A system and method that reduces computational complexity of a decoder by identifying a skippable region in anoverlaid area. The invention provides a system for processing encoded video data, comprising: an analysis system that determines if a current video frame having an overlaid area acts as a reference for future video frames; and a system for identifying a skippable region in the overlaid area. The invention may also include a system for identifying a portion of the overlaid area as the skippable based on analysis of motion vectors or motion vector ranges.