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Microsoft Excel LibreOffice Calc

PepsiCo Inc. (PEP)


Analysis of Goodwill and Intangible Assets

Advanced level


Accounting Policy on Goodwill and Intangible Assets

Indefinite-lived intangible assets and goodwill are not amortized and, as a result, are assessed for impairment at least annually, using either a qualitative or quantitative approach. PepsiCo performs this annual assessment during the third quarter. Where PepsiCo uses the qualitative assessment, first PepsiCo determines if, based on qualitative factors, it is more likely than not that an impairment exists. Factors considered include macroeconomic, industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the brand or reporting unit. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

In the quantitative assessment of indefinite lived-intangible assets and goodwill, an assessment is performed to determine the fair value of the indefinite-lived intangible asset and the reporting unit, respectively. Estimated fair value is determined using discounted cash flows and requires an analysis of several estimates including future cash flows or income consistent with management’s strategic business plans, annual sales growth rates, perpetuity growth assumptions and the selection of assumptions underlying a discount rate (weighted-average cost of capital) based on market data available at the time. Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors to estimate future levels of sales, operating profit or cash flows. All assumptions used in PepsiCo’s impairment evaluations for indefinite-lived intangible assets and goodwill, such as forecasted growth rates and weighted-average cost of capital, are based on the best available market information and are consistent with the internal forecasts and operating plans.

Amortizable intangible assets are only evaluated for impairment upon a significant change in the operating or macroeconomic environment. If an evaluation of the undiscounted future cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on its discounted future cash flows.

Source: 10-K (filing date: 2019-02-15).


Goodwill and Intangible Assets Disclosure

PepsiCo Inc., balance sheet: goodwill and intangible assets

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
Acquired franchise rights hidden hidden hidden hidden hidden
Reacquired franchise rights hidden hidden hidden hidden hidden
Brands hidden hidden hidden hidden hidden
Other identifiable intangibles hidden hidden hidden hidden hidden
Amortizable intangible assets, gross hidden hidden hidden hidden hidden
Accumulated amortization hidden hidden hidden hidden hidden
Amortizable intangible assets, net hidden hidden hidden hidden hidden
Reacquired franchise rights hidden hidden hidden hidden hidden
Acquired franchise rights hidden hidden hidden hidden hidden
Brands hidden hidden hidden hidden hidden
Other indefinite-lived intangible assets hidden hidden hidden hidden hidden
Other intangible assets hidden hidden hidden hidden hidden
Goodwill hidden hidden hidden hidden hidden
Intangible assets hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

Item Description The company
Other intangible assets Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. PepsiCo Inc.’s other intangible assets increased from 2016 to 2017 and from 2017 to 2018.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. PepsiCo Inc.’s goodwill increased from 2016 to 2017 and from 2017 to 2018.
Intangible assets Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. PepsiCo Inc.’s intangible assets increased from 2016 to 2017 and from 2017 to 2018.

Adjustments to Financial Statements: Removal of Goodwill

PepsiCo Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total PepsiCo Shareholders’ Equity
Total PepsiCo shareholders’ equity (as reported) hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden
Total PepsiCo shareholders’ equity (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).


PepsiCo Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Goodwill (Summary)

PepsiCo Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. PepsiCo Inc.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. PepsiCo Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

PepsiCo Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
As Reported
Selected Financial Data (US$ in millions)
Net revenue hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Activity Ratio
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net revenue hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden
Activity Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

1 Total asset turnover = Net revenue ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net revenue ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. PepsiCo Inc.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets hidden hidden hidden hidden hidden
Total PepsiCo shareholders’ equity hidden hidden hidden hidden hidden
Solvency Ratio
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets hidden hidden hidden hidden hidden
Adjusted total PepsiCo shareholders’ equity hidden hidden hidden hidden hidden
Solvency Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

1 Financial leverage = Total assets ÷ Total PepsiCo shareholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total PepsiCo shareholders’ equity
= hidden ÷ hidden = hidden

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to PepsiCo hidden hidden hidden hidden hidden
Total PepsiCo shareholders’ equity hidden hidden hidden hidden hidden
Profitability Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income attributable to PepsiCo hidden hidden hidden hidden hidden
Adjusted total PepsiCo shareholders’ equity hidden hidden hidden hidden hidden
Profitability Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

1 ROE = 100 × Net income attributable to PepsiCo ÷ Total PepsiCo shareholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Net income attributable to PepsiCo ÷ Adjusted total PepsiCo shareholders’ equity
= 100 × hidden ÷ hidden = hidden

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to PepsiCo hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Profitability Ratio
ROA1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income attributable to PepsiCo hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden
Profitability Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

1 ROA = 100 × Net income attributable to PepsiCo ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Net income attributable to PepsiCo ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. PepsiCo Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.