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There has been more interest recently in the research of accounting practices in areas of popular culture. One such area of popular culture, and where there has been some interesting accounting stories is film-making.

Consider for instance the block-buster film, Forrest Gump, released in 1994. Starring the world-famous actor Tom Hanks, of course, winner of many accolades including 6 Academy Awards, and in its time hailing record box office receipts, the film’s profits have been surprising low. And, this is all really down to the accounting of the film.

According to popular media reports, the writer of the book on which the film is based received somewhere in the region of $300k for the rights to make a film, and then ‘only’ $250k receipts from the film studio based on net profits for the film. While to you and I these might seem like enormous monies, they are not really so huge in this type of industry, even back in 1994.

Hollywood, and their film studios (which are effectively the accounting/profit centres) are notorious for idiosyncratic accounting practices, and it is these practices which have steered such a smash-hit film towards surprisingly low profitability. For instance, it is claimed that the studio for Forest Gump allocated significant and many expenses against gross profits, including a charge for losses in future films! And also, maybe bizarrely, major stakeholders such as the lead actor Tom Hanks, are claimed to have received part of their payment based on gross profits (which is bound to have a sizeable effect on net profit).