|
|
 | | | |
- close
- close
- close
- close
| |||||||||
This excerpt taken from the DIS 10-K filed Dec 7, 2005. EITF 00-21
The Company adopted EITF No. 00-21,
Revenue Arrangements with Multiple Deliverables
(EITF 00-21), effective at the beginning of fiscal
2003. EITF 00-21 addresses revenue recognition for revenues
derived from a single contractual arrangement that contains
multiple products or services. The rule provides additional
requirements to determine when such revenues may be recorded
separately for accounting purposes. Previously, the Company had
recognized the NFL broadcast portion of ESPN’s affiliate
revenue when the NFL games were aired, as ESPN’s affiliate
contracts provided a basis for allocating such revenue between
NFL and non-NFL programming. Since the cost of the NFL rights
had also been recognized as the games were aired, the Company
recognized both the NFL revenues and NFL costs in the quarters
the games were aired.
Under EITF 00-21’s requirements for separating the revenue elements of a single contract, beginning in fiscal 2003 the Company no longer allocates ESPN’s affiliate revenue between NFL and non-NFL programming for accounting purposes. As a consequence, the Company no longer matches all NFL revenue with NFL costs, as ESPN affiliate revenue (including the NFL portion) is generally recognized ratably throughout the year, while NFL contract costs continue to be recognized in the quarters the games are aired. This accounting change impacts only the timing of revenue recognition and has no impact on cash flow. As a result of this change, the Media Networks segment reports significantly reduced revenue and profitability in the first fiscal quarter when the majority of the NFL games are aired, with commensurately increased revenues and profits in the second and third fiscal quarters. The Company elected to adopt this new accounting rule using the cumulative effect approach and recorded an after-tax charge of $71 million for the cumulative effect of a change in accounting as of the beginning of fiscal year 2003. This amount represented the revenue recorded for NFL games in the fourth quarter of fiscal year 2002, which has been recorded ratably over fiscal 2003 under the new accounting method.
Effective with the beginning of fiscal 2005 and
in connection with the completion of the Company’s
implementation of new company-wide accounting systems in late
fiscal 2004, the Company changed its reporting period from a
calendar period end to a period end that coincides with the
cut-off of the Company’s accounting systems. The accounting
systems cut off on the Saturday closest to the calendar quarter
end. Accordingly, fiscal 2005 began on October 1, 2004 and
ended on October 1, 2005. This resulted in the same number
of reporting days in each year, since fiscal 2004 included the
additional day associated with the leap year. The change did not
have a material impact on year-over-year earnings comparisons.
Fiscal 2009 will be the first fifty-three week fiscal year
following this change.
Certain reclassifications have been made in the
fiscal 2004 and fiscal 2003 financial statements to conform to
the fiscal 2005 presentation.
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.
-87-
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
service providers include annual programming commitments. In
these cases, revenue subject to the commitment, which is
generally collected ratably over the year, 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 and tickets sold through bulk distribution channels, we recognize revenue based on estimated usage patterns which are derived from historical usage patterns. Revenues from corporate sponsors at the theme parks are generally recognized over the period of the applicable agreements commencing with the opening of the related attraction. Revenues from the theatrical distribution of motion pictures are recognized when motion pictures are exhibited. Revenues from video sales, net of anticipated returns, 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 material is available for telecasting by the licensee and when certain other conditions are met. Merchandise licensing advance and guarantee royalty payments are recognized when the underlying royalties are earned.
Advertising costs are expensed as incurred.
Advertising expense incurred for fiscal 2005, 2004 and 2003
totaled $2.9 billion, $3.0 billion and
$2.5 billion, respectively.
Cash and cash equivalents consist of cash on hand
and marketable securities with original maturities of three
months or less.
Debt securities that the Company has the positive
intent and ability to hold to maturity are classified as
“held-to-maturity” and reported at amortized cost.
Debt securities not classified as held-to-maturity and
marketable equity securities are classified as either
“trading” or “available-for-sale,” and are
recorded at fair value with unrealized gains and losses included
in earnings or shareholders’ equity, respectively. All
other equity securities are accounted for using either the cost
method or the equity method.
The Company regularly reviews its investments to determine whether a decline in fair value below the cost basis is other than temporary. If the decline in fair value is judged to be other than temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in the Consolidated Statements of Income.
|
| |||||||
