NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Part)

  

(Tabular dollars in millions, except per share amounts)

  

1. Description of the Business and Segment Information (In Part)

  

The Walt Disney Company, together with the subsidiaries through which businesses are conducted (the Company), is a diversified worldwide entertainment company with operations in the following business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive Media.

  

2. Summary of Significant Accounting Policies (In Part)

  

Principles of Consolidation

  

The consolidated financial statements of the Company include the accounts of The Walt Disney Company and itsmajority-owned and controlled subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. In December 1999, DVD Financing, Inc. (DFI), a subsidiary of Disney Vacation Development, Inc. and an indirect subsidiary of the Company, completed a receivable sale transaction that established a facility that permitted DFI to sell receivables arising from the sale of vacation club memberships on a periodic basis. In connection with this facility, DFI prepares separate financial statements, although its separate assets and liabilities are also consolidated in these financial statements. DFI’s ability to sell new receivables under this facility ended on December 4, 2008. (See Note 16 for further discussion of this facility)

  

Reporting Period

  

The Company’s fiscal year ends on the Saturday closest to September 30 and consists of fifty-two weeks with the exception that approximately every six years, we have a fifty-three week year. When a fifty-three week year occurs, the Company reports the additional week in the fourth quarter. Fiscal 2009 was a fifty-three week year beginning on September 28, 2008 and ending on October 3, 2009.

  

Use of Estimates

  

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those estimates.

  

Revenue Recognition

  

Broadcast advertising revenues are recognized when commercials are aired. Revenues from television subscription services related to the Company’s primary cable programming services are recognized as services are provided. Certain of the Company’s contracts with cable and satellite operators include annual live programming commitments. In these cases, recognition of revenues subject to the commitments is deferred until the annual commitments are satisfied, which generally results in higher revenue recognition in the second half of the year.

  

Revenues from advance theme park ticket sales are recognized when the tickets are used. For non-expiring, multi-day tickets, revenues are recognized over a three-year time period based on estimated usage, which is derived from historical usage patterns. 

  

Revenues from the theatrical distribution of motion pictures are recognized when motion pictures are exhibited. Revenues from DVD and video game sales, net of anticipated returns and customer incentives, are recognized on the date that video units are made available for sale by retailers. Revenues from the licensing of feature films and television programming are recorded when the content is available for telecast by the licensee and when certain other conditions are met.

  

Merchandise licensing advances and guarantee royalty payments are recognized based on the contractual royalty rate when the licensed product is sold by the licensee. Nonrefundable advances and minimum guarantee royalty payments in excess of royalties earned are generally recognized as revenue at the end of the contract term.

  

Revenues from our internet and mobile operations are recognized as services are rendered. Advertising revenues at our internet operations are recognized when advertisements are viewed online.

  

Taxes collected from customers and remitted to governmental authorities are presented in the Consolidated Statements of Income on a net basis.

  

Allowance for doubtful accounts

  

The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The allowance for doubtful accounts is estimated based on our analysis of trends in overall receivables aging, specific identification of certain receivables that are at risk of not being paid, past collection experience and current economic trends. In times of domestic or global economic turmoil, the Company’s estimates and judgments with respect to the collectability of its receivables are subject to greater uncertainty than in more stable periods.

  

Advertising Expense

  

Advertising costs are expensed as incurred. Advertising expense for fiscal 2010, 2009 and 2008 was $2.6 billion, $2.7 billion and $2.9 billion, respectively. 

  

Cash and Cash Equivalents

  

Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less.

  

Inventories

  

Inventory primarily includes vacation timeshare units, merchandise, materials, and supplies. Carrying amounts of vacation ownership units are recorded at the lower of cost or net realizable value. Carrying amounts of merchandise, materials, and supplies inventories are generally determined on a moving average cost basis and are recorded at the lower of cost or market.

  

      

  

Required

  

a. The statement is entitled “Consolidated Balance Sheets.” What does it mean to have a consolidated balance sheet?

  

b. 1. What is the gross amount of current receivables at October 2, 2010?

  

2. What is the trend in receivables?

  

c. 1. Does there appear to be a significant increase in projects in progress?

  

2. Are projects in progress and land depreciated?

  

d. 1. What is the amount of total assets at October 2, 2010?

  

2. What is the total current assets at October 2, 2010?

  

3. What is the total inventory at October 2, 2010? Does the inventory method appear to be conservative? Comment.

  

e. Comment on the use of estimates.

  

f. Why are advertising expenses expensed as incurred?

  

g. Are cash and cash equivalents presented conservatively? Comment.

  

h. Revenue recognition; comment on the following:

  

1. Broadcast advertising revenues

  

2. Revenues from advance theme park ticket sales

  

3. Revenues from the theatrical distribution of motion pictures

  

4. Merchandise licensing advances and guarantee royalty payments

  

5. Revenues from internet and mobile operations

  

6. Why the use of several revenue recognition methods?

  

7. Are the revenue recognition methods industry-specific?

  

i. Describe treasury stock and how it is reported.

  

j. Describe noncontrolling interests.

  

k. 1. Describe the reporting period.

  

2. Does the reporting period create an inconsistency?

Transcribed Image Text:

The Walt Disney Company - 2010 Annual Report* CONSOLIDATED BALANCE SHEETS (In millions, except per share data) October 2, 2010 Otober 3, 2009 ASSETS Current assets Cash and cash equivalents Recerivables $ 2,722 5,784 1,442 678 $ 3,417 4,854 1,271 631 Inventories Television costs Deferred income taxes 1,018 581 1,140 576 Other current as sets 12,225 4,773 2,513 11,889 5,125 2,554 Total Current Assets Film and television costs Investments Parks, resorts and other property, at cost Attractions, buildings and equipment Acaumulated depreciation 32,875 (18,373) 14,502 2,180 1,124 17,806 5,081 24,100 2,708 $ 69,206 32,475 (17,395) 15,080 1,350 1,167 17,597 2,247 21,683 2,022 $ 63,117 Projects in progress Land Intangible assets, net Goodwill Other assets LIABILITES AND EQUITY Current Liabilities Accounts payable and other accrued liabilities Current portion of borrowings Unearned royalties and other advances Total current liabilities $ 6,109 2,350 2,541 11,000 10,130 2,630 6,104 $ 5,616 1,206 2,112 8,934 11,495 Borrowings Deferred income taxes 1,819 Other long-term liablities Commitments and contingencies (note 15) Equity Preferred stock, S.01 par value Authorized – 100 million shares, Issucd – none 5,444 The Walt Disney Company - 2010 Annual Report* CONSOLIDATED BALANCE SHEETS (In millions, except per share data) October 2, 2010 Otober 3, 2009 ASSETS Current assets Cash and cash equivalents Recerivables $ 2,722 5,784 1,442 678 $ 3,417 4,854 1,271 631 Inventories Television costs Deferred income taxes 1,018 581 1,140 576 Other current as sets 12,225 4,773 2,513 11,889 5,125 2,554 Total Current Assets Film and television costs Investments Parks, resorts and other property, at cost Attractions, buildings and equipment Acaumulated depreciation 32,875 (18,373) 14,502 2,180 1,124 17,806 5,081 24,100 2,708 $ 69,206 32,475 (17,395) 15,080 1,350 1,167 17,597 2,247 21,683 2,022 $ 63,117 Projects in progress Land Intangible assets, net Goodwill Other assets LIABILITES AND EQUITY Current Liabilities Accounts payable and other accrued liabilities Current portion of borrowings Unearned royalties and other advances Total current liabilities $ 6,109 2,350 2,541 11,000 10,130 2,630 6,104 $ 5,616 1,206 2,112 8,934 11,495 Borrowings Deferred income taxes 1,819 Other long-term liablities Commitments and contingencies (note 15) Equity Preferred stock, S.01 par value Authorized – 100 million shares, Issucd – none 5,444