A few months back, we wrote about yet another example of Hollywood accounting appearing in the courts, when StudioCanal sued Universal Studios, saying that Universal (which, for many years, was owned by the same parent company) had cheated them out of millions that it owed them for certain movies, according to an audit. These kinds of audits are pretty standard practice in Hollywood. You hear about them all the time. The studios do everything possible not to pay, and eventually the party who's pretty damn sure they're being cheated (usually because they are) conducts an audit which shows how much they're actually owed.
In this case, Universal has hit back with its own "re-examination" of the accounting that doesn't only say that it doesn't owe StudioCanal any money but that that it actually overpaid:
"Indeed, as a result of the audit reports, Universal has re-examined its accounting generally and has specifically re-examined almost all of the alleged improper practices identified by StudioCanal's auditors. In so doing, Universal has determined that not only has its accounting been consistent with both the [Joint Venture] Agreement and the [Co-Financing and Distribution Agreement], but Universal actually significantly overpaid StudioCanal in connection with four movies for which third-party expenses were substantially undercharged. Thus, the net result of the audits and Universal's re-examination will likely be an amount owing from StudioCanal to Universal."
I don't deny that Universal Studios probably has some of the most.... er... creative accountants in the business, so I'm sure they can put together something that supports this claim, but upfront it seems extremely dubious. If you look over the history of
Hollywood accounting, this is the thing that the big studios like Universal are the experts at: doing anything possible not to pay what they owe. I imagine this will get more interesting before it's over. StudioCanal's lawyers are already flabbergasted, as they told The Hollywood Reporter:
"Honestly, the information they provided in supposed error in their favor is so messed up. All it tells us is that we can have no confidence in their accounting system, and we will have to dig much deeper."
In fact, he suggests that Universal has now opened a new avenue for investigating the company's accounting tricks:
He adds that what is being claimed is "horrifying" and that it illustrates the need to do more auditing. "We only audited six films," he said. "We didn't audit TV. There's a lot more digging to do."
Dig away...
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