ASC 926: Film Cost Capitalization, Amortization, and Impairment

ASC 926 is the FASB codification topic that tells U.S. GAAP filers how to account for the costs of producing or acquiring films and episodic television content. The short version of ASC 926 film cost accounting: capitalize direct production costs as a separate asset, amortize that asset using the individual-film-forecast method tied to estimated ultimate revenue, and write it down to fair value when circumstances suggest the carrying amount is no longer recoverable. The mechanics below work the same way whether you are producing a feature, a limited series, or a multi-season show.

What ASC 926 Covers

The standard reaches any entity that produces or distributes films and episodic television series, with “films” defined broadly to include feature films, television specials, television series, and similar products on any recording format.¹

ASU 2019-02 pulled episodic television content under the same capitalization framework as films and told entities to treat multiple seasons of a series as a single product for amortization. The older rule that capped episodic capitalization at contracted revenue per episode is gone. These changes took effect for public companies in fiscal years beginning after December 15, 2019, and one year later for everyone else, so the aligned rules are now fully in force.¹

Which Production Costs You Capitalize

Film production costs sit on the balance sheet as a separate asset. The cost basis includes all direct costs of physically producing the film, which the codification calls direct negative costs:¹

Compensation for actors, directors, producers, extras, and crew.
Set construction and operations, wardrobe, props, accessories, location rentals, and equipment.
Post-production work including editing, sound synchronization, special effects, and music.
Story rights and screenplay acquisition.

Production overhead gets allocated to the film asset when it directly relates to production activity. Depreciation on sound stages, utilities for production facilities, and salaries of production supervisors all qualify. Capitalized interest under ASC 835 may also be included. General and administrative expenses do not qualify. Corporate rent, executive salaries, and legal fees unrelated to the production are expensed in the period incurred.

Pre-Production and Development

Spending that happens before management formally commits to a specific project is expensed as incurred. General story research, exploratory concept development, and creative department overhead sit on that side of the line. Once a project is greenlit, subsequent development costs shift to capitalization: story rights, screenplay drafts, and initial talent commitments made to secure the production become part of the asset’s cost basis.

Participations and Residuals

Participation payments to talent or producers based on revenue or profit, and residuals owed to guilds for reuse across distribution windows, are accrued and included in the film’s cost basis when they are expected to be paid over the film’s revenue-earning life. The codification requires those estimates to flow into both amortization and fair value calculations.¹ Weak estimates here distort both the carrying value and the reported expense.

Estimating Ultimate Revenue

Ultimate revenue is the total gross revenue the film is expected to earn over its useful life from every source: theatrical, home video, digital distribution, streaming licenses, television licensing, and ancillary sources like film-tied merchandising. Management sets the estimate when the film is released and updates it at every reporting date.

The standard caps how far out revenue can be projected:¹

Standard films: up to 10 years from initial release.
Episodic television series: up to 10 years from delivery of the first episode, or 5 years from delivery of the most recent episode if the series is still in production, whichever is later.
Acquired film libraries: up to 20 years from the acquisition date, but only for films whose initial release was at least three years before the acquisition.

Expected wholesale promotional or advertising reimbursements from third parties stay out of the revenue estimate. Those amounts offset exploitation costs instead.¹ Everything downstream depends on this number, so the quality of the estimate drives the quality of the reported amortization and any impairment analysis.

Amortization Under the Individual-Film-Forecast Method

ASC 926 requires a specific amortization approach called the individual-film-forecast-computation method. Each film is calculated separately. Films cannot be pooled, though multiple seasons of a series count as one product.¹

The formula: take the current period’s actual revenue as a fraction of estimated remaining unrecognized ultimate revenue as of the beginning of the fiscal year, then multiply that fraction by the unamortized film costs at the beginning of the fiscal year. The product is the period’s amortization expense. Amortization begins when the film is released and starts earning revenue.¹

Because the denominator is remaining ultimate revenue rather than lifetime ultimate revenue, the method produces a constant rate of profit over the earning life. A film that pulls a large share of its remaining expected revenue into a single quarter will carry a correspondingly large amortization charge in that quarter.

Revising the Estimate

Ultimate revenue estimates change often. When they do, recompute using a denominator that includes only ultimate revenue from the beginning of the fiscal year in which the change happens. The current-year revenue in the numerator stays the same. Apply the revised fraction to the unamortized cost balance at the start of the year, and recognize the difference between the newly calculated expense and amounts already expensed that year as an adjustment.¹

Adjustments are prospective. Prior-period statements are not restated. A downward revision in expected revenue tends to produce a large catch-up expense in the current period because the same costs now have to be absorbed over a smaller revenue base. An upward revision slows amortization going forward.

Films Monetized in a Group

When a film is predominantly monetized together with other films or licensed content, such as a title inside a streaming library, the entity estimates the portion of unamortized costs that corresponds to the film’s use in exhibition or exploitation and expenses that portion as the film is exhibited.¹ The relevant unit of account for impairment then becomes the film group, defined as the lowest level at which cash flows are largely independent.

Marketing and Distribution Costs

Exploitation costs cover advertising, marketing, publicity, promotion, and physical distribution. These are expensed as incurred rather than capitalized, because they drive current-period revenue rather than build the long-lived asset. Production costs amortize over years; the marketing spend that launches a film hits the income statement immediately.

Impairment Testing

Test for impairment whenever events or changes in circumstances suggest the film’s fair value may have dropped below its unamortized cost. A weak theatrical opening, loss of a major distribution contract, a shift in audience demand, or a talent dispute that delays release are all typical triggers.

Compare unamortized cost to fair value. For a film monetized on its own, fair value is estimated by projecting future cash inflows and subtracting the cash outflows required to generate them, including remaining distribution costs, exploitation expenses, and unaccrued participation and residual payments. A discounted cash flow model is permitted.¹ For a film inside a film group, the test is performed at the group level.

If fair value is below unamortized cost, recognize the difference as an impairment loss in the current period. The write-down becomes the new cost basis for future amortization. Impairments cannot be reversed. If the film later outperforms expectations, that only affects future amortization by slowing the rate at which the reduced cost basis is expensed.²

Balance Sheet and Disclosures

Film costs appear as a separate asset on the balance sheet, not blended into inventory, goodwill, or other intangibles. Rights held under program-material license agreements under ASC 920-350 must be shown separately from produced film costs, either on the face of the balance sheet or in the notes.¹

Footnote disclosures required by ASC 926-20 include the methods used to compute amortization, the unit of account used for impairment testing, and the methods used to determine fair value. When an impairment is recognized, the notes must describe the circumstances that produced it, the aggregate amount, where it appears on the income statement, and which operating segments are affected.²

How the Tax Treatment Differs

The GAAP treatment under ASC 926 is separate from how production costs are handled on a federal tax return, and the tax side has its own elections with important timing issues.

Section 181 Expensing

Under IRC Section 181, a taxpayer can elect to deduct the cost of a qualified film, television, or live theatrical production immediately rather than capitalizing it. The deduction is capped at $15 million per production, or $20 million if a significant portion of the production costs are incurred in a low-income community or distressed area. Qualified sound recording productions face a lower cap of $150,000 per production or in aggregate for the tax year.³

Section 181 expires for productions commencing after December 31, 2025. A production that begins principal photography, or principal recording for sound, in 2026 or later cannot use this election.³

Bonus Depreciation Under Section 168(k)

Qualified film and television productions are also eligible for bonus depreciation under Section 168(k), which treats them as depreciable property placed in service upon initial release.⁴ The One Big Beautiful Bill Act, signed in 2025, restored the additional first-year depreciation deduction to 100 percent on a permanent basis for qualified property acquired and placed in service after January 19, 2025, and expanded eligibility to include qualified sound recording productions.⁵

A taxpayer can elect out of bonus depreciation for any class of qualified property if a different recovery approach fits the situation better. For productions with costs above the Section 181 caps, 168(k) bonus depreciation often offers a cleaner path to full first-year expensing on the return, with no dollar ceiling. With Section 181 sunsetting at the end of 2025 and 168(k) bonus depreciation now permanent, the tax planning picture for productions starting in 2026 looks meaningfully different from prior years.

1
PwC Viewpoint. Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20)
2
Deloitte Accounting Research Tool. ASC 926, Entertainment — Films
3
Office of the Law Revision Counsel. 26 USC 181 – Treatment of Certain Qualified Productions
4
Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System
5
IRS. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction