Fun reading for accountants

Manual accounting records. Anyone miss those? Didn't think sol. Image courtesy of Adobe Stock.
Manual accounting records. Anyone miss those? Didn’t think so. Image courtesy of Adobe Stock.

A few fun reads for accountants:

  • Why no Hollywood movie will ever show a profit.
  • Adrienne Gonzalez is back at Going Concern, talking about the idea of TBTF Big 4 firms possibly, maybe, becoming SIFI (not likely to ever happen, but a fun read anyway).
  • Talent shortage appearing in the CPA world.
  • Research from Management of an Accounting Practice now available.

9/14/11 (yes, 2011) – The Atlantic – How Hollywood Accounting Can Make a $450 Million Movie “Unprofitable” – If you have never taken a look at the astoundingly creative accounting in Hollywood, this article will give you a superb introduction.

Several years ago I took a fraud education CPE course in which the instructor went on a tangent to explain why no Hollywood movie has ever made a profit and none of them ever will.

In essence, here’s the plan: set up each movie in a separate corporation; then allocate overhead and fees into the shell greater than the margin generated. It is a simple journal entry to make all the profit disappear.

The linked article contains an income statement purported to be for Harry Potter And The Order of the Phoenix, one of the top grossing movies last decade. The defined gross is $612M.

Wave our magic journal entry…

Image courtesy of Adobe Stock.
Image courtesy of Adobe Stock.

A “distribution fee” of $212M appears. Then check out the “Negative Cost and/or Advance” for $316M. Finally there is $58M allocated for interest.

Abracadabra!

A movie grossing $612M has a cumulative loss of $167M.

Guess what? None of the stars or other people promised a percent of the profit will ever see a penny of their profits or residuals.

1/17 – Adrienne Gonzalez at Going Concern – Labeling Big 4 as Systemically Important Would Only Confuse Their Sense of Importance – Yes, Adrienne is back at Going Concern.

If you are looking for a smart-aleck introduction to the idea of categorizing the TBTF Big 4 firms as SIFI, this is the article for you.

Here is another way to recommend this article: if you know what TBTF and SIFI mean, you probably ought to read the article.

Of course, if you enjoy reading AG, you just gotta’ click the link.

12/6 – Accounting Web – How Are Firms Handling the Talent Shortage? – Sitting at my desk in a sole practitioner’s office it sure looks to me like the market has now shifted from

  • firms not having to pay attention to the staff because there’s always someone else to replace them because other firms aren’t hiring

to

  • firms are desperately trying to keep their staff because anyone that is unhappy can find another job by tomorrow afternoon because all the other firms are hiring.

Article discusses pressures that small and large firms are under in finding and keeping staff. Article also describes what a lot of firms are doing to adjust.

December – AICPA – National Management of an Accounting Practice (MAP) Survey – The new MAP survey is out. It has some good benchmarking information. I haven’t looked at the report for a while.

One feature I like is drill down of the statistics. You can look at national, regional, and sub regional information. I hid several columns and was able to look at national, West region, and Pacific subregion immediately adjacent to each other, which was helpful.

The data is split out into multiple firm sizes: under 200K, up to 500K, up to 750K, and more categories above that.

If you’re a member of PCPS, the reports are free. If you’re a small firm it might be worth joining PCPS just to get the report.

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