01—Abstract
Summary
Summary of the 8-K filed October 10, 2018. Cited figures are marked; the original filing is the authoritative source.
This Form 8-K filing by Procter & Gamble (PG) on October 10, 2018, primarily serves to disclose the retrospective adoption of FASB ASU 2017-07, which impacts the presentation of net periodic pension and postretirement benefit costs.
This change requires the current service cost component to be presented within operating expenses, while other components are moved to non-operating income/expense. The filing provides revised historical consolidated earnings information for fiscal years 2017 and 2018, and for the quarterly periods within them, to reflect this accounting change. For investors, the key takeaway is that previously reported figures have been adjusted, particularly within Cost of Products Sold, Selling, General & Administrative Expense, and Other Non-Operating Income/(Expense), Net.
While the overall Net Earnings Attributable to Procter & Gamble remain unchanged for previously reported periods, the reclassification impacts key operating metrics like Gross Profit, Operating Income, and Operating Margin. The company also provides selected non-GAAP "Core" measures, adjusted for restructuring, tax act impacts, and debt extinguishment charges, offering a view of underlying operational performance.
02—Key points
Key Highlights
- Procter & Gamble adopted FASB ASU 2017-07, changing the presentation of pension and postretirement benefit costs, effective July 1, 2018.
- Historical financial statements (FY17, FY18, and relevant quarters) have been revised retrospectively to reflect this accounting standard adoption.
- The change reclassifies certain benefit costs from operating expenses (Cost of Products Sold, SG&A) to 'Other Non-Operating Income/(Expense), Net'.
- While net earnings remain the same, the change impacts the reported Gross Profit, Operating Income, and Operating Margin.
- The filing provides both revised GAAP figures and selected non-GAAP 'Core' measures (Core EPS, Core Margins) which exclude items like restructuring, Tax Act impacts, and debt extinguishment.
- Core EPS for FY18 (revised GAAP) was $4.22, up from $3.92 (revised GAAP) in FY17, with currency-neutral Core EPS showing 6% and 4% growth respectively.
- This filing is informational and does not revise previously filed official financial statements.
03—Questions
Frequently Asked Questions
What is the main purpose of this 8-K filing?
The main purpose of this 8-K filing is to inform investors about the company's adoption of a new accounting standard (ASU 2017-07) related to the presentation of pension and postretirement benefit costs and to provide revised historical financial information reflecting this change.
How does the new accounting standard affect reported financial figures?
The new standard requires the service cost component of net benefit costs to be presented with operating expenses (Cost of Products Sold, SG&A), while other components are reported in non-operating income/expense. This reclassification impacts the presentation of Cost of Products Sold, SG&A, and Other Non-Operating Income/(Expense), Net, thereby affecting Gross Profit, Operating Income, and Operating Margin, although Net Earnings remain unchanged for the periods presented.
What are the 'Core' financial measures, and why are they presented?
The 'Core' financial measures are non-GAAP measures that adjust the reported GAAP figures for items the company considers not indicative of sustainable operations. These include incremental restructuring costs, transitional impacts of the U.S. Tax Act, and early debt extinguishment charges. Management uses these measures to provide a supplemental view of operational performance and for evaluating senior management compensation.
Are the previously filed financial statements being restated due to this 8-K?
No, this 8-K filing explicitly states that it in no way revises or restates previously filed Consolidated Statements of Comprehensive Income, Balance Sheets, Shareholders' Equity, or Statements of Cash Flows. It serves as an informational disclosure providing revised consolidated earnings information.
04—Continue