Goliath Productions in Film Industry - Case Study Example

The contract also gives Giant the exclusive right to show the five films during the six-month contract period. Another criterion is that the revenue is already earned, that is, the company has already delivered the goods bought by the buyer under their contract, has already transferred the risks and rewards of using the item sold, and no longer has any obligation to perform further services after delivery of the bought item. In Goliath’s case, with the presence of an existing contract with Giant, a reasonably certain amount of revenue and the receipt of payments, Goliath may claim that it has already realized the revenues from the said contract.

 In addition, when Goliath delivered the five films to Giant for the latter’s film showing, Goliath has also earned the revenues under the contract. Thus, the two criteria have been substantially met. However, there is the matter of Goliath’s obligation to Giant that it will not allow other theatres to show the films during the contract period. This is a controllable condition on Goliath’s part and if Goliath is certain that it can meet this condition, then it can recognize the revenues from the said contract.

This means that Goliath can recognize the fixed fee of $5,000,000 on a straight-line basis over the six month period and the variable fee of $500 for each film showing upon proof that the actual showing has taken place. However, if Goliath is not certain it can meet this condition (and in this case, it seems that Goliath did not meet it), then it should only recognize all the revenues from the said contract after the six-month period has lapsed because only then will Goliath be able to ascertain that it has already met all the necessary criteria for recognizing its revenues under this contract.