Question

Use the companies' financial information to answer the following questions.

a.   What were Coca-Cola's and PepsiCo's net revenues (sales) for the year 2017? Which company increased its revenue more (dollars and percentage) from 2016 to 2017?

b.   Are the revenue recognition policies of Coca-Cola and PepsiCo similar? Explain.

c.   In which foreign countries (geographic areas) did Coca-Cola and PepsiCo experience significant revenues in 2017? Compare the amounts of foreign revenues to U.S. revenues for both Coca-Cola and PepsiCo.

Answer 1

b) Answer = The Revenue Recognition Policies of Coca-Cola and PepsiCo are Slightly Different because the Revenue Recognition of Coco-Cola is when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Our sales terms do not allow for a right of return except for matters related to any manufacturing defects on our part. Our customers can earn certain incentives which are included in deductions from revenue, a component of net operating revenues in our consolidated statements of income. These incentives include, but are not limited to, cash discounts, funds for promotional and marketing activities, volume-based incentive programs and support for infrastructure programs. The aggregate deductions from revenue recorded by the Company in relation to these programs, including amortization expense on infrastructure programs, were $6.2 billion, $6.6 billion and $6.8 billion in 2017, 2016 and 2015, respectively. In preparing the financial statements, management must make estimates related to the contractual terms, customer performance and sales volume to determine the total amounts recorded as deductions from revenue. Management also considers past results in making such estimates. The actual amounts ultimately paid may be different from our estimates. Such differences are recorded once they have been determined and have historically not been significant. The Company will adopt ASU 2014-09, Revenue from Contracts with Customers, and its amendments on January 1, 2018. Adoption of this standard will result in a change in our revenue recognition policy. While the PepsiCo Company Revenue Recognition is shipment or delivery to our customers based on written sales terms that do not allow for a right of return. As discussed in "Our Customers in Item 1 Business,” we offer sales incentives and discounts through various programs to customers and consumers. Total marketplace spending includes sales incentives, discounts, advertising and other marketing activities. Sales incentives and discounts are primarily accounted for as a reduction of revenue and include payments to customers for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. Sales incentives and discounts also include support provided to our independent bottlers. New revenue recognition guidance, which becomes effective in the first quarter of 2018.Our products are sold for cash or on credit terms. Our 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 payments. We estimate and reserve for our bad debt exposure based on our experience with past due accounts and collectability, the aging of accounts receivable and our analysis of customer data.