Analysis of the Accounting Policies of Pepsico as Compared to Coca Cola

5041 Words Jun 7th, 2011 21 Pages
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
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The three largest are: (1) Frito-Lay North America, (2) Frito-Lay International and (3) Gatorade/Tropicana. Pepsi’s major liabilities include:
‡ Accounts payable (34.2% of total liabilities) and long term debt (20.4% of total liabilities). Pepsi’s major equity

figure is retained earnings of $11,519 million. Contrary to Pepsi’s, Coke’s major assets include: 1. 2. Long-term investments (36.6% of total assets) Current assets (32% of total assets)§
25% 20% 1 5% 10%

Intangible Assets as a % of Total Assets

* † ‡ §

Computed: PPE = $6876M / $21,695M = 31.7% Intangible assets = $4041M / $21,695M = 22% Computed: $3,374M / $4,841 = 70% Computed: Accounts payable = $4461M / $13,021M = 34.2% Long-term debt = $2651M / $13,021M = 20.4% Computed: Long-term investments = $8214M / $22,417M = 36.6% Current assets = $7171M / $22,417M = 32%

5% 0%

Pepsi

Coke

Page 2

Analysis of Accounting Policies

With regard to intangibles, Coke’s intangibles amount to only 11.5%* of total assets, or only half that of Pepsi’s intangibles. This demonstrates the relative magnitude of Pepsi’s intangible asset balance. Coke’s major liabilities include loans/notes payable (33.9% of total liabilities) and accounts payable/accrued expenses (17.6%
† of total liabilities). Coke’s major equity is retained earnings in the amount of $23,443 million. Coke’s retained

earnings and overall stockholder equity are much larger than those of
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