Professor James Ridilla
December 7, 2014
Week Six Research Paper: Financial Statement Analysis
The company I have chosen for my financial statement analysis is the Walt Disney Company. All amounts stated are in millions unless stated otherwise. The Walt Disney is a diverse worldwide company with operations in media networks, parks and resorts, studio entertainment, consumer products and interactive games and media. I will be analyzing their property and equipment, intangible assets, current liabilities, and long-term debt.
The Walt Disney Company reported 4,728 million and 3,928 million for their total deferred tax assets for the year 2012 and 2013 respectively. They also reported 5,395 million and 6,451 million for their total deferred tax liabilities for the year 2012 and 2013 respectively. According to David Spiceland, Jim Sepe, and Mark Nelson (2013), deferred income tax assets and liabilities are recorded as the temporary differences in the accounting treatment of items for financial reporting purposes and for income tax purposes (p. 949). The company does not disclose any information on temporary and permanent differences other than that any amounts are reported through the deferred income tax assets and liabilities. An example of temporary differences would be using accelerated methods for tax purposes and using straight-line methods for accounting purposes. An example of permanent differences would be if a company is fined for breaking civil, criminal, or statutory law the company deducts any fines against book income but the company never gets to reduce taxable income for the expense which creates a permanent difference between net and taxable income. The Walt Disney Company reported the income tax expense in 2013 is a total of $2,926 million for federal, state, and foreign. The reported income tax expense in 2012 is a total of $2,624 million for federal, state, and foreign. They state in their annual report that:
The ultimate recognition of the noncontrolling interest share of the net operating losses, which have an indefinite carryforward period in France and Hong Kong and a five-year carryforward period in China, would not have an impact on net income attributable to Disney as any income tax benefit would be offset by a charge to noncontrolling interests in the income statement (p. 87).
According to GAAP loss carryback can be applied only to the three years preceding the loss and a loss carryforwards can be used in any one of the seven years following the loss.
Postretirement Benefits The Walt Disney Company has mentioned its pension benefits are generally based on years of service and/or compensation making it a defined benefit plan. It promises fixed retirement benefits defined by a designated formula. Unlike a defined contribution plan which promises fixed annual contributions to a pension fund and retirement pay depends on the size of the fund at retirement (Spiceland, Sepe, & Nelson, 2013). The company uses a percentage of average monthly compensation to base its benefits plan on which was reduced in 2011 but the company added overtime, commissions and regular bonus amounts to the calculation of average monthly compensation. They reported that the ending projected benefit obligations in 2013 for their pension plan was ($10,066) million and for their post-retirement medical plan was ($1,325) million. The ending fair value of plans’ assets in 2013 for their pension plan was $8,965 million and for their post-retirement medical plan was $508 million. The net periodic benefit cost in 2013 for their pension plan was $606 million and for their post-retirement medical plan was $92 million.
Earnings Per Share
The Walt Disney Company disclosed on their consolidated statement of income for 2013 the diluted earnings per share was $3.38 and the basic