business memo

Everybody Wants to Make a Movie Background Richard Brae runs a hedge fund based in New York City for which you serve as CFO. He has recently expressed an interest in getting into the film financing business but does not understand the accounting for film costs. Before investing, he would like you to prepare a memo that describes accounting for costs in film production. ich is fairly astute in the world of accounting and finance and thus a technical memo with citations to guidance would be entirely appropriate. Obtain and read ASC 926-20 and ASC 926-720; the posted case study on the film industry by Rizzio; and PwC Perspectives Filmed Entertainment: Cost Capitalization, Amortization and Impairment. Required Prepare a memo to Mr. Brae that explains the following: Why is there a challenge in applying the "matching" principle (matching revenue and the related expense) in film production? What different types of costs are incurred in the movie making business? If costs are not expensed when incurred, what is the method by which those costs are recognized? Be sure and describe the determinants of the amortization and how it is calculated. Explain how this satisfies the matching principle. Explain the three year rule including any exceptions