Question

Explain and give an example of how a film company can inflate their costs and lower their net income for a specific movie through the use of a related entity (or entities).

Answer 1

Hello Buddy,

There are several ways in which any company can inflate their costs be it a film company or any other.

Ways in which a film company can inflate its costs are as follows -

a) Inflate fees of producers (themselves)

b) Overhead costs are inflated ( Day to Day expenses or rents to related parties etc.)

c) Unnecesary legal charges, insurance expenses, financing costs, etc, where all such expenses are paid to people or companies under control of the producer himself. (Paid to related entities)

I hope the above solution is what you were looking for. For any further queries or doubts in the solution, please feel free to drop a comment. Please do leave a positive feedback, Thank you :)