Finance And Accounting In The Media Industry Accounting Essay

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Media and entertainment includes a variety of products that entertains or keeps informed a daily consumer. The industry is segmented into radio, television, radio broadcasting, etc. The competition in the media and entertainment space is increasing day by day. To be on the top or even to survive in this highly competitive market one has to be very efficient in managing the information systems.

Finance and Accounting

Relationship to Accounting: There is very little difference between finance and accounting. Both fall under the jurisdiction of chief financial officer who uses a particular MIS to serve the purpose of both.

The difference lies in the sense that in finance the purpose is to maximize the profit whereas the purpose of accounting is score keeping so that a base for tax payment is prepared.

A financial manager analyses the raw data (provided by the accountant about the company's past, present and future) as inputs to MIS for making important decisions.

Accounting is not concerned with cash flows. It is just based on the recognized revenues when sale occurs. Finance is only concerned to cash flows. The magnitude, timing and risk of cash flows are the focus of finance manager.

Finance involves decision making under uncertain conditions and is concerned with future whereas accounting is concerned with the past records.

WHY MIS IS USED?

 

Large organizations have a lot of information. This collection of data cannot be of any use if it is not streamlined so that data can be retrieved easily.

MIS would help in controlling, tracking and monitoring of data.

Segregation of data into modules would result in faster decision making.

Would help in going paper free.

Use of MIS would ensure the result as per the expectation and analysis of data would be done easily.

SAP FOR FINANCE IN MEDIA AND ENTERTAINMENT

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Reliance Mediaworks uses SAP for serving its financial problems. SAP for Media provides tailored solutions to keep up with rapid changes driven by the Internet, online publishing, and digital broadcasting.

License acquisition and outgoing royalties - Reports on accurate royalty statements are prepared using SAP.

Core accounting and reporting capabilities

Financial supply chain management

Treasury Management

Shared services

Supply Chain Management

RELIANCE MEDIAWORKS

Company profile

In 2005 Reliance ventured into this space and quickly adopted the standards required to survive in this market. The year 2005 saw the entry of new players across all segments of the E&M industry. Reliance made its way into entertainment by buying out 'Adlabs' and also acquired a radio station known as BIG FM 92.7after bidding for 50 FM radio stations across with aggregate bids of over INR 1.5 billion. In this M&E industry one cannot forget the role of finance and accounting in the success path of these companies. Finance and accounting should be very efficient so that there are no statistical errors/delays. The presence of reliance mediaworks is felt in Film Services: Motion Picture Processing and DI; Visual Effects; Film Restoration and image enhancement; Digital Mastering: Studios and Equipment rentals with facilities located at US and India.

Most companies that fail in this industry have no or have a weak information system for finance and accounting system. Finance holds the key for company's success. Reliance Media works adopted a very good MIS as soon as it entered the space. It implemented a 'SAP' made MIS and quickly got the positive results of using it.

Use of SAP in Reliance Mediaworks

Used for accounting purposes.

Used for taxation purposes.

Used for forming general ledgers.

Maintaining payable and receivable accounts.

Also used for calculation of various ratios and analysing them.

Used for formulation of annual and quarterly reports.

Used for setting up a fixed budget.

Accounting

Financial accounting consists of:-

General ledger - SAP helps in managing a general ledger for the company.

General ledger keeps an account of the assets, revenues, expenses and the liabilities of the company. At the heart of the Financials module, the General Ledger component automates the integration of all your financial information and posting to your accounts - providing the end point for all summary information in the system. From the General Ledger all the key management reports of your business' are generated, including the balance sheet, revenue statement, trading account and trial balance. Comprehensive drill down capabilities and graphical reporting makes problem identification and resolution simple in the extreme. The General Ledger stores information on all of your accounts, including all transactions - providing the ability to update work-in progress, stock values, foreign currency fluctuations, debtors and creditors, so that an accurate representation of the business' financial situation is always presented. Flexibility is provided in the set up of your chart of accounts, which can be standard of customised to suit the unique needs of you business. Full integration from the entire Prism system ensures the General Ledger presents reliable, accurate and timely management information.

Treasury Management of Assets

Reliance has a separate module for the purpose of treasury management.

This module constantly manages the assets and the investments that have been made by the company.

Investments

Reliance Mediaworks is invested in many bonds and mutual funds. The list of these investments as well as such other investments is maintained by SAP. New investments to be made are also analysed by the MIS. A provision for diminution is made to recognise a decline, other than temporary, in the value of long-term investments and is determined separately for each individual investment.

Fixed assets and depreciation / amortisation

Tangible assets

Assets that can be equated in terms of money are known as tangible assets. Expenses incurred for up keeping of the assets are taken into account. Depreciation on fixed assets is provided on the straight line method,.

Cost of film rights comprises original purchase price / minimum guarantee. Cost is ascertained on specific identification basis where possible. In case multiple films / rights are acquired for a consolidated amount, cost is allocated to each film / right based on management's best estimates.

The individual film forecast method is used to amortise the cost of film rights acquired. Under this method, costs are amortised in the proportion that gross revenues realised bear to management's estimate of the total gross revenues expected to be received. If estimates of the total revenues and other events or changes in circumstances indicate that the realisable value of a right is less than its unamortised cost, a loss is recognised for the excess of unamortised cost over the film right's realisable value.

Liabilities examples of liability accounts include accounts payable and long term debt.

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Advertisement / sponsorship revenue

Reliance generates its revenues from advertisements and sponsorships that it offers to various companies. BIG FM as well as some other subsidiaries of 'Reliance Mediaworks' like the 'Adlabs' generates revenues through advertisement offerings.

Film production and related income

The day the film rights are sold, the income/revenue from film production is registered in the book of accounts.

Income from film distribution activity

Distribution rights for a film produced by Reliance Mediaworks, overseas rights, video, music or satellite rights are sold and the revenues are registered by SAP.

Film production services

Revenue from processing / printing of cinematographic films is recognised upon completion of the related processing / printing.

Theatrical exhibition and related income

Revenues are also generated by the sale of tickets at Big Cinemas. The entertainment tax is exempted from the revenue.

Interest income / income from film financing

Revenues may also be generated from financing a particular film and then eventually buying the film.

Foreign currency transactions

Due to operations in various countries, Reliance has the revenues in various currencies which is converted into rupees at the end of the year. The difference in exchange rates may cause additional revenue for the company.

Expense/Cost

Expense or cost can defined as outflows from the company.

Personal costs

Salaries, wages, bonuses, PPF, staff welfare expenses

Operational costs

Advertisement, bank charges, rent, insurance, labour charges, loss on sale, bad debts, printing and communication, other miscellaneous expenses.

Other costs include interest payment on the loans, financial charges etc.

Receivable accounts-: Managing a list of receivable accounts can be very tedious if done manually. This problem is solved using SAP which records and manages such accounts. The Accounts Receivable component of the Prism Financials module reveals a 360° view of sales performance - the basis for accurate and effective decision-making. Accounts Receivable stores all customer information, terms, transactions and balances, streamlining dayto- day administration. It provides management with full and accurate graphical analysis, projections of sales, receipts and cash flow. Credit control facilities with comprehensive diary notes and sales history facilitate easy customer management. Full integration is provided from Accounts Receivable to the General Ledger and Cash Book components of the Financials module, as well as the Job Costing and Inventory modules on a real time basis.

Payable accounts-: Just as we have receivable accounts to record the income so also a record should be maintained for the outgoing payments that are to be made.

With the Accounts Payable component of the Prism Financials module you'll achieve efficiencies throughout your invoice and payment process. By storing all your supplier information, transactions and balances, and providing detailed analysis of your purchases, Accounts Payable will prove an invaluable tool within your accounts department. Staff can automatically create payment runs and print computerised checks and remittances, in addition to allowing multiple currencies by creditor. Extensive graphical reporting on all expenses incurred provides management with vital decision making information.

Taxation-: Calculation of taxes (sales and purchases) and reporting of the same is easily done using SAP.

Income-tax expense comprises current tax expense computed in accordance with the relevant provisions of the Income tax Act, 1961 and deferred tax charge or credit.

Deferred tax charge or credit and the corresponding deferred tax liability or asset is recognised for timing differences between the profits / losses offered for income taxes and profits / losses as per the financial statements. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

Entertainment tax is also levied as a form of tax.

Accrual accounting-: Accrual means recording revenue or cost as soon as they are earned and not wait for the time when they would be settled. SAP helps in managing payable and receivable accounts according to accrual accounting.

Benifits to Reliance Mediaworks

The operating costs have reduced and the efficiency has been increased thereby increasing the incoming royalties.

The transaction and communication charges have gone down drastically thereby increasing the profit margins for the company.

The cost of integration with finance and accounting management has reducing and has resulted in incremental revenue for the company.

Replacing manual accounting with the new system has improved the transparency and simplicity of managing accounts.

Version: SAP Crystal Reports

Editions: SAP Crystal Reports comes in a single edition that is the feature equivalent of the previous Developer Edition. SAP Crystal Reports Dashboard Design package is a soft bundle of SAP Crystal Reports and SAP Crystal Dashboard Desing (formerly known as Xcelsius Engage).

Data sources: Native, ODBC, OLE DB, and JDBC connectivity to relational, OLAP, web services, XML, and enterprise data sources, and new salesforce.com driver.

License model: Licensed per named user

Languages: English, French, German, Italian, Spanish, Portuguese (Brazilian), Dutch, Swedish, Russian, Simplified Chinese, Traditional Chinese, Japanese, Korean, Polish, Norwegian, Thai, Czech, and Finnish

System Requirements

Disk space: 300 MB available hard drive space, 600 MB recommended with SAP Crystal Reports, version for Visual Studio .NET

Operating systems: Microsoft Windows 7, Windows Vista, Windows XP with Service Pack (SP) 2, Windows Server 2003 with SP1, or later

Integrated development environments: SAP Crystal Reports, version for Visual Studio 2008, 2005, and 2003

Flash Support: Embedded Flash objects can be viewed with the .NET Winform viewer, .Net Webform viewer, Java DHTML viewer, SAP Crystal Reports viewer, and exported PDF files.

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