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Revenues Revenues
 12 Months Ended
Sep. 28, 2019
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block]
Revenues
At the beginning of fiscal 2019, the Company adopted Financial Accounting Standards Board (FASB) guidance that replaced the existing accounting guidance for revenue recognition with a single comprehensive five-step model (“new revenue guidance”). The core principle is to recognize revenue upon the transfer of control of goods or services to customers at an amount that reflects the consideration expected to be received. We adopted the new revenue guidance using the modified retrospective method; therefore, results for reporting periods beginning after September 30, 2018 are presented under the new revenue guidance, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting. Upon adoption, we recorded a net reduction of $116 million to opening retained earnings in fiscal 2019.
The most significant changes to the Company’s revenue recognition policies resulting from the adoption of the new revenue guidance are as follows:
•
For television and film content licensing agreements with multiple availability windows with the same licensee, the Company now defers more revenue to future windows than under the previous accounting guidance.
•
For licenses of character images, brands and trademarks with minimum guaranteed license fees, the excess of the minimum guaranteed amount over actual amounts earned based on a percentage of the licensee’s underlying sales (“shortfall”) is now recognized straight-line over the remaining license period once an expected shortfall is probable. Previously, shortfalls were recognized at the end of the contract period.
•
For licenses that include multiple television and film titles with a minimum guaranteed license fee across all titles that earns out against the aggregate fees based on the licensee’s underlying sales, the Company now allocates the minimum guaranteed license fee to each title at contract inception and recognizes the allocated license fee as revenue when the title is made available to the customer. License fees earned by titles in excess of their allocated amount are deferred until the minimum guaranteed license fee across all titles is exceeded. Once the minimum guaranteed license fee across all titles is exceeded, license fees are recognized as earned based on the licensee’s underlying sales. Previously, license fees were recognized as earned based on the licensee’s underlying sales with any shortfalls recognized at the end of the contract period.
•
For renewals or extensions of license agreements for television and film content, revenues are now recognized when the licensed content becomes available under the renewal or extension. Previously, revenues were recognized when the agreement was renewed or extended.
The adoption of the new revenue guidance resulted in certain reclassifications on the Condensed Consolidated Balance Sheet. The primary changes are the reclassification of sales returns reserves (previously reported as a reduction of receivables) to other accrued liabilities ($0.2 billion at September 28, 2019) and the reclassification of refundable customer advances (previously reported as deferred revenues) to other accrued liabilities ($1.0 billion at September 28, 2019).
The cumulative effect of adoption at September 29, 2018 and the impact at September 28, 2019 (had we not applied the new revenue guidance) on the Consolidated Balance Sheet is as follows:
 
September 29, 2018
 
September 28, 2019
 
Fiscal 2018 Ending Balances as Reported
 
Effect of Adoption
 
Q1 2019 Opening Balances
 
Balances Assuming
Historical Accounting
 
Impact of New Revenue guidance
 
Q4 2019 Ending Balances as Reported
Assets
 
 
 
 
 
 
 
 
 
 
 
Receivables - current/non-current
$
11,262

 
$
(241
)
 
$
11,021

 
$
18,343

 
$
(66
)
 
$
18,277

Film and television costs and advances - current/non-current
9,202

 
48

 
9,250

 
27,384

 
23

 
27,407

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and other accrued liabilities
9,479

 
1,039

 
10,518

 
16,514

 
1,248

 
17,762

Deferred revenue and other
4,591

 
(1,082
)
 
3,509

 
5,950

 
(1,228
)
 
4,722

Deferred income taxes
3,109

 
(34
)
 
3,075

 
7,919

 
(17
)
 
7,902

Equity
52,832

 
(116
)
 
52,716

 
93,935

 
(46
)
 
93,889


The impact on the Consolidated Statement of Income for fiscal 2019 due to the adoption of the new revenue guidance is as follows:
 
 
Results Assuming
Historical Accounting
 
Impact of New Revenue guidance
 
Reported
Revenues
 
$
69,225

 
$
345

 
$
69,570

Cost and Expenses
 
(57,465
)
 
(254
)
 
(57,719
)
Income Taxes
 
(3,010
)
 
(21
)
 
(3,031
)
Net Income
 
11,514

 
70

 
11,584


The most significant impact was at the Studio Entertainment reflecting a change in the timing of revenue recognition related to film content licensing agreements with multiple availability windows.
The following table presents our revenues by segment and major source:
 
2019
 
Media
Networks
 
Parks, Experiences and Products
 
Studio
Entertainment
 
Direct-to-Consumer & International
 
Eliminations
 
Consolidated
Affiliate fees
$
13,433

 
$
—

 
$
—

 
$
2,740

 
$
(253
)
 
$
15,920

Advertising
6,965

 
6

 
—

 
3,534

 
—

 
10,505

Theme park admissions
—

 
7,540

 
—

 
—

 
—

 
7,540

Resort and vacations
—

 
6,266

 
—

 
—

 
—

 
6,266

Retail and wholesale sales of merchandise, food and beverage
—

 
7,716

 
—

 
—

 
—

 
7,716

TV/SVOD distribution licensing
4,046

 
—

 
2,920

 
404

 
(1,705
)
 
5,665

Theatrical distribution licensing
—

 
—

 
4,726

 
—

 
—

 
4,726

Merchandise licensing
—

 
2,768

 
561

 
51

 
—

 
3,380

Subscription fees
—

 
—

 
—

 
2,244

 
—

 
2,244

Home entertainment
—

 
—

 
1,734

 
97

 
—

 
1,831

Other
383

 
1,929

 
1,186

 
279

 
—

 
3,777

Total revenues
$
24,827

 
$
26,225

 
$
11,127

 
$
9,349

 
$
(1,958
)
 
$
69,570

 
2018
 
Media
Networks
 
Parks, Experiences and Products
 
Studio
Entertainment
 
Direct-to-Consumer & International
 
Eliminations
 
Consolidated
Affiliate fees
$
11,907

 
$
—

 
$
—

 
$
1,372

 
$
—

 
$
13,279

Advertising
6,586

 
7

 
—

 
1,311

 
—

 
7,904

Theme park admissions
—

 
7,183

 
—

 
—

 
—

 
7,183

Resort and vacations
—

 
5,938

 
—

 
—

 
—

 
5,938

Retail and wholesale sales of merchandise, food and beverage
—

 
7,365

 
—

 
—

 
—

 
7,365

TV/SVOD distribution licensing
3,120

 
—

 
2,340

 
105

 
(668
)
 
4,897

Theatrical distribution licensing
—

 
—

 
4,303

 
—

 
—

 
4,303

Merchandise licensing
—

 
2,566

 
556

 
70

 
—

 
3,192

Subscription fees
—

 
—

 
—

 
168

 
—

 
168

Home entertainment
—

 
—

 
1,647

 
103

 
—

 
1,750

Other
309

 
1,642

 
1,219

 
285

 
—

 
3,455

Total revenues
$
21,922

 
$
24,701

 
$
10,065

 
$
3,414

 
$
(668
)
 
$
59,434


Amounts for fiscal 2018 reflect our historical accounting prior to the adoption of the new revenue guidance.
The following table presents our revenues by segment and primary geographical markets:
 
2019
 
Media
Networks
 
Parks, Experiences and Products
 
Studio
Entertainment
 
Direct-to-Consumer & International
 
Eliminations
 
Consolidated
United States and Canada
$
23,623

 
$
19,631

 
$
5,269

 
$
3,671

 
$
(1,639
)
 
$
50,555

Europe
785

 
3,135

 
2,956

 
1,260

 
(130
)
 
8,006

Asia Pacific
275

 
3,222

 
2,121

 
2,367

 
(189
)
 
7,796

Latin America
144

 
237

 
781

 
2,051

 
—

 
3,213

Total revenues
$
24,827

 
$
26,225

 
$
11,127

 
$
9,349

 
$
(1,958
)
 
$
69,570


Revenues recognized in the current year from performance obligations satisfied (or partially satisfied) in previous reporting periods primarily relate to revenues earned on TV/SVOD and theatrical distribution licensee sales on titles made available to the licensee in previous reporting periods. For fiscal 2019, $1.2 billion was recognized related to performance obligations satisfied prior to September 30, 2018.
As of September 28, 2019, revenue for unsatisfied performance obligations expected to be recognized in the future is $16 billion, which primarily relates to content to be delivered in the future under existing agreements with television station affiliates and TV/SVOD licensees. Of this amount, we expect to recognize approximately $7 billion in fiscal 2020, $4 billion in fiscal 2021, $3 billion in fiscal 2022 and $2 billion thereafter. These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (i) contracts with an original expected term of one year or less (such as most advertising contracts) or (ii) licenses of IP that are solely based on the sales of the licensee.
Payment terms vary by the type and location of our customers and the products or services offered. For certain products or services and customer types, we require payment before the products or services are provided to the customer; in other cases, after appropriate credit evaluations, payment is due in arrears. Advertising contracts, which are generally short term, are billed monthly with payments generally due within 30 days. Payments due under affiliate arrangements are calculated monthly and are generally due within 30 days of month end. Home entertainment terms generally include payment within 60 to 90 days of availability date to the customer. Licensing payment terms vary by contract but are generally collected in advance or over the license term. The Company has accounts receivable with original maturities greater than one year related to the sale of film and television program rights and vacation club properties (see Note 15). These receivables are discounted to present value at an appropriate discount rate at contract inception, and the related revenues are recognized at the discounted amount.
When the timing of the Company’s revenue recognition is different from the timing of customer payments, the Company recognizes either a contract asset (customer payment is subsequent to revenue recognition and subject to the Company satisfying additional performance obligations) or deferred revenue (customer payment precedes the Company satisfying the performance obligations). Consideration due under contracts with payment in arrears is recognized as accounts receivable. Deferred revenues are recognized as (or when) the Company performs under the contract. Contract assets, accounts receivable and deferred revenues from contracts with customers are as follows:
 
September 28,
2019
 
September 30,
2018
Contract assets
$
125

 
$
89

Accounts Receivable
 
 
 
Current
12,755

 
8,553

Non-current
1,987

 
1,640

Allowance for doubtful accounts
(327
)
 
(226
)
Deferred revenues
 
 
 
Current
4,050

 
2,926

Non-current
619

 
609


Contract assets primarily relate to certain multi-season TV/SVOD licensing contracts. Activity for fiscal 2019 related to contract assets and the allowance for doubtful accounts was not material.
Deferred revenue primarily relates to non-refundable consideration received in advance for (i) licensing contracts and theme park vacation packages, tickets and annual passes and (ii) the deferral of advertising revenues due to ratings shortfalls. The increase in the deferred revenue balance at September 28, 2019 was primarily due to the receipt of additional prepaid park admissions, advances on certain licensing arrangements and non-refundable travel deposits, as well as the acquisition of TFCF and consolidation of Hulu (see Note 4). The acquisition of TFCF and consolidation of Hulu increased deferred revenues by $0.6 billion, of which $0.4 billion was recognized during fiscal 2019. For fiscal 2019, the Company recognized revenues of $2.7 billion primarily related to licensing advances, theme park admissions and vacation packages included in the deferred revenue balance at September 30, 2018.