Question

On a separate tab of your Excel document you will be answering the questions noted below. Ensure that your calculations are linked to your financial statement numbers in order to support your conclusions. If other documentation is used to answer the question, please indicate through a detailed reference where this information was obtained/copied.

What type of income format(s) is used by these two companies? Identify any differences in income statement format between these two companies.

What are the gross profits, operating profits, net incomes, and net incomes attributable to non-controlling interest for these two company over the 3 year period 2012 – 2014? Which company has had better financial results over this period of time?

What income statement format do these two companies use to report comprehensive income?

PEPSICO INC
10-K
02/12/2015
OUR FINANCIAL RESULTS
	2014
	Pre-tax amounts		Tax amounts		After-tax amounts
Net income					$6,558
Other Comprehensive Loss
Currency translation adjustment	($5,010)		$-		(5,010)
Cash flow hedges:
Reclassification of net losses to net income	249		(95)		154
Net derivative losses	(88)		44		(44)
Pension and retiree medical:
Reclassification of net losses to net income	369		(122)		247
Remeasurement of net liabilities and translation	(1,323)		437		(886)
Unrealized losses on securities	(11)		5		(6)
Other	1		-		1
Total Other Comprehensive Loss	($5,813)		$269		($5,544)
Comprehensive income					1,014
Comprehensive income attributable to noncontrolling interests					(43)
Comprehensive Income Attributable to PepsiCo					$971
PEPSICO INC
10-K
02/12/2015
OUR FINANCIAL RESULTS
	2013
	Pre-tax amounts		Tax amounts		After-tax amounts
Net income					$6,787
Other Comprehensive Loss
Currency translation adjustment	($1,303)		$-		(1,303)
Cash flow hedges:
Reclassification of net losses to net income	45		(17)		28
Net derivative losses	(20)		10		(10)
Pension and retiree medical:
Reclassification of net losses to net income	353		(123)		230
Remeasurement of net liabilities and translation	2,164		(764)		1,400
Unrealized gains on securities	57		(28)		29
Other	-		(16)		(16)
Total Other Comprehensive Loss	$1,296		($938)		358
Comprehensive income					7,145
Comprehensive income attributable to noncontrolling interests					(45)
Comprehensive Income Attributable to PepsiCo					$7,100
PEPSICO INC
10-K
02/12/2015
OUR FINANCIAL RESULTS
	2012
	Pre-tax amounts		Tax amounts		After-tax amounts
Net income					$6,214
Other Comprehensive Loss
Currency translation adjustment	$737		$-		737
Cash flow hedges:
Reclassification of net losses to net income	90		(32)		58
Net derivative losses	(50)		10		(40)
Pension and retiree medical:
Reclassification of net losses to net income	508		(87)		421
Remeasurement of net liabilities and translation	(581)		88		(493)
Unrealized gains on securities	18		-		18
Other			36		36
Total Other Comprehensive Loss	$722		$15		737
Comprehensive income					6,951
Comprehensive income attributable to noncontrolling interests					(31)
Comprehensive Income Attributable to PepsiCo					$6,920

PEPSICO INC
10-K
2/12/2015
OUR FINANCIAL RESULTS
		2014		2013		2012
Net Revenue	$66,683		$66,415		$65,492
Cost of sales	30,884		31,243		31,291
Gross profit	35,799		35,172		34,201
Selling, general and administrative expenses	26,126		25,357		24,970
Amortization of intangible assets	92		110		119
Operating Profit	9,581		9,705		9,112
Interest expense	(909)		(911)		(899)
Interest income and other	85		97		91
Income before income taxes	8,757		8,891		8,304
Provision for income taxes	2,199		2,104		2,090
Net income	6,558		6,787		6,214
Less: Net income attributable to noncontrolling intrests	45		47		36
Net Income Attributable to PepsiCo	$6,513		$6,740		$6,178
Net Income Attributable to PepsiCo per common share
Basic	$4.32		$4.37		$3.97
Diluted	$4.27		$4.32		$3.92
Weighted-average common shares outstanding
Basic	1,509		1,541		1,557
Diluted	1,527		1,560		1,575
Cash dividends declared per common share	$2.53		$2.24		$2.13

THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
(In millions)
	2014	2013	2012
CONSOLIDATED NET INCOME	$7,124	$   8,626	$   9,086
Other comprehensive income:
Net foreign currency translation adjustment	(2,382)	(1,187)	(182)
Net gain (loss) on derivatives	357	151	99
Net unrealized gain (loss) on available-for-sale
securities	714	(80)	178
Net change in pension and other benefit
liabilities	(1,039)	1,066	(668)
TOTAL COMPREHENSIVE INCOME	4,774	8,576	8,513
Less: Comprehensive income (loss) attributable
to noncontrolling interests	21	39	105
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO
SHAREOWNERS OF THE COCA-COLA COMPANY	$4,753	$   8,537	$   8,408

THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
In millions except per share data
	2014	2013	2012
NET OPERATING REVENUES	$ 45,998	$ 46,854	$ 48,017
Cost of goods sold	17,889	18,421	19,053
GROSS PROFIT	28,109	28,433	28,964
Selling, general and administrative expenses	17,218	17,310	17,738
Other operating charges	1,183	895	447
OPERATING INCOME	9,708	10,228	10,779
Interest income	594	534	471
Interest expense	483	463	397
Equity income (loss) - net	769	602	819
Other income (loss) - net	(1,263)	576	137
INCOME BEFORE INCOME TAXES	10,291	8,053	8,955
Income taxes	2,201	2,851	2,723
CONSOLIDATED NET INCOME	8,090	5,202	6,232
Less: Net income attributable to noncontrolling intrests	26	42	67
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF	$   8,064	$   5,160	$   6,165
BASIC NET INCOME PER SHARE1	$    1.84	$    1.16	$    1.37
DILUTED NET INCOME PER SHARE1	$    1.81	$    1.14	$    1.34
AVERAGE SHARES OUTSTANDING	4,387	4,434	4,504
Effect of dilutive securities	63	75	80
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION	4,450	4,509	4,584

Answer 1

Both the companies are using classified income statement or multistep income statement wherein there is separate classification and headings for gross profit, operating profit and nt profit.

It has following gross profit, operating profit, net income and net income attributable to non controlling interest.

PepsiCo

Particulars	2014 (in10-K)	2013 (in10-K)	2012 (in 10-K)
Gross profit	35799	35172	34201
Operating profit	9581	9705	9112
Net Income	6558	6787	6214
Net income attributable to non controlling interest	45	47	36

Coca-Cola company

Particulars	2014 (in millions)	2013 (in millions)	2012 (in millions)
Gross profit	28109	28433	28964
Operating profit	9708	10228	10779
Net income	8090	5202	6232
Net income attributable to non controlling interest	26	42	67

As far as comparison of financial results of both the company is concerned instead of using absolute figures of gross profit, operating profit and net income we should rather use their relative percentile with sales which will be a fair comparison.

Particulars	2014-pepsico	2013-pepsico	2012-pepsico	2014-coca-cola	2013-pepsico	2012-coca-cola
Sales	66683	66415	65492	45998	46854	48017
Gross profit	35799	35172	34201	28109	28433	28964
Gross profit as a percentage of sales	53.69%	52.96%	52.22%	61.11%	60.68%	60.32%
Operating profit	9581	9705	9112	9708	10228	10779
Operating profit as a percentage of sales	14.37%	14.61%	13.91%	21.11%	21.84%	22.45%
Net income	6558	6787	6214	8090	5202	6232
Net income as a percentage of sales	9.83%	10.22%	9.49%	17.59%	11.10%	12.98%

From the above table we can clearly see when comparing gross profit, net profit, operating profit of both the companies for three years in relation to sales we find out that ratios of Coca-cola are far more better than that of PepsiCo which clearly shows that although sales revenue of PepsiCo is much more than Coca-Cola but both the companies almost end up at the same net income figure , infact at some point of time Coca-Cola is having more net profit than PepsiCo despite of lower sales volume this goes to shows that financial results of Coca-Cola is better than PepsiCo.