Summary
Mondelēz International, Inc. (MDLZ) has filed an 8-K report on February 3, 2016, to disclose the deconsolidation of its Venezuelan subsidiaries. This significant accounting change, effective at the close of the 2015 fiscal year, was driven by a loss of control and the inability to exchange currency, preventing the company from meeting consolidation criteria. As a result, Mondelēz has shifted to the cost method of accounting for its Venezuelan operations. This deconsolidation led to a substantial pre-tax loss of $778 million in the fourth quarter of 2015, which encompassed the impairment of the investment in Venezuela, Venezuelan receivables, and the reversal of historical cumulative translation adjustments. The company acknowledges that this change will make direct comparisons of historical and future U.S. GAAP reported results more challenging, as Venezuelan revenues, earnings, and net assets will no longer be included in consolidated financial statements from 2016 onwards, except when cash is received.
Key Highlights
- 1Deconsolidation of Venezuelan subsidiaries effective end of fiscal year 2015 due to loss of control and currency inconvertibility.
- 2Adoption of the cost method of accounting for Venezuelan operations.
- 3Reported a $778 million pre-tax loss in Q4 2015 related to the deconsolidation and impairment of Venezuelan assets and receivables.
- 4This accounting change will impact the comparability of U.S. GAAP financial statements going forward.
- 5Venezuelan revenues, earnings, and net assets will be excluded from consolidated statements from 2016, except for cash received.
- 6Mondelēz is providing unaudited pro forma adjusted non-GAAP financial information to aid in comparability of past and future operating results.
- 7The company emphasizes that non-GAAP information should be considered alongside U.S. GAAP results.