Talk:Hollywood accounting

Reasons

 * This may be for income tax reasons, but more often it is to reduce the amount which the corporation must pay in royalties or other profit-sharing schemes.

Can we find some info to back this up? Obviously, the profit-sharing reasons get the most publicity, as that is what pisses people off and causes the lawsuits to be lobbed back and forth, but I'm not sure one way or another which reasons results in more raw dollar savings for the studios. --Bletch 02:39, 2 August 2005 (UTC)

Capitalize "Accounting"
Shouldn't "Accounting" be capitalized since "Hollywood Accounting" is a proper noun?
 * I don't think it is a proper noun. "Hollywood" obviously is, but "Hollywood accounting" isn't the name of a specific event or policy; it's a generally observed practice, like "loan sharking" or "phishing." sinisterscrawl 06:12, 3 August 2005 (UTC)

Merger
Incidentally, I feel that the info in artist exploitation could well be merged into here. Anyone agree? DS 11:44, 4 August 2005 (UTC)
 * While the examples in this article qualify as both Hollywood Accounting and Artist Exploitation, they are not really necessarily the same thing. Hollywood accounting is just one way that artists get exploited, and I'm inclined to believe that artists are not the only entities that have been "reverse Enroned".  That said, the article on artist exploitation is so anemic that it probably doesn't make a difference at this point.  --Bletch 00:15, 8 August 2005 (UTC)

Having read the article on artist exploitation, I don't think it's a good match. The very word "exploitation" requires a moral/philosophical evaluation, whereas "Hollywood accounting" requires only a mathematical evaluation. Keeping H.acct. seperate as a technical topic prevents it from flame wars by any idealogues who have their own ideas on how the economy ought to work. --L. 22:07, 12 August 2005 (UTC)

Peter Jackson
I believe that Peter Jackson is also suing New Line Cinema for doing this practise also.

Yeah, currently the lawsuit (according to Jackson/Wingnut Studios) is to force New Line to allow an independent audit of books. The suit is pretty much about that since New Line refused to let them look it over after finding "anomalies". Here's a link that includes the recent statement from Wingnut. http://www.aintitcool.com/node/31211 PHOENIXZERO 14:35, 12 January 2007 (UTC)

Crash
The NY Times has reported that Crash is the victim of Hollywood Acct'g. It's reg-only, but there's a cite on Digg.  Thomas B 23:23, 26 July 2006 (UTC)

X-files on FX
I am wondering if David Duchovny's dispute with Fox over X-Files profits fit within this subject. He argued that his contract gave him a percentage of syndication fees. Fox ended up "selling" the show to its sister network for what Duchovny felt was well below market value, thus cutting his potential payments. 

Random Thought
Makes me think they never heard the addage, "Never cost somone more money than it would cost him to have you killed."

So how much is a life sentence worth in dollar value?

Production Accounting
Why is Production Accounting being redirected here?

A little spin?
At the end of the "How it Works" section there is a little plug saying Orion Films went under after "The Silence of the Lambs," and this is proof (a reader would be led to believe) that many films are in fact quite unprofitable.

Common sense seems to dictate this is spin placed in Wikipedia. After all, why haven't Touchstone, Disney, MGM, Sony, Paramount, Warner Brothers or any other studios gone bankrupt so readily then, if a seemingly large proportion of movies incur a loss? Indeed, as a student of the Accounting field, I could testify that "Hollywood accounting" (yes the 'a' in Accounting should be lowercase here) is creative accounting designed to hide profits.

Of course, my personal opinion in such a matter does not matter, but what does matter is the attempt to mislead readers with that last paragraph plug. I'm deleting it and watching this article: if it comes back without good reason (as would be discussed here in this page) I'll just delete it again.

Scryer_360 (talk) 01:18, 15 February 2008 (UTC)

Merger suggestion: Monkey points
I didn't make the suggestion, it appears they didn't bother to explain their reasoning. But...
 * Agree. Explanation and importance depend on Hollywood accounting. - BalthCat (talk) 00:22, 9 July 2008 (UTC)
 * Agree.  Apart from the term itself and the Murphy quote, both of which would be appropriate here, there's nothing in Monkey points that isn't in this one.  Merge.  TJRC (talk) 20:42, 20 March 2009 (UTC)

Oh, heck. There's been no discussion since the merger was proposed in 2007; no subsequent edits to Monkey points since then; and it's an orphan apart from a couple "See Also" entries. I'm just going to be bold and merge it. TJRC (talk) 21:46, 20 March 2009 (UTC)

Terminology/Clarifications
This article contains incorrect terminology. The contractual definitions of Participations -- the proper term for "Hollywood Accounting" -- states that these points, which are in *addition* to salaries paid (and generally, if you are the beneficiary of Participations, you are receiving a decent paycheck already), are known as "proceeds", not profits. From an accounting perspective, there is a difference. Proceeds are paid if and when certain contractual thresholds, as defined, are met. They have nothing to do with the actual *profitability* of a motion picture. This article is mixing apples and oranges. Unlike residuals, they are not guaranteed (thus, called Contingent Compensation). The various types of proceeds are pure gross (rare), adjusted gross (more commmon for top-tier talent), net (often given to lower tier talent). While payments related to net are less common, that is as much a function of highly paid talent as it is other factors.

While these calculations factor into actual P&L statements issued by these (mostly) publicly traded companies -- meaning they are subject to SOX controls and outside auditor oversight -- they are not subject to GAAP (generally accepted accounting) rules, per se. Also, it should be noted that third party audits are commonplace and the threat of litigation (with actual filing and rare instances of actual court proceedings) are part of the process. Calculations and expenses are thoroughly checked. In some instances, actual wrong-doing has been uncovered, but these are the exception. --Ryokoz (talk) 02:56, 17 June 2009 (UTC)

Why is this legal?
It would be interesting to know how Hollywood accounting can continue to exist and why whatever loopholes it is using haven't been closed. Ragzouken (talk) 00:22, 9 September 2009 (UTC)
 * um, because lawmakers are bought and paid for by special interests with money, like motion picture studios? just a thought.Mercurywoodrose (talk) 02:59, 10 September 2009 (UTC)
 * YouKnowWhy.jpg — Preceding unsigned comment added by 107.77.207.159 (talk) 06:47, 5 February 2021 (UTC)

The Creative Accounting Section is biased?
I read the first section of this account with a bit of incredulity. At least part of the scandal of Hollywood Accounting, as I understand it, is that the studios inflate the costs to a holding company, so that the picture makes no real profit, and those who are set to receive payments based on the profit are "unfairly" denied their share. Yet the first paragraph is almost wholly about how "creative types" in the industry do not understand the difference between GAAP accounting and are just "confused" when they see a statement that a film is at a "real" loss but an "accounting profit".

As written, the first section is written as a defense of Hollywood Accounting, and tries to paint all it's critics as "confused" without providing an accurate assessment of the issues around it. I will concede that the "confused accounting" issue is interesting, and deserves a place in this article. But by biasing the opening of the article in this way, this article does not maintain a neutral POV. The opening should be more balanced, and correctly summarize the issues around Creating Accounting

BTW, I was prompted to review this article by a recent posting in TechDirt.com Hollywood Accounting Losing in the Courts, which shows how inflated expenses can be used to show a loss, and that several recent court cases have found for the "creatives" who feel that through Hollywood Accounting, they were denied the profits they felt they were entitled too. —Preceding unsigned comment added by

--Mstahl302 (talk) 15:07, 9 July 2010 (UTC)

I agree, it's biased
Even the name of the first section "creative accountants" sounds biased, why are we complementing the accountants? Within the first few sentences the writer says that "The confusion (or dispute if you like) arises because the studios keep their public books according to Generally Accepted Accounting Principals (GAAP) which are the standard accounting rules which govern all companies and which, in general terms, require the company to match income and expenses." This describes critics of Hollywood Accounting as "confused" and then attributes the reason to "following standard accounting principles". This makes no sense at all. Then it says "Many of the talent community do not understand this difference and are puzzled why a film is announced as profitable when their statement shows a loss. They then complain and/or sue—having forgotten about the up front payments or the contract they signed". This is biased and does not contribute, I'm deleting it. —Preceding unsigned comment added by 67.184.3.187 (talk) 18:24, 9 July 2010 (UTC)

lead should not only refer to "net profit", but to "net (and sometimes gross) profit"
see Peter Jackson lawsuit over lord of the rings. Basically, gross profits can also be manipulated, most notably by selling to a sister company but not at the normal market price. —Preceding unsigned comment added by 84.153.230.67 (talk) 19:42, 9 July 2010 (UTC)

Excised
The following was dropped in, in non-sequiter fashion, a while back. I've removed it because it could use some citations and editing to actually make some sense in context. It's related, but vaguely. In particularly it seems to be associated with the sense that a movie has a public profit but a private loss, which is the reverse of the usually understood meaning of the term. 137.195.68.169 (talk) 14:35, 3 September 2010 (UTC)

"The confusion (or dispute) arises because the studios keep their public books according to Generally Accepted Accounting Principles (GAAP) which are the standard accounting rules which govern all companies and which, in general terms, require the company to match income and expenses. The so-called "profit participants" in the film (generally the creators, directors, actors and/or authors) are accounted to under the terms of their specific, individual employment contracts.  These employment agreements are negotiated by their agents and/or lawyers and contain numerous provisions which are not related to the Company's public financial statements.  For example, the talent may be requesting substantial payments to them be paid up front, before the film has realized any revenue whatsoever.  In this case the participation statement will show a "loss" until such time as the advance payments are earned back while the public financial statements will show a profit because GAAP requires the up front payments to be rateably amortized over the life of the film. Many of the talent community do not understand this difference and are puzzled why a film is announced as profitable when their statement shows a loss. They then complain and/or sue—having forgotten about the up front payments or the contract they signed. The underlying books and records of the film company are required to be kept according to GAAP so there is no actual accounting fraud taking place, but any one individual actor or writer will show very different "profit" or "loss" according their highly negotiated, individual deals and may feel an injustice has occurred nonetheless.

Complaints about "studio accounting" should be distinguished from audits. Complaints commonly referred to as "studio accounting" involve the definitions of profit and loss contained in the individual employment agreements which many talent often regret later when the film is a success, but say little about when the film is a failure. Audits are a separate issue. Most participants in a film are entitled to individually or collectively audit the books and records of the production company and/or releasing company. The underlying records are painstakingly compared to each individual contract and their idiosyncratic definitions. Any errors made in favor of the talent are kept by the talent. Any errors made in favor of the production company/releasing company are reversed and also paid to the talent. So it is generally worthwhile for the talent to audit the company's books and search for these errors. At the larger companies this is an almost continual process with separate rooms being dedicated solely for the outside auditors as each actor, director, writer sends in a team to audit every movies and review every single expenditure."

Can't you read your own sources?
Check the link for My Big Fat Greek Wedding. Maybe you get the numbers right and the story behind it. The plaintiffs claim the revenue from the theatrical release alone to be $370 millions whereas the production company gives a figure of $287 millions in total for all the revenues from theatrical, tv and home video release. Seems this article is equivalent to Hollywood accounting. — Preceding unsigned comment added by 46.115.68.240 (talk) 06:12, 10 September 2013 (UTC)

taxes
Is there any report of companies using these accounting practices to prevent tax collection? I would suspect if these techniques were used for tax purposes these companies would get destroyed by IRS actions.