New Accounting Pronouncements

6 Months Ended

Mar. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

Accounting Pronouncements Adopted in Fiscal 2019

• Revenues from Contracts with Customers - See Note 3

• Intra-Entity Transfers of Assets Other Than Inventory - See Note 8

• Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost - See Note 9

• Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income - See Note 11

• Recognition and Measurement of Financial Assets and Liabilities - See Note 11

• Targeted Improvements to Accounting for Hedging Activities - The adoption of the new guidance did not have a material impact on our consolidated financial statements

Leases

In February 2016, the FASB issued new lease accounting guidance, which requires the present value of committed operating lease payments to be recorded as right-of-use lease assets and lease liabilities on the balance sheet. The guidance is effective at the beginning of the Company’s 2020 fiscal year. We expect to adopt the guidance without restating prior periods.

The new guidance provides a number of practical expedients for transition upon adoption. The Company expects to elect the practical expedients that permit the Company not to reassess its prior conclusions concerning whether:

• Arrangements contain a lease

• The Company’s lease arrangements are operating or capital leases (financing)

• Initial direct costs should be capitalized

• Existing land easements are leases

The Company is currently assessing the impact of the new guidance on its financial statements. We believe the most significant effects of adoption will be:

• Recognizing new right-of-use assets and lease liabilities on our balance sheet for our operating leases

• Reclassifying a deferred gain of approximately $350 million related to a prior sale-leaseback transaction to retained earnings

As of September 29, 2018, the Company had an estimated $3.6 billion in undiscounted future minimum lease commitments. The Company also assumed an estimated $1 billion in undiscounted future minimum lease commitments in connection with the acquisition of 21CF and consolidation of Hulu.

Improvements to Accounting for Costs of Films and License Agreements for Program Materials

In March 2019, the FASB updated guidance for the accounting for film and television content costs. The new guidance impacts the capitalization, amortization and impairment of these costs as follows:

• Eliminates the limitation on capitalization of production costs for episodic content, aligning the capitalization model with film content;

• Requires production costs amortized using estimated usage to be reviewed and updated each reporting period, with any changes in estimated usage applied prospectively; and

• Requires produced and acquired programming costs to be tested for impairment based on the lowest level of identifiable cash flows using the predominant monetization strategy for the produced content (i.e., monetized individually or in a group)

While we currently do not expect the new guidance will have a material impact on our financial statements, it is relevant to the accounting for content to be used on our streaming services. The guidance is effective at the beginning of the Company’s 2021 fiscal year (with early adoption permitted) and requires prospective adoption. The Company plans to adopt the new guidance by the beginning of fiscal 2020.