Accounting and Global Piracy
1. Executive Summary
Global piracy is a problem that the software and music industry are facing nowadays. The industries are claiming that significant losses are suffered in regards to these piracies all over the world. In response to this problem, many companies in the industry are trying to track and uncover the practices of piracy. Many different organizations also work together side by side with these companies in order to fight piracy, some of those organizations are Recording Industry Associations of America (RIAA), and International Federation of the Phonograph Industry (IFPI). The companies also try to ‘estimate’ the lost of sale figures that are growing exponentially over the last few years. The lost of sale figures is the total amount of customer that buys pirated cds which instead are able to buy original copies.
These different actions will certainly create costs and expenses for the company that needs to be paid for, and these costs needs to be recorded in the financial statements of the company itself. The dilemma in this case is the method we are going to use to input these numbers into the statement. The numbers can be input into the statement either as an asset in the balance sheet or as an expense in the profit and loss statement. The way that these numbers are input to the statements depend on how actions are taken, the criteria of the actions, future benefits of the actions, and also the period of time the action will take place. These criteria and methods will be discussed in depth in the extent of this paper.
The purpose of this paper is to examine the importance of facing the piracy problem in the music industry and also to explore it from the accounting point of view so that the audience can get a clear understanding on how to treat ‘costs’ relating to actions in facing piracy. This paper will also identify what defines and determine an item to be an asset and an expense. Its criteria will also be thoroughly discussed. Also the
Global piracy is a problem that the software and music industry are facing nowadays. The industries are claiming that significant losses are suffered in regards to these piracies all over the world. In response to this problem, many companies in the industry are trying to track and uncover the practices of piracy. Many different organizations also work together side by side with these companies in order to fight piracy, some of those organizations are Recording Industry Associations of America (RIAA), and International Federation of the Phonograph Industry (IFPI). The companies also try to ‘estimate’ the lost of sale figures that are growing exponentially over the last few years. The lost of sale figures is the total amount of customer that buys pirated cds which instead are able to buy original copies.
These different actions will certainly create costs and expenses for the company that needs to be paid for, and these costs needs to be recorded in the financial statements of the company itself. The dilemma in this case is the method we are going to use to input these numbers into the statement. The numbers can be input into the statement either as an asset in the balance sheet or as an expense in the profit and loss statement. The way that these numbers are input to the statements depend on how actions are taken, the criteria of the actions, future benefits of the actions, and also the period of time the action will take place. These criteria and methods will be discussed in depth in the extent of this paper.
The purpose of this paper is to examine the importance of facing the piracy problem in the music industry and also to explore it from the accounting point of view so that the audience can get a clear understanding on how to treat ‘costs’ relating to actions in facing piracy. This paper will also identify what defines and determine an item to be an asset and an expense. Its criteria will also be thoroughly discussed. Also the
References: Bazley, M., Hancock, P., Berry, A. and Jarvis R., (2004) Contemporary Accounting, 5 Edition, Nelson ITP, South Melbourne Hornby AS, (1987) Oxford Advanced Learner’s Dictionary of Current English, 3rd Edition, Hazell Watson & Viney Limited, England Smith T. 2001, ‘CD anti-piracy system can nuke hi-fi kit’, The Age, Available from:Factiva [20 August 2006] Anonymous Miller, N. 2006, ‘Your Number’s Up’, The Age. Available from: Factiva. [20 August 2006] International Accounting Standards Board (IASB)