Quarterly report pursuant to Section 13 or 15(d)

Accounting Guidance

v3.8.0.1
Accounting Guidance
 3 Months Ended
May 31, 2018
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
ACCOUNTING GUIDANCE
ACCOUNTING GUIDANCE:

Recently adopted accounting guidance –
Revenue recognition:
In May 2014, the FASB issued guidance regarding the recognition of revenue from contracts with customers. Under this guidance, an entity will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

We adopted this guidance on March 1, 2018, using the retrospective application method to allow for comparable reporting in all periods throughout the year ending February 28, 2019. Based on our analysis, we concluded that the adoption of the amended guidance did not have a material impact on our net sales recognition. However, the broad definition of variable consideration under this guidance requires us to estimate and record certain variable payments resulting from various sales incentives earlier than we have historically recorded them. This change in the timing of when we recognize sales incentive expenses resulted in a shift in net sales recognition primarily between our fiscal quarters. Under the retrospective application method, we recognized the cumulative impact of adopting this guidance in the first quarter of fiscal 2019 with a reduction to our March 1, 2016, opening retained earnings of $49.0 million, net of income tax effect, with an offsetting increase to current accrued promotion expense and the recognition of a deferred tax asset to align the timing of when we recognize sales incentive expense and when we recognize revenue.

The effects of the retrospective application method on our consolidated financial statements for the periods presented in this report were as follows:
 
As
Previously
Reported
 
Revenue
Recognition
Adjustments
 
As
Adjusted
(in millions, except per share data)
 
 
 
 
 
Consolidated Balance Sheet at February 28, 2018
 
 
 
 
 
Other accrued expenses and liabilities
$
583.4

 
$
94.9

 
$
678.3

Total current liabilities
$
1,944.7

 
$
94.9

 
$
2,039.6

Other liabilities (including deferred income taxes – as previously reported, $718.3 million; as adjusted, $694.4 million)
$
1,113.7

 
$
(23.9
)
 
$
1,089.8

Total liabilities
$
12,476.0

 
$
71.0

 
$
12,547.0

Retained earnings
$
9,228.2

 
$
(71.0
)
 
$
9,157.2

Total stockholders’ equity
$
8,062.7

 
$
(71.0
)
 
$
7,991.7

 
 
 
 
 
 
 
As
Previously
Reported
 
Revenue
Recognition
Adjustments
 
As
Adjusted
(in millions, except per share data)
 
 
 
 
 
Consolidated Statement of Comprehensive Income for the Three Months Ended May 31, 2017
Sales
$
2,115.3

 
$
(7.0
)
 
$
2,108.3

Net sales
$
1,935.5

 
$
(7.0
)
 
$
1,928.5

Gross profit
$
995.3

 
$
(7.0
)
 
$
988.3

Operating income
$
568.1

 
$
(7.0
)
 
$
561.1

Income before income taxes
$
479.4

 
$
(7.0
)
 
$
472.4

Provision for income taxes
$
(74.1
)
 
$
2.7

 
$
(71.4
)
Net income
$
405.3

 
$
(4.3
)
 
$
401.0

Net income attributable to CBI
$
402.8

 
$
(4.3
)
 
$
398.5

Comprehensive income attributable to CBI
$
590.3

 
$
(4.3
)
 
$
586.0

 
 
 
 
 
 
Net income per common share attributable to CBI:
 
 
 
 
 
Basic – Class A Common Stock
$
2.09

 
$
(0.02
)
 
$
2.07

Basic – Class B Convertible Common Stock
$
1.90

 
$
(0.02
)
 
$
1.88

 
 
 
 
 
 
Diluted – Class A Common Stock
$
2.00

 
$
(0.02
)
 
$
1.98

Diluted – Class B Convertible Common Stock
$
1.85

 
$
(0.02
)
 
$
1.83


The adoption of the revenue recognition guidance had no impact to cash flows from operating, financing or investing activities in our consolidated statement of cash flows for the three months ended May 31, 2017.

Income taxes:
In October 2016, the FASB issued guidance that simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under this guidance, an entity is required to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Prior guidance prohibited the recognition in earnings of current and deferred income taxes for an intra-entity asset transfer until the asset had been sold to an outside party or recovered through use.

We adopted this guidance on March 1, 2018, using the modified retrospective basis, which requires a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Based on our assessment of intra-entity asset transfers that are in scope and the related deferred income taxes, in the first quarter of fiscal 2019, we recognized a net increase in our March 1, 2018, opening retained earnings and deferred tax assets of $2.2 billion, primarily in connection with the intra-entity transfer of certain intellectual property related to our imported beer business for the year ended February 28, 2018.

Accounting guidance not yet adopted –
Leases:
In February 2016, the FASB issued guidance for the accounting for leases. Under this guidance, a lessee will recognize assets and liabilities for most leases, but will recognize expense similar to current lease accounting guidance. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. We are required to adopt this guidance for our annual and interim periods beginning March 1, 2019, using a modified retrospective approach. We are currently assessing the financial impact of this guidance on our consolidated financial statements.