Webster University
BUSN 5600
Case Study
The Walt Disney Company – Revenue Recognition
Company Description
The Walt Disney Company (“Disney”) is one of the world’s most well known
enterprises. The company is a diversified network spanning four basic entertainment
segments: media and television networks, theme parks and resorts, motion pictures, and
consumer products.
Assignment
Refer to Disney’s 10K regarding revenue recognition taken from Disney’s 2011
Annual Report to answer the following questions.
1.
Some revenues come from advance theme park ticket sales. Is it
reasonable to assume that Disney records sales as revenue at the time
the ticket is sold? Explain your rationale.
2.
Disney records revenue from both the release of motion pictures in
theaters and again later, for that same movie, through its release as a
DVD. In both cases, viewer entertainment is derived from watching the
movie, yet the company appears to apply two different revenue
recognition policies. What is their revenue recognition policy for
theater-based revenue? For DVD based revenue? Why might those
policies differ?
3.
Disney records revenue from television programming in the period
when the program is broadcast. When does Disney expense the
production costs (e.g. actor salaries, studio rentals) that may have been
incurred many years in the past, related to that television program?
Explain the rationale for that policy.
4.
What are the different categories of equity shares (stock) does the
Disney Corporation have available to issue. What is Treasury stock?
What is the difference between authorized and issued shares? Why do
you think Disney has not issued any Preferred Stock?