Equity Method Investments

9 Months Ended

Sep. 30, 2018

Equity Method Investments and Joint Ventures [Abstract]

Note 6. Equity Method Investments

Our investments accounted for under the equity method of accounting totaled $7,006 million as of September 30, 2018 and $6,193 million as of December 31, 2017. Our largest investments are in Jacobs Douwe Egberts (“JDE”) and Keurig Dr Pepper Inc. (NYSE: "KDP”).

JDE:

As of September 30, 2018, we held a 26.5% voting interest, a 26.4% ownership interest and a 26.3% profit and dividend sharing interest in JDE. We recorded JDE equity earnings of $38 million in the third quarter of 2018 and $50 million in the third quarter of 2017 and $126 million in the first nine months of 2018 and $88 million in the first nine months of 2017. We also recorded $73 million of cash dividends received during the first quarter of 2018 and $49 million of cash dividends received during the first quarter of 2017.

Keurig Dr Pepper Transaction:

On July 9, 2018, Keurig Green Mountain, Inc. ("Keurig") closed on its definitive merger agreement with Dr Pepper Snapple Group, Inc., and formed KDP, a publicly traded company. Following the close of the transaction, our 24.2% investment in Keurig together with our shareholder loan receivable became a 13.8% investment in KDP. During the third quarter of 2018, we recorded a preliminary pre-tax gain of $757 million reported as a gain on equity method transaction and $184 million of deferred tax expense reported in the provision for income taxes (or $573 million after-tax gain) related to the change in our ownership interest while KDP finalizes the valuation for the transaction. We hold two director positions on the KDP board as well as additional governance rights. As we continue to have significant influence, we continue to account for our investment in KDP under the equity method, resulting in recognizing our share of their earnings within our earnings and our share of their dividends within our cash flows. In connection with this transaction, we changed our accounting principle to reflect our share of Keurig's historical and KDP's ongoing earnings on a one-quarter lag basis while we continue to record dividends when cash is received. We determined a lag was preferable as it enables us to continue to report our quarterly and annual results on a timely basis and to record our share of KDP’s ongoing results once KDP has publicly reported its results. This change in accounting principle was applied retrospectively to all periods. While our operating income did not change, equity method investment net earnings, net earnings and earnings per share have been adjusted to reflect the lag across all reported periods. The following tables show the primary line items on the condensed consolidated

statements of earnings and comprehensive earnings and the condensed consolidated balance sheet that changed as a result of the lag. The condensed consolidated statements of cash flow and equity were also updated to reflect these changes.



	For the Three Months Ended September 30, 2017				For the Nine Months Ended September 30, 2017
	As Reported		As Adjusted		As Reported		As Adjusted
	(in millions)
Statements of Earnings
Equity method investment net earnings	$	103	$	92	$	236	$	249
Net earnings	993		982		2,126		2,139
Net earnings attributable to Mondelēz International	992		981		2,120		2,133
Earnings per share attributable to Mondelēz International:
Basic EPS	$	0.66	$	0.65	$	1.40	$	1.41
Diluted EPS	$	0.65	$	0.64	$	1.38	$	1.39

Statements of Other Comprehensive Earnings
Currency translation adjustment	$	337	$	325	$	1,260	$	1,242
Total other comprehensive earnings / (losses)	308		296		1,229		1,211
Comprehensive earnings attributable to Mondelēz International	1,292		1,269		3,325		3,320



	As of December 31, 2017
	As Reported			As Adjusted
	(in millions)
Balance Sheet
Equity method investments	$	6,345		$	6,193
Deferred income taxes	3,376			3,341
Retained earnings	22,749			22,631
Accumulated other comprehensive losses	(9,998		)	(9,997		)
Total Mondelēz International shareholders' equity	26,111			25,994
Total equity	26,191			26,074

As of September 30, 2018, we continue to hold a 13.8% ownership interest in KDP. Our ownership interest in KDP may change over time due to stock-based compensation arrangements and other transactions by KDP. We recorded equity earnings of $21 million in the third quarter of 2018 and equity earnings, shareholder loan interest and cash dividends of $14 million, $6 million and $5 million in the third quarter of 2017. We recorded equity earnings, shareholder loan interest and cash dividends of $191 million, $12 million and $5 million in the first nine months of 2018 and $67 million, $18 million and $11 million in the first nine months of 2017.