Inventory Accounting Policy

Inventories are stated at the lower of cost or market. The cost of approximately 80% of inventories is determined using the first-in, first-out ("FIFO") method. The cost of all other inventories, in the U.S. and Mexico, is determined using the last-in, first-out ("LIFO") method.

Source: Colgate-Palmolive Co., Annual Report

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Inventory Disclosure

Colgate-Palmolive Co., Statement of Financial Position, Inventory

USD $ in millions

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Raw materials and supplies 349  340  362  319  295 
Work-in-process 55  60  81  54  50 
Finished goods 978  1,025  922  954  877 
Inventories 1,382  1,425  1,365  1,327  1,222 

Source: Based on data from Colgate-Palmolive Co. Annual Reports

Item Description The company
Raw materials and supplies Aggregated amount of unprocessed materials to be used in manufacturing or production process and supplies that will be consumed. Colgate-Palmolive Co.'s raw materials and supplies declined from 2012 to 2013 but then slightly increased from 2013 to 2014.
Work-in-process Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing. Colgate-Palmolive Co.'s work-in-process declined from 2012 to 2013 and from 2013 to 2014.
Finished goods Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Colgate-Palmolive Co.'s finished goods increased from 2012 to 2013 but then slightly declined from 2013 to 2014.
Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). Colgate-Palmolive Co.'s inventories increased from 2012 to 2013 but then slightly declined from 2013 to 2014 not reaching 2012 level.

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Adjustment to Inventory: from LIFO to FIFO

Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in millions

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Adjustment to Inventories
Inventories at LIFO (as reported) 1,382  1,425  1,365  1,327  1,222 
Add: Inventory LIFO reserve 18  37  37  30  52 
Inventories at FIFO (adjusted) 1,400  1,462  1,402  1,357  1,274 
Adjustment to Current Assets
Current assets (as reported) 4,863  4,822  4,556  4,402  3,730 
Add: Inventory LIFO reserve 18  37  37  30  52 
Current assets (adjusted) 4,881  4,859  4,593  4,432  3,782 
Adjustment to Total Assets
Total assets (as reported) 13,459  13,876  13,394  12,724  11,172 
Add: Inventory LIFO reserve 18  37  37  30  52 
Total assets (adjusted) 13,477  13,913  13,431  12,754  11,224 
Adjustment to Total Colgate-Palmolive Company Shareholders' Equity
Total Colgate-Palmolive Company shareholders' equity (as reported) 1,145  2,305  2,189  2,375  2,675 
Add: Inventory LIFO reserve 18  37  37  30  52 
Total Colgate-Palmolive Company shareholders' equity (adjusted) 1,163  2,342  2,226  2,405  2,727 
Adjustment to Net Income Attributable To Colgate-Palmolive Company
Net income attributable to Colgate-Palmolive Company (as reported) 2,180  2,241  2,472  2,431  2,203 
Add: Increase (decrease) in inventory LIFO reserve (19) (22) (3)
Net income attributable to Colgate-Palmolive Company (adjusted) 2,161  2,241  2,479  2,409  2,200 

Colgate-Palmolive Co.'s inventory value on Dec 31, 2014 would be $1,400  (in millions) if the FIFO inventory method was used instead of LIFO. Colgate-Palmolive Co.'s inventories, valued on a LIFO basis, on Dec 31, 2014 were $1,382 . Colgate-Palmolive Co.'s inventories would have been $18  higher than reported on Dec 31, 2014 if the FIFO method had been used instead.

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Adjusted Ratios: LIFO vs. FIFO (Summary)

Colgate-Palmolive Co., adjusted ratios

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Current Ratio
Reported current ratio (LIFO) 1.23 1.08 1.22 1.18 1.00
Adjusted current ratio (FIFO) 1.24 1.09 1.23 1.19 1.01
Net Profit Margin
Reported net profit margin (LIFO) 12.62% 12.86% 14.47% 14.53% 14.15%
Adjusted net profit margin (FIFO) 12.51% 12.86% 14.51% 14.40% 14.14%
Total Asset Turnover
Reported total asset turnover (LIFO) 1.28 1.26 1.28 1.32 1.39
Adjusted total asset turnover (FIFO) 1.28 1.25 1.27 1.31 1.39
Financial Leverage
Reported financial leverage (LIFO) 11.75 6.02 6.12 5.36 4.18
Adjusted financial leverage (FIFO) 11.59 5.94 6.03 5.30 4.12
Return on Equity (ROE)
Reported ROE (LIFO) 190.39% 97.22% 112.93% 102.36% 82.36%
Adjusted ROE (FIFO) 185.81% 95.69% 111.37% 100.17% 80.67%
Return on Assets (ROA)
Reported ROA (LIFO) 16.20% 16.15% 18.46% 19.11% 19.72%
Adjusted ROA (FIFO) 16.03% 16.11% 18.46% 18.89% 19.60%
Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Colgate-Palmolive Co.'s adjusted current ratio deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Colgate-Palmolive Co.'s adjusted net profit margin deteriorated from 2012 to 2013 and from 2013 to 2014.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted total asset turnover deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 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.
Colgate-Palmolive Co.'s adjusted financial leverage declined from 2012 to 2013 but then increased from 2013 to 2014 exceeding 2012 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Colgate-Palmolive Co.'s adjusted ROE deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted ROA deteriorated from 2012 to 2013 and from 2013 to 2014.

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Adjusted Current Ratio

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
As Reported
Current assets (USD $ in millions) 4,863  4,822  4,556  4,402  3,730 
Current liabilities (USD $ in millions) 3,946  4,470  3,736  3,716  3,728 
Current ratio1 1.23 1.08 1.22 1.18 1.00
Adjusted: from LIFO to FIFO
Adjusted current assets (USD $ in millions) 4,881  4,859  4,593  4,432  3,782 
Current liabilities (USD $ in millions) 3,946  4,470  3,736  3,716  3,728 
Adjusted current ratio2 1.24 1.09 1.23 1.19 1.01

2014 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 4,863 ÷ 3,946 = 1.23

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 4,881 ÷ 3,946 = 1.24

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Colgate-Palmolive Co.'s adjusted current ratio deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level.

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Adjusted Net Profit Margin

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
As Reported
Net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,180  2,241  2,472  2,431  2,203 
Net sales (USD $ in millions) 17,277  17,420  17,085  16,734  15,564 
Net profit margin1 12.62% 12.86% 14.47% 14.53% 14.15%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,161  2,241  2,479  2,409  2,200 
Net sales (USD $ in millions) 17,277  17,420  17,085  16,734  15,564 
Adjusted net profit margin2 12.51% 12.86% 14.51% 14.40% 14.14%

2014 Calculations

1 Net profit margin = 100 × Net income attributable to Colgate-Palmolive Company ÷ Net sales
= 100 × 2,180 ÷ 17,277 = 12.62%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Colgate-Palmolive Company ÷ Net sales
= 100 × 2,161 ÷ 17,277 = 12.51%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Colgate-Palmolive Co.'s adjusted net profit margin deteriorated from 2012 to 2013 and from 2013 to 2014.

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Adjusted Total Asset Turnover

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
As Reported
Net sales (USD $ in millions) 17,277  17,420  17,085  16,734  15,564 
Total assets (USD $ in millions) 13,459  13,876  13,394  12,724  11,172 
Total asset turnover1 1.28 1.26 1.28 1.32 1.39
Adjusted: from LIFO to FIFO
Net sales (USD $ in millions) 17,277  17,420  17,085  16,734  15,564 
Adjusted total assets (USD $ in millions) 13,477  13,913  13,431  12,754  11,224 
Adjusted total asset turnover2 1.28 1.25 1.27 1.31 1.39

2014 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 17,277 ÷ 13,459 = 1.28

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 17,277 ÷ 13,477 = 1.28

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted total asset turnover deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level.

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Adjusted Financial Leverage

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
As Reported
Total assets (USD $ in millions) 13,459  13,876  13,394  12,724  11,172 
Total Colgate-Palmolive Company shareholders' equity (USD $ in millions) 1,145  2,305  2,189  2,375  2,675 
Financial leverage1 11.75 6.02 6.12 5.36 4.18
Adjusted: from LIFO to FIFO
Adjusted total assets (USD $ in millions) 13,477  13,913  13,431  12,754  11,224 
Adjusted total Colgate-Palmolive Company shareholders' equity (USD $ in millions) 1,163  2,342  2,226  2,405  2,727 
Adjusted financial leverage2 11.59 5.94 6.03 5.30 4.12

2014 Calculations

1 Financial leverage = Total assets ÷ Total Colgate-Palmolive Company shareholders' equity
= 13,459 ÷ 1,145 = 11.75

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Colgate-Palmolive Company shareholders' equity
= 13,477 ÷ 1,163 = 11.59

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.
Colgate-Palmolive Co.'s adjusted financial leverage declined from 2012 to 2013 but then increased from 2013 to 2014 exceeding 2012 level.

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Adjusted Return On Equity (ROE)

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
As Reported
Net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,180  2,241  2,472  2,431  2,203 
Total Colgate-Palmolive Company shareholders' equity (USD $ in millions) 1,145  2,305  2,189  2,375  2,675 
ROE1 190.39% 97.22% 112.93% 102.36% 82.36%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,161  2,241  2,479  2,409  2,200 
Adjusted total Colgate-Palmolive Company shareholders' equity (USD $ in millions) 1,163  2,342  2,226  2,405  2,727 
Adjusted ROE2 185.81% 95.69% 111.37% 100.17% 80.67%

2014 Calculations

1 ROE = 100 × Net income attributable to Colgate-Palmolive Company ÷ Total Colgate-Palmolive Company shareholders' equity
= 100 × 2,180 ÷ 1,145 = 190.39%

2 Adjusted ROE = 100 × Adjusted net income attributable to Colgate-Palmolive Company ÷ Adjusted total Colgate-Palmolive Company shareholders' equity
= 100 × 2,161 ÷ 1,163 = 185.81%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Colgate-Palmolive Co.'s adjusted ROE deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level.

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Adjusted Return On Assets (ROA)

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
As Reported
Net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,180  2,241  2,472  2,431  2,203 
Total assets (USD $ in millions) 13,459  13,876  13,394  12,724  11,172 
ROA1 16.20% 16.15% 18.46% 19.11% 19.72%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,161  2,241  2,479  2,409  2,200 
Adjusted total assets (USD $ in millions) 13,477  13,913  13,431  12,754  11,224 
Adjusted ROA2 16.03% 16.11% 18.46% 18.89% 19.60%

2014 Calculations

1 ROA = 100 × Net income attributable to Colgate-Palmolive Company ÷ Total assets
= 100 × 2,180 ÷ 13,459 = 16.20%

2 Adjusted ROA = 100 × Adjusted net income attributable to Colgate-Palmolive Company ÷ Adjusted total assets
= 100 × 2,161 ÷ 13,477 = 16.03%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted ROA deteriorated from 2012 to 2013 and from 2013 to 2014.

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