Hollywood accounting

In accountancy, Hollywood accounting is the practice of distributing the profit earned by a large project to corporate entities which, though distinct from the one responsible for the project itself, are typically owned by the same people. This has the net result of reducing the project's profit by a substantial margin, sometimes even eliminating it altogether. This may be for income tax reasons, but more often it is to reduce the amount which the corporation must pay in royalties or other profit-sharing schemes.

Related Topics:
Accountancy - Profit - Corporate entities - Income tax - Royalties

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Hollywood accounting can take several forms. In one form a subsidiary is formed to perform a given activity, and the parent entity will extract money out of the subsidiary not in terms of profits, but in the form of charges for certain "services". The specific schemes can range from the simple and obvious to the extremely complex.

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Hollywood accounting gets its name from the frequency with which it is alleged to be practiced in the entertainment industry, that is, in the movie studios of Hollywood. Stereotypically, the creators of material which is adapted into screenplays fall victim to Hollywood accounting.

Related Topics:
Movie - Hollywood - Screenplay

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