Analyzing the Effect of Major Events on Financial Statements

This presentation provides a financial statement analysis of two major events affecting organizations: Facebook's acquisition of Instagram in 2012 and Kellogg's acquisition of Pringles. It examines the effects of these events on the companies' income statements, balance sheets, and cash flow statements. The analysis of the Facebook-Instagram merger highlights the increase in revenue and brand value for Facebook, as well as the impact on cash flow and earnings per share. The Kellogg's-Pringles acquisition analysis discusses the strategic reasons behind the merger, the increase in overall revenue, and the short-term impact on the company's stock price and profitability. The presentation references academic sources and provides a framework for understanding how major events influence financial reporting.

Financial Statement
Analysis
Name of the student-
Date – 02/04/2018

Introduction
• Facebook is the giant of the technology world and is
popular worldwide. It is a phenomenon, more than an app
and has been able to connect people all over the world.
• Instagram is the worlds most popular photo sharing app
and has been a success among the masses, the standalone
value of the company is more than millions.
• Both the tech giants collaborated when Facebook acquired
Instagram in 2012

Facebook + Instagram
• Both the companies were doing extremely good in their
fields and were having big brand value.
• Facebook in 2012, acquired Instagram for $1 billion, making
it one of the largest acquisition of the year.
• A lot of companies had approached Instgram before for a
tie up, but nothing was finalized.
• Facebook paid $1 billion, but in return it was able to tap in
the enormous amount of revenue, the traffic, the followers
that Instagram had.

Effect on the financial Statements.
• Facebook was earning a lot of revenue even before 2012,
but after acquiring Instagram it was able to develop itself
as a brand equivalent to Google, that had properties and
brand which held their individual stand.
• If we go through the Income statement, we see a lot of
changes have taken place since 2012 and that is very well
reflected in the overall financials of the company.

Effect on the financials of the company
• The effect on the cash flow was negative as we see that
there was a decrease in the net operating income of
1miilion, this was because the company had to pay an
amount of $1billion to acquire the new company.
• It can also be seen that there was an increase in the selling
and administrative expenses of $1billion, owing to the
buying of Instagram
• The Eps of the company had increased from 0.02 to 0.62,
this was good from the investors point of view .

Financial analysis on the overall effect
on the company
• If we go through the balance sheet of the company, it can
be seen that net assets of the company had increased
considerably from 15.1B in 2012, to around 17.9B in 2013,
the net increase was in the total cash amount that
increased more than 1.5B in one year.
• The accrued expenses of the company had also increased
considerably which had affected the overall payables of the
company.

Kellogg's acquiring Pringles
• Kellogg is one of the biggest brands that people associate
with food items, it has been in business since more than
decades and has been consistently doing great business.
• Pringles are owned by Procter and Gamble, and are a very
famous chips brand.
• On February 2012, Kellogg’s acquired Pringles and made
way for a great food association, that was healthy and tasty

Reasons behind the events
• Pringles had a global presence that was attractive for
Kellogg's in many ways.
• Both the companies shared similar views and principles and
could make sue of the synergies of scale, given their overall
increase in the manufacturing and production capacity post
the merger.
• It was helpful in Kellogg's becoming the global lead, that it
wanted to become since a very long time.

Effect on Financial Statement
• It helped in the overall growth of the company, and the
overall revenue for the company tripled.
• The overall net sales increased from $13198 to $14197 in
2012, also the net cash flow also increased from $1758 to
$1595.
• There was an decrease in the overall stock price for the
company that increased from range $ 48-58, to the range
of $ 46-57 $. This may be because it was a strategic
decision taken by the company and the market will take
some time to adapt to the same.

Effect on financial Statements
• The company acquired Pringles for a sum of ) for $2.668 billion,
including working capital adjustments, which was funded from
cash-onhand and the issuance of $2.3 billion of short and long-
term debt.
• Since the acquisition of the Pringle business, the net accounting
sales increased by 2.5%. The company experienced great
business in areas like North America, Latin America, and most of
Asia Pacific.
• There was a negative impact on the underlying profit for the
company that decreased by 5.7%, that was in line with the
expectations of the company.

References
• Abbott, M. & Kantor, A., 2017. Fair Value Measurement and Mandated Accounting Changes: The Case of the
Victorian Rail Track Corporation. Australian accounting Review.
• Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp. 411-431.
• Anon., 2017. Explaining auditors’ propensity to issue going-concern opinions in Australia after the global financial
crisis. Accunting and Finance, pp. Carson,E;Fargher,N;Zhang,Y;.
• Cayon, E., Thorp, S. & Wu, E., 2017. Immunity and infection: Emerging and developed market sovereign spreads
over the Global Financial Crisis. Emerging Markets Review.
• Chariri, A., 2017. FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING ACCOUNTING WITHIN
INSTITUTIONAL FRAMEWORK. Journal of Economics, Business and Accountancy, 14(1).
• Chiapello, E., 2017. Critical accounting research and neoliberalism. Critical Perspectives on Accounting, Volume
43, pp. 47-64.
• Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6),
pp. 617-632.
• Maynard, J., 2017. Financial accounting reporting and analysis. second ed. United Kingdom: Oxford University
Press.
• Vieira, R., O’Dwyer, B. & Schneider, R., 2017. Aligning Strategy and Performance Management Systems. SAGE
Journals, 30(1).