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Microsoft Excel LibreOffice Calc

PepsiCo Inc. (PEP)

Analysis of Revenues

Difficulty: Advanced

Revenue Recognition Accounting Policy

PepsiCo recognizes revenue when the performance obligation is satisfied. PepsiCo’s primary performance obligation (the distribution and sales of beverage products and food and snack products) is satisfied upon the shipment or delivery of products to the customers, which is also when control is transferred. Merchandising activities are performed after a customer obtains control of the product, are accounted for as fulfillment of PepsiCo’s performance obligation to ship or deliver product to the customers and are recorded in selling, general and administrative expenses. Merchandising activities are immaterial in the context of PepsiCo’s contracts.

The transfer of control of products to PepsiCo’s customers is typically based on written sales terms that do not allow for a right of return. However, PepsiCo’s policy for DSD and certain chilled products is to remove and replace damaged and out-of-date products from store shelves to ensure that consumers receive the product quality and freshness they expect. Similarly, PepsiCo’s policy for certain warehouse-distributed products is to replace damaged and out-of-date products. As a result, PepsiCo records reserves, based on estimates, for anticipated damaged and out-of-date products.

In addition, upon adoption of the revenue recognition guidance, PepsiCo excludes from net revenue and cost of sales, all sales, use, value-added and certain excise taxes assessed by governmental authorities on revenue-producing transactions.

PepsiCo’s products are sold for cash or on credit terms. PepsiCo’s credit terms, which are established in accordance with local and industry practices, typically require payment within 30 days of delivery in the United States, and generally within 30 to 90 days internationally, and may allow discounts for early payment.

PepsiCo estimates and reserves for the bad debt exposure based on the experience with past due accounts and collectibility, the aging of accounts receivable and the analysis of customer data. Bad debt expense is classified within selling, general and administrative expenses on PepsiCo’s income statement.

PepsiCo is exposed to concentration of credit risk from the major customers, including Walmart. In 2018, sales to Walmart (including Sam’s) represented approximately 13% of PepsiCo’s consolidated net revenue, including concentrate sales to the independent bottlers, which were used in finished goods sold by them to Walmart. PepsiCo has not experienced credit issues with these customers.

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

Revenues as Reported

PepsiCo Inc., Income Statement, Revenues

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
Frito-Lay North America (FLNA) hidden hidden hidden hidden hidden
Quaker Foods North America (QFNA) hidden hidden hidden hidden hidden
North America Beverages (NAB) hidden hidden hidden hidden hidden
Latin America hidden hidden hidden hidden hidden
Europe Sub-Saharan Africa (ESSA) hidden hidden hidden hidden hidden
Asia, Middle East and North Africa (AMENA) hidden hidden hidden hidden hidden
Net revenue 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
Net revenue Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss). PepsiCo Inc.’s net revenue increased from 2016 to 2017 and from 2017 to 2018.