Analyzing and Interpreting Disclosures on Equity Method Investments Assume Cater
ID: 2556873 • Letter: A
Question
Analyzing and Interpreting Disclosures on Equity Method Investments
Assume Caterpillar, Inc. (CAT) reports investments in affiliated companies, consisting mainly of its 50% ownership of Shin Caterpillar Mitsubishi, Ltd. Caterpillar reports those investments on its balance sheet at $572 million, and provides the following footnote in its 10-K report.
Investments in unconsolidated affiliated companies
Our investments in affiliated companies accounted for by the equity method consist primarily of a 50% interest in Shin Caterpillar Mitsubishi Ltd. (SCM) located in Japan. Combined financial information of the unconsolidated affiliated companies accounted for by the equity method (generally on a three-month lag, e.g., SCM results reflect the periods ending September 30) was as follows:
Sales from SCM to Caterpillar of approximately $1.67 billion, $1.81 billion and $1.73 billion in 2011, 2010 and 2009 respectively, are included in the affiliated company sales. In addition, SCM purchased $268 million, $273 million and $282 million of products from Caterpillar in 2011, 2010 and 2009, respectively.
(a) What assets and liabilities of unconsolidated affiliates are included on CAT's balance sheet as a result of the equity method of accounting for those investments?
AssetsAnswer
($ millions)
Years Ended December 31 (Millions of Dollars) 2011 2010 2009 Results of operations: Sales $ 4,007 $ 4,420 $ 4,140 Cost of sales 3,210 3,526 3,257 Gross profit $ 797 $ 894 $ 883 Profit $ 157 $ 187 $ 161 Caterpillar's profit $ 74 $ 81 $ 73Explanation / Answer
Assets and liabilities of unconsolidated affiliates that are included on CAT's balance sheet as a result of the equity method of accounting for those investments is
572 ($ million)
It is specified in the question that caterpillar's investment in unconsolidated affiliated companies according to investment in equity method companies in 2011 is 572.