ASC

ASC 405-920

Entertainment—Broadcasters

405 Liabilities

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In brief

IntermediateRecognitionInitial measurementPresentationIndustry-specific

This Subtopic governs how broadcasters account for the liabilities they incur under license agreements for program material. A broadcaster recognizes both an asset (the program rights) and a liability when the license period begins and the conditions in 920-350-25-2 are met, measuring both at either the fair value or the gross amount of the liability, with any discount accreted as interest under Topic 835. The liability is then split between current and noncurrent on the balance sheet according to the payment terms.

Key points (6)
  • A broadcaster recognizes an asset and a liability for rights acquired and obligations incurred under a program license agreement when the license period begins and the conditions of 920-350-25-2 are met (405-920-25-1).
  • The licensee reports the asset and liability at either the fair value of the liability or the gross amount of the liability (405-920-30-1).
  • If a present value technique is used to measure fair value, the difference between the gross and net liability is accounted for as interest under Topic 835 (405-920-30-1).
  • The recorded liability must be segregated between current and noncurrent based on the payment terms of the license agreement (405-920-45-1).
  • The Subtopic uses the same scope as the Overall Broadcasters Subtopic, Section 920-10-15 (405-920-15-1).
  • Example 1 at 920-350-55-1 through 55-7 illustrates the accounting for a television program license agreement (405-920-55-1).

For students. This is a rare instance where GAAP permits a policy choice between gross and fair (discounted) value for a liability — students often wrongly assume discounting is mandatory. Remember recognition is triggered by the start of the license period, not by contract signing or payment.

broadcast license agreementprogram material rightslicense periodgross versus present value measurementimputed interestcurrent and noncurrent classificationbroadcaster liabilities

Machine-generated study aid for ASC 405-920. Check the source paragraphs below.

405-920-00Status

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405-920-00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
BarterSupersededAccounting Standards Update No. 2014-0905/28/2014
920-405-25-2SupersededAccounting Standards Update No. 2014-0905/28/2014

405-920-05Overview and Background

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405-920-05-1
This Subtopic addresses the accounting and reporting by broadcasters for obligations incurred under broadcast license agreements.

405-920-15Scope and Scope Exceptions

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Overall Guidance

405-920-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 920-10-15.

405-920-25Recognition

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License Agreement for Program Material

405-920-25-1
Paragraph 920-350-25-2 requires that a broadcaster shall recognize an asset and a liability for the rights acquired and obligations incurred under a license agreement for program material when the license period begins and certain conditions specified in that paragraph are met.

405-920-30Initial Measurement

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License Agreement for Program Material

405-920-30-1
A licensee shall report the asset and liability for a broadcast license agreement at either of the following:
  1. a
    The fair value of the liability
  2. b
    The gross amount of the liability.
If a present value technique is used to measure fair value, the difference between the gross and net liability shall be accounted for as interest in accordance with Topic 835.

405-920-45Other Presentation Matters

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License Agreement for Program Material

405-920-45-1
The liability recorded for the obligation incurred under a license agreement for program material shall be segregated between current and noncurrent based on the payment terms.

405-920-55Implementation Guidance and Illustrations

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License Agreement for Program Material

405-920-55-1
See Example 1 (paragraphs
920-350-55-1 through 55-7
) for an Example illustrating the accounting for a license agreement for television program material in accordance with this Topic.

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