Valuation
Measuring and Managing the Value of Companies
5th Edition
Chapter 26 Solutions
Nonoperating Expenses, One-Time Charges, Reserves, and Provisions
Version 1.0
April 1, 2010
Chapter 26
Question 1
2009 2008 2007
Procter & Gamble
Annual report, 2009
Selling, general and administrative expense
Selling, general and administrative expense (SG&A) is primarily comprised of marketing expenses, selling expenses, research and
and other miscellaneous operating items. Research and development costs are charged to expense as incurred and were $2,044 in 2009,
$2,212 in 2008, and $2,100 in 2007. Advertising costs, charged to expense as incurred, include worldwide television, print, radio, internet
and in-store advertising expenses and were $7,579 in 2009, $8,583 in 2008 and $7,850 in 2007. Non-advertising related components
of the Company’s total marketing spending include costs associated with consumer promotions, product sampling and sales aids, all of
which are included in SG&A, as well as coupons and customer trade funds, which are recorded as reductions to net sales.
Note 2
The amortization of intangible assets for the years ended June 30, 2009, 2008 and 2007 was $648, $649 and $640, respectively.
Source: www.pg.com/en_US/downloads/investors/annual_reports/2009/PG_2009_AnnualReport.pdf.
development costs, administrative and other indirect overhead costs, depreciation and amortization expense on non-manufacturing assets
Chapter 26
Question 2
Balance sheet Reorganized financial statements
ROIC
Chapter 26
Question 3
Today Year 1 Year 2
Today Year 1 Year 2
Chapter 26
Question 4
Commentary
The treatment of consecutive restructuring charges is a judgment call. The key assessment is whether or not the restructuring charges
will continue and whether or not they are cash. For instance, many restructuring charges are layoGs and asset write-oGs. To forecast cash
How, determine the level of future severance and any tax impacts from asset write-oGs. These should be included in the valuation.