# ASC 405-926-25: Liabilities — Entertainment—Films — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/405/926/#25-recognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:17:32.820Z to 2026-09-10T00:17:32.820Z Record version: sha256:60828de462cdd6c68385e0d95365535509ca174b424ac38b2e6c4e4db8566a5b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 405-926-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/405/926/#25-recognition) SEC content: no #### Participation Costs ##### [405-926-25-1](https://asc.understandingaccounting.org/asc/405/926/#405-926-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:17:32.820Z to 2026-09-10T00:17:32.820Z Record version: sha256:3742a9327d036321493c7f7d93de07cf9fb7291e3d5d54435e6a4b4c8f0dbaf0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall accrue (expense) [participation costs](https://asc.understandingaccounting.org/glossary/p/#participation-costs "Parties involved in the production of a film may be compensated in part by contingent payments based on the financial results of a film pursuant to contractual formulas (participations) and by contingent amounts due under provisions of collective bargaining agreements (residuals). Such parties are collectively referred to as participants, and such costs are collectively referred to as participation costs. Participations may be given to creative talent, such as actors or writers, or to entities from whom distribution rights are licensed.") using the individual-film-forecast-computation method, which accrues (expenses) such costs in the same ratio that current period actual revenue (numerator) bears to estimated remaining unrecognized ultimate revenue as of the beginning of the current fiscal year (denominator). That is, unaccrued (not yet expensed) ultimate participation costs at the beginning of the current fiscal year are multiplied by the individual-film-forecast-computation method fraction. In this way, in the absence of changes in estimates, participation costs are accrued (expensed) in a manner that yields a constant rate of profit over the ultimate period, as described in paragraph [926-20-35-5(a)](https://asc.understandingaccounting.org/asc/926/20/#926-20-35-5), for each film before [exploitation costs](https://asc.understandingaccounting.org/glossary/e/#exploitation-costs "All direct costs (including marketing, advertising, publicity, promotion, and other distribution expenses) incurred in connection with the distribution of a film."), manufacturing costs, and other period expenses. ##### [405-926-25-2](https://asc.understandingaccounting.org/asc/405/926/#405-926-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:17:32.820Z to 2026-09-10T00:17:32.820Z Record version: sha256:1350d0e41facc782d5c434f798d20eebd9920f9dea11562b566c07336d16f178 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall accrue a liability for participation costs only if it is probable that there will be a sacrifice of assets to settle its obligation under the terms of the participation agreement. At each balance sheet date, accrued participation costs shall not be less than the amounts that an entity is obligated to pay as of that date. ##### [405-926-25-3](https://asc.understandingaccounting.org/asc/405/926/#405-926-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:17:32.820Z to 2026-09-10T00:17:32.820Z Record version: sha256:b01c1d8dfe881285b6f0f6b1613d6d58e6f4b9f7e76fab43d19be70ba636c983 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall begin accruing (expensing) participation costs when a film is released and it begins to recognize revenue from that film. ##### [405-926-25-4](https://asc.understandingaccounting.org/asc/405/926/#405-926-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:17:32.820Z to 2026-09-10T00:17:32.820Z Record version: sha256:98b2c4ad44bc896635f738e89e9b4deeace98810004fbd0fbb773f9df402c63f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Estimates of unaccrued (that is, not yet expensed) ultimate participation costs are used in the individual-film-forecast-computation method to arrive at current period participation cost expense. Such costs shall be determined using assumptions that are consistent with an entity's estimates of [film costs](https://asc.understandingaccounting.org/glossary/f/#film-costs "Film costs include all direct negative costs incurred in the physical production of a film, as well as allocations of production overhead and capitalized interest in accordance with Topic 835. Examples of direct negative costs include costs of story and scenario; compensation of cast, directors, producers, extras, and miscellaneous staff; costs of set construction and operations, wardrobe, and accessories; costs of sound synchronization; rental facilities on location; and postproduction costs such as music, special effects, and editing."), exploitation costs, and ultimate revenue, as limited by paragraphs [926-20-35-5](https://asc.understandingaccounting.org/asc/926/20/#926-20-35-5) and [926-20-35-11](https://asc.understandingaccounting.org/asc/926/20/#926-20-35-11). ##### [405-926-25-5](https://asc.understandingaccounting.org/asc/405/926/#405-926-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:17:32.820Z to 2026-09-10T00:17:32.820Z Record version: sha256:67d096f1032c46c08db969ab1ac6b493661e34566228e6095197a5650e4a0068 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A film may continue to generate revenue after its film costs are fully amortized. When revenue is recorded on fully amortized [films](https://asc.understandingaccounting.org/glossary/f/#films "Feature films, television specials, television series, or similar products (including animated films and television programming) that are sold, licensed, or exhibited, whether produced on film, video tape, digital, or other video recording format."), an entity shall accrue associated participation costs as that revenue is recognized. #### Costs Incurred for Insignificant Changes to a Film ##### [405-926-25-6](https://asc.understandingaccounting.org/asc/405/926/#405-926-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:17:32.820Z to 2026-09-10T00:17:32.820Z Record version: sha256:0c79cea9c8e6f8e6aea511f7432004cc78c375806a995d57be51f2ad2eced939 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A licensing arrangement may require an entity to make changes to a film after its initial availability to a customer. Those changes may be deemed [significant](https://asc.understandingaccounting.org/glossary/s/#significant-changes "Changes that are additive to a film; that is, the creation of new or additional content after the film is initially available to the customer. For example, reshooting a scene or creating additional special effects are significant changes. (P) December 16, 2019; (N) December 16, 2020926-20-65-2Glossary term superseded by Accounting Standards Update No. 2019-02.") or not significant. Any costs expected to be incurred for changes that are not significant shall be accrued and charged to expense if an entity begins to recognize revenue from the arrangement before incurring those costs.