Analysis of the Accounting Policies of Pepsico as Compared to Coca Cola
Analysis of the Accounting Policies of
PepsiCo as compared to
Coca Cola
Year-end December 31, 2001
Prepared for
Robin Webb, G. D. Meyers and Company
Allison Heiland, Angela Heyroth, Robin Tieman FBD I Section 4 O b 17 2002
Analysis of Accounting Policies
EXECUTIVE SUMMARY In investigating PepsiCo’s accounting policies for G. D. Meyers and Company, we have focused on nine major areas of the annual report, comparing PepsiCo with Coca Cola throughout our analysis. Through the Balance Sheet, we focused on the major assets and major liabilities of each, and discovered that the primary difference is PepsiCo’s large balance of intangibles. In the Income Statement, we analyzed the major sources of revenue and expenses for both companies, and found that PepsiCo’s recent merger with Quaker Oats accounts for a large part of the difference between the two. In the Cash Flow Statement, we compared the major inflows and outflows for PepsiCo and Coca Cola and discovered that PepsiCo has more outflows for the last year as compared to Coca Cola. In looking at the Audit Report, both companies were audited by “Big 4” accounting firms and both were issued clean opinions. In evaluating Revenue Recognition, we found that the two firms are comparable in the types of revenue transactions and recognition methods, although their geographic diversification varies. When looking at Cost of Goods Sold, we found the two to be virtually identical with regards to elements such as inventory types, inventory turnover, inventory writedowns, and more. Analyzing Property, Plant, and Equipment revealed that PepsiCo and Coca Cola have similar equipment and depreciation. In their Stockholders Equity section, we discovered that PepsiCo has a significant dilutive effect on stock options, while Coca Cola does not. Finally, we found that PepsiCo had the most tantalizing Unusual Items, due to its recent merger with Quaker, and that taking those items into account may help in understanding
PepsiCo as compared to
Coca Cola
Year-end December 31, 2001
Prepared for
Robin Webb, G. D. Meyers and Company
Allison Heiland, Angela Heyroth, Robin Tieman FBD I Section 4 O b 17 2002
Analysis of Accounting Policies
EXECUTIVE SUMMARY In investigating PepsiCo’s accounting policies for G. D. Meyers and Company, we have focused on nine major areas of the annual report, comparing PepsiCo with Coca Cola throughout our analysis. Through the Balance Sheet, we focused on the major assets and major liabilities of each, and discovered that the primary difference is PepsiCo’s large balance of intangibles. In the Income Statement, we analyzed the major sources of revenue and expenses for both companies, and found that PepsiCo’s recent merger with Quaker Oats accounts for a large part of the difference between the two. In the Cash Flow Statement, we compared the major inflows and outflows for PepsiCo and Coca Cola and discovered that PepsiCo has more outflows for the last year as compared to Coca Cola. In looking at the Audit Report, both companies were audited by “Big 4” accounting firms and both were issued clean opinions. In evaluating Revenue Recognition, we found that the two firms are comparable in the types of revenue transactions and recognition methods, although their geographic diversification varies. When looking at Cost of Goods Sold, we found the two to be virtually identical with regards to elements such as inventory types, inventory turnover, inventory writedowns, and more. Analyzing Property, Plant, and Equipment revealed that PepsiCo and Coca Cola have similar equipment and depreciation. In their Stockholders Equity section, we discovered that PepsiCo has a significant dilutive effect on stock options, while Coca Cola does not. Finally, we found that PepsiCo had the most tantalizing Unusual Items, due to its recent merger with Quaker, and that taking those items into account may help in understanding