Summary:
Cinemark Inc. is now the second largest theater chain in United States and it reported that over the Winter holidays the attendance at the theater rose 21%. This increase customers went down in the history of the U.S. movie theater industry being a record setting quarter. Revenue earned from movie tickets increased by 34% and revenue earned through concession jumped 28%. Most of the these profits came from an increase in attendance of consumers, and the rest of it came from an increase in ticket costs. This caused an increase in the company's shares by 36 cents each.
Connection:
Upon reading this article I can see that the relationship between Cinemark's booming success and chapter 4 is revenue recognition. Cinemark is recording revenue and profits under GAAP principles. Also, although Cinemark may have huge potential for future profits, they aren't recording it down because that would be bad accounting practice and many people, especially shareholders, will be mislead into overestimating Cinemark's performance. One of such principles that Cinemark is following is the matching principle. This states that the expenses must be recorded in the same fiscal period as the revenue it was used to generate.
Reflection:
I believe that a major factor that attracted an increase in attendance at theaters is the improved technology that present day theaters now have installed. The new 3-D effects that were implemented in "Avatar" is an example of this. Consumers chose to buy tickets to watch the movie in IMAX instead of waiting for the DVD or Blue-ray version to be released. The 3-D technology may have increased expenses by a lot theaters, but the overall profit margin increases since it attracts more customers, and the 3-D glasses used to view the movie can be easily recyclable.
Connection:
Upon reading this article I can see that the relationship between Cinemark's booming success and chapter 4 is revenue recognition. Cinemark is recording revenue and profits under GAAP principles. Also, although Cinemark may have huge potential for future profits, they aren't recording it down because that would be bad accounting practice and many people, especially shareholders, will be mislead into overestimating Cinemark's performance. One of such principles that Cinemark is following is the matching principle. This states that the expenses must be recorded in the same fiscal period as the revenue it was used to generate.
Reflection:
I believe that a major factor that attracted an increase in attendance at theaters is the improved technology that present day theaters now have installed. The new 3-D effects that were implemented in "Avatar" is an example of this. Consumers chose to buy tickets to watch the movie in IMAX instead of waiting for the DVD or Blue-ray version to be released. The 3-D technology may have increased expenses by a lot theaters, but the overall profit margin increases since it attracts more customers, and the 3-D glasses used to view the movie can be easily recyclable.
