Term Paper Undergraduate 1,897 words

PepsiCo Annual Report Analysis: 2011–2012 Financial Data

~10 min read

Abstract

This paper analyzes PepsiCo's annual report using 2011 and 2012 financial data. It examines key balance sheet items including property, plant, and equipment; intangible assets and goodwill; depreciation and amortization methods; asset impairment charges; current and long-term liabilities; bonds payable; and capital lease classifications. Drawing directly from PepsiCo's 2012 annual report, the paper presents financial figures in tabular form and explains the accounting treatments behind each category, including straight-line depreciation, deferred tax liabilities, goodwill impairment testing, and the criteria distinguishing capital leases from operating leases.

📝 How to Write This Type of Paper Writing guide — click to expand

▼

What makes this paper effective

Integrates data tables directly from the source annual report, giving readers precise figures alongside written explanations — a strong model for financial analysis assignments.
Consistently moves from definition to application: each section defines an accounting concept (e.g., impairment, contingent liability) and then immediately shows how PepsiCo applies it, making abstract concepts concrete.
Covers a broad range of balance sheet topics systematically, demonstrating how multiple financial statement elements interconnect within a single company.

Key academic technique demonstrated

The paper demonstrates financial statement analysis by extracting and interpreting line items from a real corporate annual report. Rather than simply reproducing figures, it explains the accounting policies behind them — such as the two-step goodwill impairment test and deferred tax liability recognition — showing how policy choices affect reported values.

Structure breakdown

The paper is organized as a numbered question-and-answer response to a structured assignment. Each section addresses one financial topic (property and equipment, intangibles, goodwill, depreciation, impairment, current liabilities, long-term liabilities, bonds, and capital leases) in a consistent format: a brief definition or policy explanation, supporting data in tabular form, and a short interpretive commentary. This format makes it easy to follow and suitable as a template for similar financial analysis tasks.

Company Overview

Pepsi Beverages Company (PBC) is a global beverage company popularly known as PepsiCo. The company operates in several countries across North America, South America, Europe, Asia, Africa, and the Middle East. Founded in 1898, the company operates with a diverse portfolio that includes some of the world's most widely recognized brands, such as Pepsi, Dr Pepper, Mountain Dew, Aquafina, Lipton, Muscle Milk, and ROCKSTAR.

The objective of this paper is to analyze PepsiCo's annual report. The paper uses 2012 and 2011 financial data for the analysis.

Property, Plant, and Equipment

The value of PepsiCo's property and equipment on the company's balance sheet for 2012 and 2011 were $19.1 billion and $19.69 billion, respectively. Depreciation expenses were $2.48 billion in 2012 and $2.47 billion in 2011. The amount of cash flow relating to depreciation was $2.68 billion in 2012 and $2.73 billion in 2011. Table 1 presents an overview of these figures.

Table 1: PepsiCo Property and Equipment Summary ($Millions)

The individual components of property and equipment are as follows:

Table 2: PepsiCo Property and Equipment Components ($Millions)

The company accounts for nonmonetary disposition and exchange of property and equipment based on the fair value of the property and equipment. By using fair value, the company recognizes any gain or loss immediately.

PepsiCo does have intangible assets. The company's intangible assets are as follows:

Intangible Assets and Goodwill

Table 3: PepsiCo Intangible Assets ($Millions)

The most recent cash flow statement amount relating to the purchase and sale of intangible assets was $900 million, which relates to the acquisition of distribution and manufacturing rights from DPSG in 2010. Amortization expense for the 2012 fiscal year was $119 million, while amortization expense for the 2011 fiscal year was $133 million.

Intangible assets differ from property and equipment in that property and equipment are tangible assets — assets that one can see and touch. Intangible assets, by contrast, lack physical substance but provide long-term benefit to the company. These are assets that the company has acquired over time; goodwill is one example. The cost allocation of intangible assets is called amortization, and the straight-line method is used to amortize them over their useful lives. PepsiCo's net cost of intangible assets for the 2012 fiscal year was $1.78 billion, while the net cost for 2011 was $1.88 billion.

PepsiCo has also developed and acquired significant goodwill over the years through brand building, acquisitions, and business combinations. The company determines the fair values of its brands through product life cycles, consumer awareness, and projected future cash flows. PepsiCo believes that goodwill and perpetual brands are not amortized and should be assessed annually for impairment.

The company evaluates goodwill "using a two-step impairment test at the reporting unit level. A reporting unit can be a division or business within a division. The first step is to compare the book value of a reporting unit, including goodwill, with its fair value, as determined by its discounted cash flows. Discounted cash flows are primarily based on growth rates for sales and operating profit, which are inputs from the annual long-range planning process" (PepsiCo, 2012, p. 5).

As of December 29, 2012, the value of the company's goodwill was $31.7 billion, primarily related to the acquisitions of PAS, PBG, and WBD. The table below presents the full disclosure of the company's goodwill and intangible assets.

Table 4: Disclosure of PepsiCo Goodwill and Intangible Assets ($Millions)

3 Locked Sections · 1,020 words remaining

Depreciation Methods and Income Tax Expense · 280 words

"Straight-line depreciation, deferred taxes, and income tax data"

Impairment, Current Liabilities, and Long-Term Debt · 520 words

"Restructuring charges, current liabilities, and long-term debt structure"

Bonds Payable and Capital Leases · 220 words

"Bond valuation, note payables, and capital lease criteria"

You’re 27% through this paper. Sign up to read the remaining 3 sections.

130,000+ paper examples AI writing assistant Citation generator Cancel anytime

Key Concepts in This Paper

Property and Equipment Goodwill Impairment Straight-Line Depreciation Intangible Assets Deferred Tax Liabilities Long-Term Debt Capital Leases Amortization Senior Notes Contingent Liabilities