Tax Incentives have increased interest from public accountants (CPA’s and CA’s) in seminars and workshops in the area of film accounting within the film industry. Most of the Film Tax Incentive boards have a clause in their legislation that the auditor needs to be locally licensed, then it inevitably carries on with a broad statement that the auditor must be familiar with the film industry practices and standards.

What are the opportunities for Public Accountants?

Tax Incentive Administrator – Once the local governing body gets some experience they almost always start to see that the same public accountants who are helping the independent film producer prepare the initial application prior to production is the same public accountant who is doing the audit. Out of this gray area usually rises the need for a Tax Incentive Administrator. Someone who can track the application from beginning to end, stays in touch with the productions costs to ensure everything is being booked properly (in film production you can’t take this for granted) and then follows through on the final application for the tax incentive with the State. Once this administrative “post” has some experience they get on a first name basis with the appropriate people in key positions along the way (film commissions, bonding companies, banks, brokers if the that particula area has Transferable Tax Credits,etc) and their reputation will lead to many such contracts. For most productions over $3Mil a fair fee is about $20,000 to $25,000.

Public Auditor – This is a no-brainer, but how do you get assigned as the auditor? Who do you pitch? In the early stages you pitch the producers and the tax credit administrators (noted above), as well as the bonding companies, the financiers, etc. Who they are, exactly, is a matter of networking. In the film business, there just isn’t an easy way to find such people without being “involved” in the ‘biz. You’re limited by your imagination.

Tax Accountant/Consultant – Film Producers are usually congenitally unable to do tax returns, tax remittances, workers compensation registration and returns, quasi legal work like options agreements, etc etc. These are areas that a trusted CPA/CA/Enrolled Agent/CGA/etc could up-sell their services.

How Does a Public Accountant Get Familiar With Film Accounting Practices?

The only way I know is to attend one of my workshops.  I am registered with the State of New York and the State of Florida as a “Licensed” sponsor – at least for the workshop entitled, “Film Accounting and Auditing”. Continuing Education in Canada also recognizes my workshops as “Qualified Hours” in Ontario. All of my workshops are designed to qualify as CPE under California, Michigan, Louisiana type rules. (Unfortunately, some States want the instructor to pay for a license and a review – like New York and Florida – so I only paid for the one course in those States).

See my web site at http://www.talkfilm.biz for the agenda and the when/where for a workshop near you. I have done workshops in Los Angeles, Detroit, Florida and New York. The next one is in Louisiana on Sun May 23rd/10.

Regards to all,

John Gaskin

Veteran of 45 film and television productions of all sizes in 5 different countries. See IMDb for credits.

Link with me on LinkedIn to see announcements of workshop events.

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