Do you think Hollywood is not subject to regulators?
Does Disney file a 10-K? Has star wars made a profit?
I'd suggest reading the linked wikipedia article first to understand what hollywood accounting actually is. It is neither illegal nor fraudulent. It is arguably immoral, but we aren't talking about morals in this thread. I'll assume you simply don't know what the term Hollywood accounting actually means and that's why you thought I was saying Ford committed fraud.
Yes, and they are not required to breakdown financial figures for each movie they make.
> It is neither illegal nor fraudulent.
Because it is not subject to regulations, it is specifically designed to screw various vendors in the movie business, without violating any business agreements (or skirting the line so that it is not worth the counterparty to file a lawsuit).
If Disney did try to submit a 10-K with the same calculations they do for their “Hollywood accounting”, it would be illegal.
The key point in the Hollywood accounting Wikipedia write up is:
> Because of the studio's ability to place arbitrary charges along the value chain, net participation "points" (a percentage of the net income as opposed to a percentage of the gross income of a film) are sometimes referred to as "monkey points". The term is attributed to Eddie Murphy, who is said to have also stated that only a fool would accept net points in their contract.
This is all irrelevant for SEC filings, since those have to include ALL ins and outs of the business. If a Disney CEO tried to screw investors by artificially lowering net income and reducing the investors’ profit, heads would roll.
This is ignoring the basic fact that CEO and other company executives are compensated in shares in the first place, which means they want net income to be high so that the share price goes higher.
> This is all irrelevant for SEC filings, since those have to include ALL ins and outs of the business. If a Disney CEO tried to screw investors by artificially lowering net income and reducing the investors’ profit, heads would roll.
The Disney CEO wouldn't screw investors by lowering net income. Investors aren't (generally) compensated with income. In fact, the opposite is true, Disney can force net income down buy doing a stock buy back which drives the stock prices higher. There's a reason investors, for the most part, ignore net income. In fact, always having a positive net income is generally a sign that the company is not investing and growing, which in and of itself is generally treated as a negative sign from investors.
> This is ignoring the basic fact that CEO and other company executives are compensated in shares in the first place, which means they want net income to be high so that the share price goes higher.
Net income is barely a predictor for stock prices (especially now-a-days). For example, disney had a 170% increase in net income in their March quarterly report. Did they see a 170% increase in stock price? A 17% increase? Or a slight loss?
