FINANCIAL DATA FOR QUESTIONS IN THE WEB LINK BELOW http://www.zonebourse.com/DR-
ID: 2547819 • Letter: F
Question
FINANCIAL DATA FOR QUESTIONS IN THE WEB LINK BELOW
http://www.zonebourse.com/DR-PEPPER-SNAPPLE-GROUP-3017910/pdf/813894/Dr%20Pepper%20Snapple%20Group_SEC-Filing-10K.pdf
Instructions: Use the financial statements from the annual report for the year ended 12/31/2017 for Dr. Pepper Snapple Group (DPSG). The Annual Report is on MOODLE. Answer the questions after each question. Use a different font to distinguish your answer from the question. All answers should be in your own words. Do not cut and paste from the annual report. Answers will be graded for content and written communication skills. Use complete sentences in answering questions.
MAKE A NOTATION HERE IF THE DOLLAR AMOUNTS ARE STATED IN MILLIONS.
What three Accounting Standards Updates will be adopted for the quarter ending March 31, 2018 (List the number and the Name-Example: ASU 2017-07 Impairment of Goodwill)? What is the expected impact of these new standards to the financial statements?
When does DPSG recognize revenue? Why do they have deferred revenue (unearned revenue)? Do they handle consistently with the material presented in ACC 3100?
In regards to fair value, does DPSG use the three-level hierarchy for disclosure? What level are the majority of their assets and liabilities that are measured at fair value on a recurring basis?
Did DPSG have any acquisitions fiscal year 2017? If so, what was the acquisition? Did it include any goodwill?
29. What was DPSG’s current ratio and working capital as of 12/31/2017?
30. In a two detailed paragraph, indicate a couple of interesting items you learned while reading this annual report.
Explanation / Answer
Accounting standard to be adopted from quarter ending March 31, 2018
1. ASU 2014-09, Revenue from Contracts with Customers (Topic 606)
The company expects the decrease in the retained earnings due to increase in the customer incentives as the company shall adopt the modified retrospective approach.
The new standard shall also impact the disclosure requirement.
2. ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost
The company expects to have an impact of reclassification of $ 7 million, pertaining to pension and other PRMB expenses, from SG&A to other non-operating income (net).
Recognition of revenue
The accounting policy of the company states the following with respect to recognition of revenue-
a) The company recognizes revenue when all of the following conditions occur-
The Company have long term contracts with the PepsiCo and Coca-Cola Company. The Company has received one-time non-refundable cash deposits from these companies which are to be recognized as revenue over the estimated life of 25 years of customer relationship. Therefore, the company has unearned revenue which shall be recognized as revenue.
Fair value disclosures
Yes, the company has presented the three level i.e. Level 1, Level 2 and Level 3 hierarchy for fair value disclosures for financial assets and financial liabilities.
Majority of their assets and liabilities that are measured at fair value on a recurring basis are disclosed on level 2 hierarchy calculated after taking into consideration current market price and creditworthiness.
Goodwill
The company has done the step-acquisition of Bai Brands. The goodwill from this step-acquisition is $568 million.
Current ratio and working capital
Working capital:
Current assets- current liabilities
=1117- 1268
= (151)
Current ratio
= Current assets/ current liabilities
=1117/1268
= 0.88
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