Summary
Mondelez International, Inc. (MDLZ) reported a significant change in its accounting for Venezuelan operations in this 8-K filing dated April 22, 2014. Effective March 31, 2014, the company is shifting from using the official Venezuelan bolivar exchange rate to the SICAD I rate for translating its Venezuelan operations into U.S. dollars and valuing its net monetary assets. This change reflects the evolving and complex currency landscape in Venezuela, where multiple exchange rates now exist, including the official rate, SICAD I, and the newly introduced SICAD II market-based rate. The adoption of the SICAD I rate, which was 10.7 bolivars to the U.S. dollar as of March 31, 2014 (compared to the official rate of 6.3), is deemed more representative of the actual availability of U.S. dollars for the company's entire Venezuelan business. This adjustment is expected to create more economic representativeness in the company's financial reporting from Venezuela, given the uncertainty and limited availability of dollars at the official rate. Investors should note that this change will impact the valuation of net monetary assets and future operating results, with the potential for variations throughout the year due to the auction-based nature of SICAD I.
Key Highlights
- 1Mondelez is changing the exchange rate used for its Venezuelan operations from the official bolivar rate to the SICAD I rate, effective March 31, 2014.
- 2The SICAD I rate (10.7 BVD/USD at March 31, 2014) is considered more representative of U.S. dollar availability for the company's Venezuelan business than the official rate (6.3 BVD/USD).
- 3This change is driven by the existence of multiple exchange rates in Venezuela and uncertainty surrounding access to U.S. dollars at the official rate.
- 4The company will incur a pre-tax currency remeasurement charge of approximately $140 million for the three months ended March 31, 2014, related to net monetary assets in Venezuela due to this accounting change.
- 5Bolivar-denominated net monetary assets in Venezuela were approximately $200 million as of March 31, 2014, after the remeasurement charge.
- 6The remeasurement charge, and similar future charges, will be excluded from Mondelez's non-GAAP financial measures (Adjusted Operating Income and Adjusted Earnings Per Share) for comparability.
- 7A similar remeasurement pre-tax charge of $54 million from Q1 2013 will also be excluded from non-GAAP measures for comparability purposes.