ACCT 220 Principals of Accounting Sec 10-K Paper

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ACCT 220 Principals of Accounting Sec 10-K Paper

ACCT 220 Principals of Accounting
Sec 10-K Paper
10/03/2015

The walt Disney Company
The Walt Disney Company describes themselves as a “leading diversified
international family entertainment and media enterprise with five business segments:
media networks, parks and resorts, studio entertainment, consumer products and
interactive media.” [ CITATION Abo \l 1033 ] While this is most definitely true, in a
business sense, The Walt Disney Company (Disney), is much more than that to their
consumers. Disney has become, over the years, synonymous with “making dreams
come true” by capturing the heart of childhood imaginations and bringing them to life
through movies, songs, theme parks, games and toys. (Being number 57 on the Forbes
500 Companies list definitely has helped make many investor’s dreams come true as
well.)
In this paper, I would like to take a closer look at Disney’s fiscal year 2014, and
provide a brief glimpse into their financial activities, success over the last year, and
potential for next year with an important purchase by the Walt Disney Media Network. I
will be referencing their Sec 10-K report [CITATION Uni14 \l 1033 ], which is their
comprehensive summary of their business activities as reported to the Federal
Government for the months September 2013 – September 2014. Disney is incorporated
in Delaware with their Headquarters located in Burbank, California. The auditing agency
for their report is PricewaterhouseCoopers LLP with a reported gross profit of $22.393
Million for FY 2014.

Inventory Methods
Calculating inventories for Disney is done two different ways based on the
product. Because Disney sells merchandise as well as vacation packages, both are
calculated differently, as their vacation packages are sold in a timeshare format. For
merchandise, materials, and supplies, those inventories are generally determined on a
moving average cost basis and recorded at the lower of cost or market. Disney vacation
ownership units are recorded at the lower of cost or net realizable value. In FY 2014,
Disney reported an inventory of $1,574,000 which is an $87,000 increase from 2013.

Accounts Receivable

Stacey Greene
ACCT 220 Principals of Accounting
Sec 10-K Paper
10/03/2015

Disney accounts receivable for the year were calculated to be $7,822 million,
($7,976 million - $154 million for doubtful accounts). This is an $855 million increase
from last year. These accounts include several media groups from ESPN, Disney
Channel, ABC Family, to radio stations and even some investments into online
streaming such as HULU LLC, and Fusion. Accounts receivable also accounts for
theme park revenue in Walt Disney World Florida, Disneyland California, Disneyland
Paris, 48% ownership in Hong Kong Disney, 43% ownership Shanghai Disney Resort,
and royalties from Disney Tokyo. These figures also include revenues from Disney
Vacation Club, Disney Cruise Line, Adventures by Disney, Aulani Vacations in Hawaii,
and Disney Imagineering which designs theme park concepts and attractions to resort
properties. Not to mention the accounts receivables from their media groups, motion
pictures under DreamWorks, plays, musicals, live events, and commercial products in
retail stores.

Uncollected Accounts
Since there is no exact science to calculating doubtful accounts, Disney
maintains a reserve account for potentially uncollected receivables. While watching
trends in their current accounts, specific identification of at risk accounts, and analysis
of overall trends in the economy, Disney maintains this account by taking into
consideration those fluctuations in the market and with their consumer base. The
allowances allocated to that account are an estimate based on the above factors from
their consumer base, but also based on assessments of the financial condition of the
companies Disney does business with. In times of domestic or global economic turmoil
their estimates regarding their accounts receivable tend to be more uncertain than in
stable periods. Disney maintains that if their estimates for this particular account are too
low, costs and expenses may increase in future periods. If their valuations of this
account are too high, costs and expenses may decrease in future periods.

Future Revenue Potential

Disney has added a new powerhouse to their repertoire: Lucas Film (purchased
in 2012 for $4 billion). This seems like a very brave move, for such a large investment,
but may be a huge pay off for Disney. “Star Wars: Episode VII – The Force Awakens”,
releases December 2015. Already, the Disney Accounts Receivable have seen a $2.2
billion boost from pre-sales, merchandise, stock increases, additions to their theme
parks, and advertising. On box office weekend, the movie is estimated to bring in “$1.2 $1.5 million on opening weekend“, stated Ray Subers from BoxOfficeMojo.com–
[ CITATION Jon15 \l 1033 ]. Walt Disney CEO Igor told CNBC that he thought the Star

Stacey Greene
ACCT 220 Principals of Accounting
Sec 10-K Paper
10/03/2015

Wars franchise would be, “one of if not our most valuable property once the movie
comes out.” BoxOfficeMojo also goes on to say that they value the Star Wars franchise
at approximately $4.7 billion, at this time with a potential for more earnings later on with
more movies and merchandise. Considering that the Star Wars brand, over the last 30
years prior to the Disney buyout, has earned $30.5 billion[ CITATION 4Bi12 \l 1033 ], it
is easy to assume that Disney plans on matching that amount or exceeding it over the
next 35 years. This could lead to very large earning potentials for The Walt Disney
Company.

Disney has been successful at many things over their 90+ years. They have
created such imagery as Snow White and her Seven Dwarves, Bambi, Winnie the
Pooh, Tinkerbelle and Mary Poppins. They have captivated the hearts of young and old
alike and will continue to be part of the iconic imagery that define a child’s imagination.
Their success over the years comes from their unique approach to capturing memories
and putting feelings to them. It comes from successful marketing campaigns,
investments, character creation, and understanding the ever changing needs of their
audience(s) and demands for new technology. From starting with a small cartoon about
a mouse on a steam boat that didn’t talk, to introducing us to aliens who captured the
laughter of children for energy, to their new 3D Star Wars undertaking, Disney remains
on the Fortune 500 list and will continue to climb the ladder and remain an industry
giant. It may not be #1 on the Forbes list, but to many, they are #1 in our hearts, with
their stories, songs, and experiences to be shared for several generations to come

Stacey Greene
ACCT 220 Principals of Accounting
Sec 10-K Paper
10/03/2015

References
4 Billion for Star Wars. (2012, October 31). Retrieved from 247wallst.com: http://247wallst.com/specialreport/2012/10/31/how-4-billion-for-star-wars-will-generate-over-30-billion-for-disney/2/
About Disney. (n.d.). Retrieved from The Walt Disney Company :
https://thewaltdisneycompany.com/about-disney/company-overview
Berr, J. (2015, April 17). The Force Be With the Newest Star Wars Movie. Retrieved from
www.cbsnews.com: http://www.cbsnews.com/news/will-the-force-be-with-the-newest-starwars-movie/
SEC 10-K Report. (2014, September 27). Retrieved from The Walt Disney Company.com:

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