Item 16. Form 10-K Summary

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Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			THE WALT DISNEY COMPANY
			(Registrant)
Date:	November 25, 2020	By:	/s/ ROBERT A. Chapek
			(Robert A. Chapek,
			Chief Executive Officer and Director)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date

Principal Executive Officer
/s/ ROBERT A. CHAPEK	Chief Executive Officer and Director	November 25, 2020
(Robert A. Chapek)

Principal Financial and Accounting Officers
/s/ CHRISTINE M. MCCARTHY	Senior Executive Vice President and Chief Financial Officer	November 25, 2020
(Christine M. McCarthy)

/s/ BRENT A. WOODFORD	Executive Vice President-Controllership, Financial Planning and Tax	November 25, 2020
(Brent A. Woodford)

Directors
/s/ SUSAN E. ARNOLD	Director	November 25, 2020
(Susan E. Arnold)

/s/ MARY T. BARRA	Director	November 25, 2020
(Mary T. Barra)

/s/ SAFRA A. CATZ	Director	November 25, 2020
(Safra A. Catz)




/s/ FRANCIS A. DESOUZA	Director	November 25, 2020
(Francis A. deSouza)

/s/ MICHAEL FROMAN	Director	November 25, 2020
(Michael Froman)

/s/ ROBERT A. IGER	Executive Chairman, Chairman of the Board and Director	November 25, 2020
(Robert A. Iger)

/s/ MARIA ELENA LAGOMASINO	Director	November 25, 2020
(Maria Elena Lagomasino)










/s/ MARK G. PARKER	Director	November 25, 2020
(Mark G. Parker)

/s/ DERICA W. RICE	Director	November 25, 2020
(Derica W. Rice)

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THE WALT DISNEY COMPANY AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA


			Page
Management’s Report on Internal Control Over Financial Reporting			71
Report of Independent Registered Public Accounting Firm			72
Consolidated Financial Statements of The Walt Disney Company and Subsidiaries
Consolidated Statements of Operations for the Years Ended October 3, 2020, September 28, 2019 and September 29, 2018			74
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended October 3, 2020, September 28, 2019 and September 29, 2018			75
Consolidated Balance Sheets as of October 3, 2020 and September 28, 2019			76
Consolidated Statements of Cash Flows for the Years Ended October 3, 2020, September 28, 2019 and September 29, 2018			77
Consolidated Statements of Shareholders’ Equity for the Years Ended October 3, 2020, September 28, 2019 and September 29, 2018			78
Notes to Consolidated Financial Statements			79
Quarterly Financial Summary (unaudited)			133

All schedules are omitted for the reason that they are not applicable or the required information is included in the financial statements or notes.

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on our evaluation under the framework in Internal Control - Integrated Framework, management concluded that our internal control over financial reporting was effective as of October 3, 2020.

The effectiveness of our internal control over financial reporting as of October 3, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of The Walt Disney Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of The Walt Disney Company and its subsidiaries (the “Company”) as of October 3, 2020 and September 28, 2019, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended October 3, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of October 3, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 3, 2020 and September 28, 2019, and the results of its operations and its cash flows for each of the three years in the period ended October 3, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 3, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in fiscal year 2020.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill – Interim Impairment Assessment for International Channels Reporting Unit

As described in Notes 2, 4 and 19 to the consolidated financial statements, the Company’s consolidated goodwill balance was $77.7 billion as of October 3, 2020. Management tests goodwill for impairment on an annual basis, and if current events or circumstances require, on an interim basis. In the third quarter of fiscal 2020, management performed an impairment test of the International Channels’ goodwill. The carrying value of the International Channels exceeded the fair value and management recorded a non-cash impairment charge of $3.1 billion to fully impair the International Channels reporting unit goodwill. The fair value was determined using a discounted cash flow analysis. The determination of fair value required management to make assumptions and estimates about how market participants would value the International Channels. The more sensitive inputs used in the discounted cash flow analysis include future revenue growth and projected margins as well as the discount rates used to calculate the present value of future cash flows.

The principal considerations for our determination that performing procedures relating to the goodwill interim impairment assessment of the International Channels reporting unit is a critical audit matter are the significant judgment required of management when determining the fair value of the International Channels reporting unit, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumptions related to future revenue growth, projected margins, and the discount rates used in the fair value measurement of the International Channels reporting unit. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill interim impairment assessment, including controls over the valuation of the International Channels reporting unit. These procedures also included, among others, testing management’s process for determining the fair value estimates, which included (i) evaluating the appropriateness of the discounted cash flow model; (ii) testing the completeness and accuracy of underlying data used in the model; and (iii) evaluating the significant assumptions used by management related to the future revenue growth, projected margins and discount rates. Evaluating management’s assumptions related to future revenue growth and projected margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discount rates.

Amortization of Produced Content Cost – Predominantly Monetized as a Group

As described in Note 8 to the consolidated financial statements, the Company produces content for its Direct-to-Consumer (“DTC”) streaming services and linear television networks. The Company generally classifies the content that is initially intended for use on their DTC services or on their linear television networks as group assets. Production costs predominantly monetized as a group are amortized based on projected usage (which may be, for example, derived from historical viewership patterns), typically resulting in an accelerated or straight-line amortization pattern. For the year ended October 3, 2020, the Company recognized $5.0 billion of amortization expense related to produced content cost predominantly monetized as a group, which is primarily included in “Cost of services” in the Consolidated Statements of Operations.

The principal considerations for our determination that performing procedures relating to amortization of produced content costs predominantly monetized as a group is a critical audit matter are the high degree of auditor subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s estimate of projected usage used in the amortization calculation.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

November 25, 2020

We have served as the Company’s auditor since 1938.

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CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)


	2020		2019		2018
Revenues:
Services	$	59,265	$	60,579	$	50,869
Products	6,123		9,028		8,565
Total revenues	65,388		69,607		59,434
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)	(39,406)		(36,493)		(27,528)
Cost of products (exclusive of depreciation and amortization)	(4,474)		(5,568)		(5,198)
Selling, general, administrative and other	(12,369)		(11,549)		(8,860)
Depreciation and amortization	(5,345)		(4,167)		(3,011)
Total costs and expenses	(61,594)		(57,777)		(44,597)
Restructuring and impairment charges	(5,735)		(1,183)		(33)
Other income, net	1,038		4,357		601
Interest expense, net	(1,491)		(978)		(574)
Equity in the income (loss) of investees	651		(103)		(102)
Income (loss) from continuing operations before income taxes	(1,743)		13,923		14,729
Income taxes on continuing operations	(699)		(3,026)		(1,663)
Net income (loss) from continuing operations	(2,442)		10,897		13,066
Income (loss) from discontinued operations, net of income tax benefit (expense) of $10, ($39) and $0, respectively	(32)		687		—
Net income (loss)	(2,474)		11,584		13,066
Net income from continuing operations attributable to noncontrolling and redeemable noncontrolling interests	(390)		(472)		(468)
Net income from discontinued operations attributable to noncontrolling interests	—		(58)		—
Net income (loss) attributable to The Walt Disney Company (Disney)	$	(2,864)	$	11,054	$	12,598

Earnings (loss) per share attributable to Disney(1):
Diluted
Continuing operations	$	(1.57)	$	6.26	$	8.36
Discontinued operations	(0.02)		0.38		—
	$	(1.58)	$	6.64	$	8.36

Basic
Continuing operations	$	(1.57)	$	6.30	$	8.40
Discontinued operations	(0.02)		0.38		—
	$	(1.58)	$	6.68	$	8.40

Weighted average number of common and common equivalent shares outstanding:
Diluted	1,808		1,666		1,507
Basic	1,808		1,656		1,499

(1)Total may not equal the sum of the column due to rounding.

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)


	2020		2019		2018
Net income (loss)	$	(2,474)	$	11,584	$	13,066
Other comprehensive income (loss), net of tax:

Market value adjustments, primarily for hedges	(251)		(37)		214
Pension and postretirement medical plan adjustments	(1,476)		(2,446)		434
Foreign currency translation and other	115		(396)		(289)
Other comprehensive income (loss)	(1,612)		(2,879)		359
Comprehensive income (loss)	(4,086)		8,705		13,425
Net income from continuing operations attributable to noncontrolling interests	(390)		(530)		(468)
Other comprehensive income (loss) attributable to noncontrolling interests	(93)		65		72
Comprehensive income (loss) attributable to Disney	$	(4,569)	$	8,240	$	13,029

See Notes to Consolidated Financial Statements

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CONSOLIDATED BALANCE SHEETS

(in millions, except share data)


	October 3, 2020		September 28, 2019
ASSETS
Current assets
Cash and cash equivalents	$	17,914	$	5,418
Receivables	12,708		15,481
Inventories	1,583		1,649
Licensed content costs and advances	2,171		4,597

Other current assets	875		979

Total current assets	35,251		28,124
Produced and licensed content costs	25,022		22,810
Investments	3,903		3,224
Parks, resorts and other property
Attractions, buildings and equipment	62,111		58,589
Accumulated depreciation	(35,517)		(32,415)
	26,594		26,174
Projects in progress	4,449		4,264
Land	1,035		1,165
	32,078		31,603
Intangible assets, net	19,173		23,215
Goodwill	77,689		80,293

Other assets	8,433		4,715
Total assets	$	201,549	$	193,984

LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities	$	16,801	$	17,762
Current portion of borrowings	5,711		8,857
Deferred revenue and other	4,116		4,722

Total current liabilities	26,628		31,341
Borrowings	52,917		38,129
Deferred income taxes	7,288		7,902

Other long-term liabilities	17,204		13,760
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests	9,249		8,963
Equity
Preferred stock	—		—
Common stock, $.01 par value, Authorized – 4.6 billion shares, Issued – 1.8 billion shares	54,497		53,907
Retained earnings	38,315		42,494
Accumulated other comprehensive loss	(8,322)		(6,617)
Treasury stock, at cost, 19 million shares	(907)		(907)
Total Disney Shareholders’ equity	83,583		88,877
Noncontrolling interests	4,680		5,012
Total equity	88,263		93,889
Total liabilities and equity	$	201,549	$	193,984

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	2020		2019		2018
OPERATING ACTIVITIES
Net income (loss) from continuing operations	$	(2,442)	$	10,897	$	13,066
Depreciation and amortization	5,345		4,167		3,011
Goodwill and intangible asset impairments	4,953		—		—
Net gain on investments, acquisitions and dispositions	(920)		(4,733)		(560)
Deferred income taxes	(392)		117		(1,573)
Equity in the (income) loss of investees	(651)		103		102
Cash distributions received from equity investees	774		754		775
Net change in produced and licensed content costs and advances	397		(542)		(523)
Net change in operating lease right of use assets / liabilities	31		—		—
Equity-based compensation	525		711		393
Other	641		154		441
Changes in operating assets and liabilities, net of business acquisitions:
Receivables	1,943		55		(720)
Inventories	14		(223)		(17)
Other assets	(157)		932		(927)
Accounts payable and other liabilities	(2,293)		191		235
Income taxes	(152)		(6,599)		592
Cash provided by operations - continuing operations	7,616		5,984		14,295

INVESTING ACTIVITIES
Investments in parks, resorts and other property	(4,022)		(4,876)		(4,465)

Acquisitions	—		(9,901)		(1,581)
Other	172		(319)		710
Cash used in investing activities - continuing operations	(3,850)		(15,096)		(5,336)

FINANCING ACTIVITIES
Commercial paper borrowings (payments), net	(3,354)		4,318		(1,768)
Borrowings	18,120		38,240		1,056
Reduction of borrowings	(3,533)		(38,881)		(1,871)
Dividends	(1,587)		(2,895)		(2,515)
Repurchases of common stock	—		—		(3,577)
Proceeds from exercise of stock options	305		318		210
Contributions from / sales of noncontrolling interests	94		737		399
Acquisition of noncontrolling and redeemable noncontrolling interests	—		(1,430)		—
Other	(1,565)		(871)		(777)
Cash provided by (used in) financing activities - continuing operations	8,480		(464)		(8,843)

CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash provided by operations - discontinued operations	2		622		—
Cash provided by investing activities - discontinued operations	213		10,978		—
Cash used in financing activities - discontinued operations	—		(626)		—
Cash provided by discontinued operations	215		10,974		—

Impact of exchange rates on cash, cash equivalents and restricted cash	38		(98)		(25)

Change in cash, cash equivalents and restricted cash	12,499		1,300		91
Cash, cash equivalents and restricted cash, beginning of year	5,455		4,155		4,064
Cash, cash equivalents and restricted cash, end of year	$	17,954	$	5,455	$	4,155

Supplemental disclosure of cash flow information:
Interest paid	$	1,559	$	1,142	$	631
Income taxes paid	$	738	$	9,259	$	2,503

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in millions)


	Equity Attributable to Disney
	Shares	Common Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock		Total Disney Equity		Non-controlling Interests(1)		Total Equity
Balance at September 30, 2017	1,517	$	36,248	$	72,606		$	(3,528)	$	(64,011)	$	41,315	$	3,689	$	45,004
Comprehensive income	—	—		12,598			431		—		13,029		425		13,454
Equity compensation activity	6	518		—			—		—		518		—		518
Common stock repurchases	(35)	—		—			—		(3,577)		(3,577)		—		(3,577)
Dividends	—	14		(2,529)			—		—		(2,515)		—		(2,515)
Contributions	—	—		—			—		—		—		488		488
Distributions and other	—	(1)		4			—		—		3		(543)		(540)
Balance at September 29, 2018	1,488	$	36,779	$	82,679		$	(3,097)	$	(67,588)	$	48,773	$	4,059	$	52,832
Comprehensive income	—	—		11,054			(2,814)		—		8,240		371		8,611
Equity compensation activity	7	912		—			—		—		912		—		912
Dividends	—	18		(2,913)			—		—		(2,895)		—		(2,895)
Contributions	—	—		—			—		—		—		737		737
Acquisition of TFCF	307	33,774		—			—		—		33,774		10,408		44,182
Adoption of new accounting guidance:
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	—	—		691			(691)		—		—		—		—
Intra-Entity Transfers of Assets Other Than Inventory	—	—		192			—		—		192		—		192
Revenues from Contracts with Customers	—	—		(116)			—		—		(116)		—		(116)
Other	—	—		22			(15)		—		7		—		7
Retirement of treasury stock	—	(17,563)		(49,118)			—		66,681		—		—		—
Reclassification to redeemable noncontrolling interest	—	—		—			—		—		—		(7,770)		(7,770)
Redemption of noncontrolling interest	—	—		—			—		—		—		(1,430)		(1,430)
Sales of the RSNs	—	—		—			—		—		—		(744)		(744)
Distributions and other	—	(13)		3			—		—		(10)		(619)		(629)
Balance at September 28, 2019	1,802	$	53,907	$	42,494		$	(6,617)	$	(907)	$	88,877	$	5,012	$	93,889
Comprehensive income (loss)	—	—		(2,864)			(1,705)		—		(4,569)		198		(4,371)
Equity compensation activity	8	590		—			—		—		590		—		590

Dividends	—	9		(1,596)			—		—		(1,587)		—		(1,587)
Contributions	—	—		—			—		—		—		94		94
Adoption of new lease accounting guidance	—	—		197			—		—		197		—		197
Distributions and other	—	(9)		84			—		—		75		(624)		(549)
Balance at October 3, 2020	1,810	$	54,497	$	38,315		$	(8,322)	$	(907)	$	83,583	$	4,680	$	88,263

(1)Excludes redeemable noncontrolling interest

See Notes to Consolidated Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollars in millions, except where noted and per share amounts)

1Description of the Business and Segment Information

The Walt Disney Company, together with the subsidiaries through which businesses are conducted (the Company), is a diversified worldwide entertainment company with operations in the following business segments: Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-to-Consumer & International (DTCI). In October 2020, the Company announced a strategic reorganization of our media and entertainment businesses to accelerate the growth of our direct-to-consumer (DTC) strategy. The operations of the Media Networks, Studio Entertainment and DTCI segments were reorganized into four groups: three content groups (Studios, General Entertainment and Sports), which are focused on developing and producing content that will be used across all of our traditional and DTC platforms and a distribution group, which is focused on distribution and commercialization activities across these platforms and which has full accountability for media and entertainment operating results globally.

The terms “Company”, “we”, “our” and “us” are used in this report to refer collectively to the parent company and the subsidiaries through which various businesses are conducted. The term “TWDC” is used to refer to the parent company.

Impact of COVID-19

During fiscal 2020 and continuing into fiscal 2021, the world has been, and continues to be, impacted by the novel coronavirus (COVID-19) pandemic. COVID-19 and measures to prevent its spread impacted our segments in a number of ways, most significantly at Parks, Experiences and Products where our theme parks were closed or operating at significantly reduced capacity for a significant portion of the year, cruise ship sailings and guided tours were suspended since late in the second quarter and retail stores were closed for a significant portion of the year. We also had an adverse impact on our merchandise licensing business. Our Studio Entertainment segment has delayed, or in some cases, shortened or cancelled, theatrical releases, and stage play performances have been suspended since late in the second quarter. We also had adverse impacts on advertising sales at Media Networks and Direct-to-Consumer & International. Since March 2020, we have experienced significant disruptions in the production and availability of content, including the shift of key live sports programming from our third quarter to the fourth quarter and into fiscal 2021 as well as the suspension of production of most film and television content since late in the second quarter, although some film and television production resumed in the fourth quarter.

The impact of these disruptions and the extent of their adverse impact on our financial and operating results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration and severity of the impacts of COVID-19, and among other things, the impact of governmental actions imposed in response to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward. As some of our businesses have reopened, we have incurred additional costs to address government regulations and the safety of our employees, talent and guests.

In fiscal 2020, the Company recorded goodwill and intangible asset impairments totaling $5.0 billion, in part due to the negative impact COVID-19 has had on the International Channels business (see Note 19).

Acquisition of TFCF

On March 20, 2019, the Company acquired Twenty-First Century Fox, Inc., a diversified global media and entertainment company, which was subsequently renamed TFCF Corporation (TFCF). Prior to the acquisition, TFCF and a newly-formed subsidiary of TFCF (New Fox) entered into a separation agreement, pursuant to which TFCF transferred to New Fox a portfolio of TFCF’s news, sports and broadcast businesses and certain other assets. TFCF retained all of the assets and liabilities not transferred to New Fox, the most significant of which were the Twentieth Century Fox film and television studios, certain cable networks (primarily FX and National Geographic), TFCF’s international television businesses (including Star) and TFCF’s 30% interest in Hulu LLC (Hulu). Under the terms of the agreement governing the acquisition, the Company will generally phase-out Fox brands by 2024, but has perpetual rights to certain Fox brands, including Twentieth Century Fox and Fox Searchlight, although these have been rebranded to Twentieth Century Studios and Searchlight Pictures, respectively.

As a result of the acquisition, the Company’s ownership in Hulu LLC (Hulu) increased from 30% to 60% (67% as of October 3, 2020 and September 28, 2019). The acquired TFCF operations and Hulu have been consolidated since the acquisition.

In order to obtain regulatory approval for the acquisition, the Company agreed to sell TFCF’s domestic regional sports networks (RSNs) (sold in August 2019 for approximately $11 billion) and sports media operations in Brazil and Mexico. In addition, the Company agreed to divest its interest in certain European cable channels that were controlled by A+E Television Networks (A+E) (sold in April 2019 for an amount that was not material). In the third quarter of fiscal 2020, the Company

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received regulatory approval to retain the sports media operation in Brazil. The RSNs and sports media operation in Mexico, along with certain other businesses to be divested, are presented as discontinued operations in the Consolidated Statements of Operations. At October 3, 2020 and September 28, 2019, the assets and liabilities of the businesses held for sale are not material and are included in other assets and other liabilities in the Consolidated Balance Sheets. The sports media operation in Brazil was previously presented as discontinued operations, with its assets and liabilities considered held for sale, but is now reported as continuing operations in the current and prior periods. The impact on the previously reported Consolidated Statements of Operations, Consolidated Balance Sheets and Consolidated Statements of Cash Flows was not material.

See Note 4 for additional information on these transactions.

DESCRIPTION OF THE BUSINESS

Media Networks

Significant operations:

Disney, ESPN, Freeform, FX and National Geographic branded domestic cable networks
ABC branded broadcast television network and eight owned domestic television stations
Television production and distribution
A 50% equity investment in A+E

Significant revenues:

Affiliate fees - Fees charged to multi-channel video programming distributors (i.e. cable, satellite, telecommunications and digital over-the-top (e.g. Hulu, YouTube TV) service providers) (MVPDs) and to television stations affiliated with the ABC Network for the right to deliver our programming to their customers
Advertising - Sales of advertising time/space on our domestic networks and related platforms (“ratings-based ad sales”, which excludes advertising on digital platforms that is not ratings-based) and the sale of advertising time on our domestic television stations. Ratings-based ad sales are generally determined using viewership measured with Nielsen ratings. Non-ratings-based advertising on digital platforms is reported by DTCI
TV/SVOD distribution - Licensing fees and other revenues from the right to use our television programs and productions and revenue from content transactions with other Company segments (“program sales”)

Significant expenses:

Operating expenses consisting primarily of programming and production costs, participations and residuals expense, technical support costs, operating labor and distribution costs
Selling, general and administrative costs
Depreciation and amortization

Parks, Experiences and Products

Significant operations:

Parks & Experiences:

◦Theme parks and resorts, which include: Walt Disney World Resort in Florida; Disneyland Resort in California; Disneyland Paris; Hong Kong Disneyland Resort (48% ownership interest); Shanghai Disney Resort (43% ownership interest), all of which are consolidated in our results. Additionally, the Company licenses our intellectual property to a third party to operate Tokyo Disney Resort

◦Disney Cruise Line, Disney Vacation Club, National Geographic Expeditions (73% ownership interest), Adventures by Disney and Aulani, a Disney Resort & Spa in Hawaii

Consumer Products:

◦Licensing of our trade names, characters, visual, literary and other intellectual properties to various manufacturers, game developers, publishers and retailers throughout the world, for use on merchandise, published materials and games

◦Sale of branded merchandise through retail, online and wholesale businesses, and development and publishing of books, comic books and magazines (except National Geographic, which is reported in Media Networks)

Significant revenues:

Theme park admissions - Sales of tickets for admission to our theme parks
Parks & Experiences merchandise, food and beverage - Sales of merchandise, food and beverages at our theme parks and resorts and cruise ships
Resorts and vacations - Sales of room nights at hotels, sales of cruise and other vacations and sales and rentals of vacation club properties

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Merchandise licensing and retail:

◦Merchandise licensing - Royalties from intellectual property licensing

◦Retail - Sales of merchandise at The Disney Stores and through branded internet shopping sites, as well as, to wholesalers (including books, comic books and magazines)

Parks licensing and other - Revenues from sponsorships and co-branding opportunities and real estate rent and sales. In addition, we earn royalties on Tokyo Disney Resort revenues

Significant expenses:

Operating expenses consisting primarily of operating labor, costs of goods sold, infrastructure costs, supplies, commissions and entertainment offerings. Infrastructure costs include information systems expense, repairs and maintenance, property taxes, utilities and fuel, retail occupancy costs, insurance and transportation
Selling, general and administrative costs
Depreciation and amortization

Studio Entertainment

Significant operations:

Motion picture production and distribution under the Walt Disney Pictures, Twentieth Century Studios, Marvel, Lucasfilm, Pixar, Searchlight Pictures and Blue Sky Studios banners
Development, production and licensing of live entertainment events on Broadway and around the world (stage plays)
Music production and distribution
Post-production services through Industrial Light & Magic and Skywalker Sound

Significant revenues:

Theatrical distribution - Rentals from licensing our motion pictures to theaters
Home entertainment - Sale of our motion pictures to retailers and distributors in physical (DVD and Blu-ray) and electronic formats
TV/SVOD distribution and other - Licensing fees and other revenue from the right to use our motion picture productions, revenue from content transactions with other Company segments, ticket sales from stage plays, fees from licensing our intellectual properties for use in live entertainment productions, revenue from licensing our music and revenue from post-production services

Significant expenses:

Operating expenses consisting primarily of amortization of production, participations and residuals costs, distribution costs and costs of sales
Selling, general and administrative costs
Depreciation and amortization

Direct-to-Consumer & International

Significant operations:

Direct-to-consumer (DTC) video streaming services, which include Disney+ / Disney+Hotstar, ESPN+ and Hulu. Disney+ launched in November 2019 in the U.S. and 4 other countries and has expanded to select Western European countries in the Spring of 2020. In April, our Hotstar service in India was converted to Disney+Hotstar, and in June 2020, current subscribers of the Disney Deluxe service in Japan were converted to Disney+. In September 2020, Disney+ was launched in additional European countries and Disney+Hotstar was launched in Indonesia. In November 2020, Disney+ was launched in Latin America. The Company also plans to launch a general entertainment DTC video streaming service under the Star brand outside the U.S. in calendar year 2021
Branded international television networks and channels, which include Disney, ESPN, Fox, National Geographic and Star (International Channels)
Other digital content distribution platforms and services including branded apps and websites, the Disney Movie Club and Disney Digital Network and streaming technology support services
Equity investments:

◦A 50% ownership interest in Endemol Shine Group, which was sold on July 2, 2020

◦A 20% ownership interest (49% economic interest) in Seven TV, which operates an advertising-supported, free-to-air Disney Channel in Russia

◦A 30% effective ownership interest in Tata Sky Limited, which operates a direct-to-home satellite distribution platform in India

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◦An approximate 24% effective ownership interest (14% fully diluted) in Vice Group Holding Inc. (Vice), which is a media company that targets millennial audiences. Vice operates Viceland, which is owned 50% by Vice and 50% by A+E

Significant revenues:

Subscription fees - Fees charged to customers/subscribers for our DTC services
Advertising - Sales of advertising time/space on our International Channels and sales of non-ratings-based advertising time/space on digital media platforms (“addressable ad sales”) across the Company. In general, addressable ad sales are delivered using technology that allows for dynamic insertion of advertisements into video content, which can be targeted to specific viewer groups
Affiliate fees - Fees charged to MVPDs for the right to deliver our International Channels to their customers
TV/SVOD distribution - Program sales, sub-licensing fees for sports programming rights and fees charged to customers to view our sports programming (“pay-per-view”) and Premier Access content

Significant expenses:

Operating expenses consisting primarily of programming and production costs (including amortization of content obtained from other Company segments), technical support costs, operating labor and distribution costs
Selling, general and administrative costs
Depreciation and amortization

SEGMENT INFORMATION

Segment operating results reflect earnings before corporate and unallocated shared expenses, restructuring and impairment charges, net other income, net interest expense, income taxes and noncontrolling interests. Segment operating income includes equity in the income of investees and excludes impairments of certain equity investments and purchase accounting amortization for TFCF and Hulu assets (i.e. intangible assets and the fair value step-up for film and television costs) recognized in connection with the TFCF acquisition. Corporate and unallocated shared expenses principally consist of corporate functions, executive management and certain unallocated administrative support functions.

Segment operating results include allocations of certain costs, including information technology, pension, legal and other shared services costs, which are allocated based on metrics designed to correlate with consumption.

Intersegment content transactions are presented “gross” (i.e. the segment producing the content reports revenue and profit from intersegment transactions, and the required eliminations are reported on a separate “Eliminations” line when presenting a summary of our segment results). Other intersegment transactions are reported “Net” (i.e. revenue from another segment is recorded as a reduction of costs). Studio Entertainment revenues and operating income include an allocation of Parks, Experiences and Products revenues, which is meant to reflect royalties on revenue generated by Parks, Experiences and Products on merchandise based on intellectual property from Studio Entertainment films.

As it relates to film and television content that is produced by our Media Networks and Studio Entertainment segments that will be used on our DTC services, there are four broad categories of content:

Content produced for exclusive DTC use, “Originals”;
New Studio Entertainment theatrical releases following the theatrical and home entertainment windows, “Studio Pay 1”;
New Media Networks episodic television series following their initial airing on our linear networks, “Media Pay 1”; and
Content in all other windows, “Library”.

The intersegment transfer price, for purposes of segment financial reporting pursuant to ASC 280 Segment Reporting, is generally cost plus a margin for Originals and Media Pay 1 content and generally based on comparable transactions for Studio Pay 1 and Library content. Imputed title by title intersegment license fees that may be necessary for other purposes are established as required by those purposes.

Intersegment revenue is recognized upon availability of the content to the DTC service except with respect to Library content for which revenue is recognized ratably over the license period.

Our DTC services generally amortize intersegment content costs for Originals and Studio Pay 1 content on an accelerated basis and for Media Pay 1 and Library content on a straight line basis.

When the DTC amortization timing is different than the timing of revenue recognition at Studio Entertainment or Media Networks, the difference results in an operating income impact in the elimination segment, which nets to zero over the DTC amortization period.

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The following tables provide select segment and regional financial information:


	2020		2019		2018
Revenues
Media Networks	$	28,393	$	24,827	$	21,922
Parks, Experiences and Products
Third parties	17,038		26,786		25,257
Intersegment	(536)		(561)		(556)
	16,502		26,225		24,701
Studio Entertainment
Third parties	9,100		10,566		9,509
Intersegment	536		561		556
	9,636		11,127		10,065

Direct-to-Consumer & International	16,967		9,386		3,414
Eliminations(1)	(6,110)		(1,958)		(668)
Total consolidated revenues	$	65,388	$	69,607	$	59,434
Segment operating income (loss)
Media Networks	$	9,022	$	7,479	$	7,338
Parks, Experiences and Products	(81)		6,758		6,095
Studio Entertainment	2,501		2,686		3,004
Direct-to-Consumer & International	(2,806)		(1,835)		(738)
Eliminations(1)	(528)		(241)		(10)
Total segment operating income(2)	$	8,108	$	14,847	$	15,689
Reconciliation of segment operating income to income from continuing operations before income taxes
Segment operating income	$	8,108	$	14,847	$	15,689
Corporate and unallocated shared expenses	(817)		(987)		(744)
Restructuring and impairment charges	(5,735)		(1,183)		(33)
Other income, net	1,038		4,357		601
Interest expense, net	(1,491)		(978)		(574)
Amortization of TFCF and Hulu intangible assets and fair value step-up on film and television costs(3)	(2,846)		(1,595)		—
Impairment of equity investments(4)	—		(538)		(210)
Income (loss) from continuing operations before income taxes	$	(1,743)	$	13,923	$	14,729
Capital expenditures
Media Networks
Cable Networks	$	61	$	93	$	96
Broadcasting	51		81		107
Parks, Experiences and Products
Domestic	2,145		3,294		3,223
International	759		852		677
Studio Entertainment	77		88		96
Direct-to-Consumer & International	594		258		107
Corporate	335		210		159
Total capital expenditures	$	4,022	$	4,876	$	4,465

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	2020		2019		2018
Depreciation expense
Media Networks	$	203	$	191	$	199
Parks, Experiences and Products
Domestic	1,634		1,474		1,449
International	694		724		768
Studio Entertainment	87		74		55
Direct-to-Consumer & International	348		214		106
Depreciation expense included in segment operating income	2,966		2,677		2,577
Corporate	174		167		181
Total depreciation expense	$	3,140	$	2,844	$	2,758
Amortization of intangible assets
Media Networks	$	4	$	—	$	—
Parks, Experiences and Products	109		108		110
Studio Entertainment	59		61		64
Direct-to-Consumer & International	112		111		79
Amortization of intangible assets included in segment operating income	284		280		253
TFCF and Hulu intangible assets	1,921		1,043		—
Total amortization of intangible assets	$	2,205	$	1,323	$	253

	October 3, 2020		September 28, 2019
Identifiable assets(5)
Media Networks	$	62,220	$	63,519
Parks, Experiences and Products	42,320		41,978
Studio Entertainment	32,811		34,323
Direct-to-Consumer & International	45,538		48,606
Corporate(6)	19,691		6,025
Eliminations	(1,031)		(467)
Total consolidated assets	$	201,549	193,984

	2020		2019		2018
Revenues
Americas	$	51,992	$	53,805	$	46,877
Europe	7,333		8,006		7,026
Asia Pacific	6,063		7,796		5,531

	$	65,388	$	69,607	$	59,434
Segment operating income
Americas	$	5,819	$	10,247	$	11,898
Europe	1,273		2,433		1,922
Asia Pacific	1,016		2,167		1,869

	$	8,108	$	14,847	$	15,689

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	October 3, 2020		September 28, 2019
Long-lived assets(7)
Americas	$	141,674	$	138,674
Europe	7,672		10,793
Asia Pacific	12,235		12,703

	$	161,581	$	162,170

(1)Intersegment content transactions are as follows:


	2020		2019		2018
Revenues:
Studio Entertainment:
Content transactions with Media Networks	$	(188)	$	(106)	$	(169)
Content transactions with Direct-to-Consumer & International	(2,108)		(272)		(28)
Media Networks:
Content transactions with Direct-to-Consumer & International	(3,814)		(1,580)		(471)
Total	$	(6,110)	$	(1,958)	$	(668)

Operating Income:
Studio Entertainment:
Content transactions with Media Networks	$	3	$	(19)	$	(8)
Content transactions with Direct-to-Consumer & International	(158)		(80)		—
Media Networks:
Content transactions with Direct-to-Consumer & International	(373)		(142)		(2)
Total	$	(528)	$	(241)	$	(10)

(2)Equity in the income (loss) of investees is as follows:


	2020		2019		2018
Media Networks	$	737	$	703	$	711
Parks, Experiences and Products	(19)		(13)		(23)
Studio Entertainment	(1)		—		—
Direct-to-Consumer & International	(40)		(240)		(580)
Equity in the income of investees included in segment operating income	677		450		108
Impairment of equity investments	—		(538)		(210)
Amortization of TFCF intangible assets related to equity investees	(26)		(15)		—
Equity in the income (loss) of investees	$	651	$	(103)	$	(102)

(3)For fiscal 2020, amortization of intangible assets, fair value step-up on film and television costs and intangibles related to TFCF equity investees were $1,921 million, $899 million and $26 million respectively. For fiscal 2019, amortization of intangible assets, fair value step-up on film and television costs and intangibles related to TFCF equity investees were $1,043 million, $537 million and $15 million, respectively.

(4)Impairment of equity investments for fiscal 2019 primarily reflects the impairments of Vice Group Holding Inc. and of an investment in a cable channel at A+E Television Networks ($353 million and $170 million, respectively). Impairment of equity investments for fiscal 2018 reflects impairments of Vice Group Holding Inc. and Villages Nature ($157 million and $53 million, respectively).

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(5)Equity method investments included in identifiable assets by segment are as follows:


	October 3, 2020		September 28, 2019
Media Networks	$	2,002	$	2,018
Parks, Experiences and Products	3		3
Studio Entertainment	2		8
Direct-to-Consumer & International	570		821
Corporate	55		72
	$	2,632	$	2,922

Intangible assets included in identifiable assets by segment are as follows:


	October 3, 2020		September 28, 2019
Media Networks	$	7,242	$	7,861
Parks, Experiences and Products	3,066		3,177
Studio Entertainment	2,031		2,140
Direct-to-Consumer & International	6,814		9,962
Corporate	20		75

	$	19,173	$	23,215

(6)Primarily fixed assets and cash and cash equivalents.

(7)Long-lived assets are total assets less: current assets, long-term receivables, deferred taxes, financial investments and the fair value of derivative instruments.

2Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of The Walt Disney Company and its majority-owned or controlled subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The Company enters into relationships with or makes investments in other entities that may be variable interest entities (VIE). A VIE is consolidated in the financial statements if the Company has the power to direct activities that most significantly impact the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant (as defined by ASC 810-10-25-38) to the VIE. Hong Kong Disneyland Resort and Shanghai Disney Resort (together the Asia Theme Parks) are VIEs in which the Company has less than 50% equity ownership. Company subsidiaries (the Management Companies) have management agreements with the Asia Theme Parks, which provide the Management Companies, subject to certain protective rights of joint venture partners, with the ability to direct the day-to-day operating activities and the development of business strategies that we believe most significantly impact the economic performance of the Asia Theme Parks. In addition, the Management Companies receive management fees under these arrangements that we believe could be significant to the Asia Theme Parks. Therefore, the Company has consolidated the Asia Theme Parks in its financial statements.

Reporting Period

The Company’s fiscal year ends on the Saturday closest to September 30 and consists of fifty-two weeks with the exception that approximately every six years, we have a fifty-three week year. When a fifty-three week year occurs, the Company reports the additional week in the fourth quarter. Fiscal 2019 and 2018 were fifty-two week years. Fiscal 2020 is a fifty-three week year, which began on September 29, 2019 and ended on October 3, 2020.

Reclassifications

Certain reclassifications have been made in the fiscal 2019 and fiscal 2018 financial statements and notes to conform to the fiscal 2020 presentation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those estimates.

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Revenues and Costs from Services and Products

The Company generates revenue from the sale of both services and tangible products and revenues and operating costs are classified under these two categories in the Consolidated Statements of Operations. Certain costs related to both the sale of services and tangible products are not specifically allocated between the service or tangible product revenue streams but are instead attributed to the principal revenue stream. The cost of services and tangible products exclude depreciation and amortization.

Significant service revenues include:

Affiliate fees
Advertising revenues
Subscription fees to our DTC streaming services
Revenue from the licensing and distribution of film and television properties
Admissions to our theme parks, charges for room nights at hotels and sales of cruise vacation packages
Licensing of intellectual property for use on consumer merchandise, published materials and in multi-platform games

Significant operating costs related to the sale of services include:

Amortization of programming and production costs and participations and residuals costs
Distribution costs
Operating labor
Facilities and infrastructure costs

Significant tangible product revenues include:

The sale of food, beverage and merchandise at our retail locations
The sale of DVDs and Blu-ray discs
The sale of books, comic books and magazines

Significant operating costs related to the sale of tangible products include:

Costs of goods sold
Amortization of programming and production costs and participations and residuals costs
Distribution costs
Operating labor
Retail occupancy costs

Revenue Recognition

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 fiscal 2019 retained earnings.

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,

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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 impact on the Consolidated Statement of Operations for fiscal 2019 due to the adoption of the new revenue guidance was as follows:


	Results Assuming Historical Accounting		Impact of New Revenue Guidance		Reported
Revenues	$	69,262	$	345	$	69,607
Cost and Expenses	(57,523)		(254)		(57,777)
Income Taxes	(3,005)		(21)		(3,026)
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 Company generates revenue from the sale of both services and products. The Company has four broad categories of service revenues: licenses of rights to use our intellectual property (“IP”), sales to guests at our Parks and Experiences businesses, sales of advertising time/space and subscriptions to DTC services. The Company’s primary product revenues include the sale of food, beverage and merchandise at our parks, resorts and retail stores and the sale of film and television productions in physical formats (DVD and Blu-ray).

The new revenue guidance defines two types of IP licenses: IP that has “standalone functionality,” which is called functional IP, and all other IP, which is called symbolic IP. Revenue related to the license of functional IP is generally recognized upon delivery (availability) of the IP to the customer. The substantial majority of the Company’s film and television content distribution activities at the Media Networks, Studio Entertainment and DTCI segments is considered licensing of functional IP. Revenue related to the license of symbolic IP is generally recognized over the term of the license. The Company’s primary revenue stream derived from symbolic IP is the licensing of trade names, characters and visual and literary properties at the Parks, Experiences and Products segment.

More detailed information about the revenue recognition policies for our key revenues is as follows:

Affiliate fees - Fees charged to affiliates (i.e., MVPDs or television stations) for the right to deliver our television network programming on a continuous basis to their customers are recognized as the programming is provided based on contractually specified per subscriber rates and the actual number of the affiliate’s customers receiving the programming.

For affiliate contracts with fixed license fees, the fees are recognized ratably over the contract term.

If an affiliate contract includes a minimum guaranteed license fee, the guaranteed license fee is recognized ratably over the guaranteed period and any fees earned in excess of the guarantee are recognized as earned once the minimum guarantee has been exceeded.

Affiliate agreements may also include a license to use the network programming for on demand viewing. As the fees charged under these contracts are generally based on a contractually specified per subscriber rate for the number of underlying subscribers of the affiliate, revenues are recognized as earned.

Subscription fees - Fees charged to customers/subscribers and wholesale distributors for our streaming services are recognized ratably over the term of the subscription.
Advertising - Sales of advertising time/space on our television networks, digital platforms and television stations are recognized as revenue, net of agency commissions, when commercials are aired. For contracts that contain a guaranteed number of impressions, revenues are recognized based on impressions delivered. When the guaranteed number of impressions is not met (“ratings shortfall”), revenues are not recognized for the ratings shortfall until the additional impressions are delivered.
Theme park admissions - Sales of theme park tickets are recognized when the tickets are used. Sales of annual passes are recognized ratably over the period for which the pass is available for use.
Resorts and vacations - Sales of hotel room nights and cruise vacations and rentals of vacation club properties are recognized as revenue as the services are provided to the guest. Sales of vacation club properties are recognized as revenue upon the later of when title transfers to the customer or when construction activity is deemed complete.

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Merchandise, food and beverage - Sales of merchandise, food and beverages at our theme parks and resorts, cruise ships and Disney Stores are recognized at the time of sale. Sales from our branded internet shopping sites and to wholesalers are recognized upon delivery. We estimate returns and customer incentives based upon historical return experience, current economic trends and projections of consumer demand for our products.
TV/SVOD distribution licensing - Fixed license fees charged for the right to use our television and film productions are recognized as revenue when the content is available for use by the licensee. License fees based on the underlying sales of the licensee are recognized as revenue as earned based on the contractual royalty rate applied to the licensee sales.

For TV/SVOD licenses that include multiple titles with a fixed license fee across all titles, each title is considered a separate performance obligation. The fixed license fee is allocated to each title at contract inception and the allocated license fee is recognized as revenue when the title is available for use by the licensee.

When the license contains a minimum guaranteed license fee across all titles, the 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 is exceeded, revenue is recognized as earned based on the licensee’s underlying sales.

TV/SVOD distribution contracts may limit the licensee’s use of a title to certain defined periods of time during the contract term. In these instances, each period of availability is generally considered a separate performance obligation. For these contracts, the fixed license fee is allocated to each period of availability at contract inception based on relative standalone selling price using management’s best estimate. Revenue is recognized at the start of each availability period when the content is made available for use by the licensee.

When the term of an existing agreement is renewed or extended, revenues are recognized when the licensed content becomes available under the renewal or extension.

Theatrical distribution licensing - Fees charged for licensing of our films to theatrical distributors are recognized as revenue based on the contractual royalty rate applied to the distributor’s underlying sales from exhibition of the film.
Merchandise licensing - Fees charged for the use of our trade names and characters in connection with the sale of a licensee’s products are recognized as revenue as earned based on the contractual royalty rate applied to the licensee’s underlying product sales. For licenses with minimum guaranteed license fees, the excess of the minimum guaranteed amount over actual royalties earned (“shortfall”) is recognized straight-line over the remaining license period once an expected shortfall is probable.
Home entertainment - Sales of our films to retailers and distributors in physical formats (DVD and Blu-ray) are recognized as revenue on the later of the delivery date or the date that the product can be sold by retailers. We reduce home entertainment revenues for estimated future returns of merchandise and sales incentives based upon historical return experience, current economic trends and projections of consumer demand for our products. Sales of our films in electronic formats are recognized as revenue when the product is available for use by the consumer.
Taxes - Taxes collected from customers and remitted to governmental authorities are excluded from revenue.
Shipping and handling - Fees collected from customers for shipping and handling are recorded as revenue and the related shipping expenses are recorded in cost of products upon delivery of the product to the consumer.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The allowance for doubtful accounts is estimated based on our analysis of trends in overall receivables aging, specific identification of certain receivables that are at risk of not being paid, past collection experience and current economic trends.

Advertising Expense

Advertising costs are expensed as incurred. Advertising expense for fiscal 2020, 2019 and 2018 was $4.7 billion, $4.3 billion and $2.8 billion, respectively. The increase in advertising expense for fiscal 2020 compared to fiscal 2019 was primarily due to the consolidation of TFCF and Hulu, partially offset by lower advertising expense at Studio Entertainment and Parks, Experience and Products segments reflecting the impact of COVID-19 on these segments. The increase in advertising expense for fiscal 2019 compared to fiscal 2018 was primarily due to the consolidation of TFCF and Hulu.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less.

Cash and cash equivalents subject to contractual restrictions and not readily available are classified as restricted cash. The Company’s restricted cash balances are primarily made up of cash posted as collateral for certain derivative instruments.

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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheet to the total of the amounts in the Consolidated Statement of Cash Flows.


	October 3, 2020		September 28, 2019		September 29, 2018
Cash and cash equivalents	$	17,914	$	5,418	$	4,150
Restricted cash included in:
Other current assets	3		26		1
Other assets	37		11		4

Total cash, cash equivalents and restricted cash in the statement of cash flows	$	17,954	$	5,455	$	4,155

Investments

Investments in equity securities with a readily determinable fair value, not accounted for under the equity method, are recorded at that value with unrealized gains and losses included in earnings. For equity securities without a readily determinable fair value, the investment is recorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings.

For equity method investments, the Company regularly reviews its investments to determine whether there is a decline in fair value below book value. If there is a decline that is other-than-temporary, the investment is written down to fair value.

Translation Policy

Generally, the U.S. dollar is the functional currency for our international film and television distribution and licensing businesses and the branded International Channels. Generally, the local currency is the functional currency for the Asia Theme Parks, Disneyland Paris, the branded International Channels that primarily source and exploit their content locally (primarily Star branded channels in India and international sports channels) and international locations of The Disney Stores.

For U.S. dollar functional currency locations, foreign currency assets and liabilities are remeasured into U.S. dollars at end-of-period exchange rates, except for non-monetary balance sheet accounts, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at average exchange rates in effect during each period, except for those expenses related to the non-monetary balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in income.

For local currency functional locations, assets and liabilities are translated at end-of-period rates while revenues and expenses are translated at average rates in effect during the period. Equity is translated at historical rates and the resulting cumulative translation adjustments are included as a component of accumulated other comprehensive income (loss) (AOCI).

Inventories

Inventory primarily includes vacation timeshare units, merchandise, food, materials and supplies. Carrying amounts of vacation ownership units are recorded at the lower of cost or net realizable value. Carrying amounts of merchandise, food, materials and supplies inventories are generally determined on a moving average cost basis and are recorded at the lower of cost or net realizable value.

Film and Television Content Costs

At the beginning of fiscal 2020, the Company adopted new FASB guidance that updates the accounting for film and television content costs. See Note 8 for discussion of the new guidance and the Company’s accounting policy for capitalization and amortization of film and television content costs.

Internal-Use Software Costs

The Company expenses costs incurred in the preliminary project stage of developing or acquiring internal use software, such as research and feasibility studies as well as costs incurred in the post-implementation/operational stage, such as maintenance and training. Capitalization of software development costs occurs only after the preliminary-project stage is complete, management authorizes the project and it is probable that the project will be completed and the software will be used for the function intended. As of October 3, 2020 and September 28, 2019, capitalized software costs, net of accumulated depreciation, totaled $778 million and $927 million, respectively. The capitalized costs are amortized on a straight-line basis over the estimated useful life of the software up to 10 years.

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Parks, Resorts and Other Property

Parks, resorts and other property are carried at historical cost. Depreciation is computed on the straight-line method, generally over estimated useful lives as follows:


Attractions, buildings and improvements						20 – 40 years
Furniture, fixtures and equipment						3 – 25 years
Land improvements						20 – 40 years
Leasehold improvements						Life of lease or asset life if less

Leases

At the beginning of fiscal 2020, the Company adopted new FASB guidance that requires lessees to record the present value of operating lease payments as right-of-use assets and lease liabilities on the balance sheet. See Note 16 for discussion of the new guidance and the Company’s accounting policy.

Goodwill, Other Intangible Assets and Long-Lived Assets

The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis.

Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.

The qualitative assessment requires consideration of recent market transactions, macroeconomic conditions, and changes in projected future cash flows of the reporting unit.

The quantitative assessment compares the fair value of each goodwill reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.

In fiscal 2020, the Company performed a qualitative assessment of goodwill for impairment.

The impairment test for goodwill requires judgment related to the identification of reporting units, the assignment of assets and liabilities to reporting units including goodwill, and the determination of fair value of the reporting units. To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. We apply what we believe to be the most appropriate valuation methodology for each of our reporting units. The projected cash flows of our reporting units reflect intersegment revenues and expenses for the sale and use of intellectual property as if it was licensed to an unrelated third party. The discounted cash flow analyses are sensitive to our estimates of future revenue growth and margins for these businesses as well as the discount rates used to calculate the present value of future cash flows.

In times of adverse economic conditions in the global economy, the Company’s long-term cash flow projections are subject to a greater degree of uncertainty than usual. If we had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record impairment charges.

To test its other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.

The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows.

The quantitative assessment compares the fair values of indefinite-lived intangible assets to their carrying amounts. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate. The Company has determined that there are currently no legal, competitive, economic or other factors that materially limit the useful life of our FCC licenses and trademarks.

Amortizable intangible assets are generally amortized on a straight-line basis over periods up to 40 years. The costs to periodically renew our intangible assets are expensed as incurred.

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The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of cash flows expected to be generated over the useful life of an asset group to the carrying amount of the asset group. An asset group is established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses or segments. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the group’s long-lived assets and the carrying amount of the group’s long-lived assets. The impairment is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts, but only to the extent the carrying amount of each asset is above its fair value. For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference.

The Company recorded non-cash impairment charges of $5.2 billion, $0.6 billion, and $0.2 billion in fiscal 2020, 2019 and 2018, respectively.

The fiscal 2020 impairment charges primarily related to impairments of MVPD agreement intangibles assets ($1.9 billion) and goodwill ($3.1 billion) at the International Channels’ business. See Note 19 to the Consolidated Financial Statements for additional discussion on these impairment charges.

The fiscal 2019 and 2018 charges primarily related to impairments of investments accounted for under the equity method of accounting recorded in “Equity in the income (loss) of investees” in the Consolidated Statements of Operations.

The Company expects its aggregate annual amortization expense for amortizable intangible assets for fiscal 2021 through 2025 to be as follows:


2021	$	2,055
2022	1,995
2023	1,808
2024	1,570
2025	1,471

Risk Management Contracts

In the normal course of business, the Company employs a variety of financial instruments (derivatives) including interest rate and cross-currency swap agreements and forward and option contracts to manage its exposure to fluctuations in interest rates, foreign currency exchange rates and commodity prices.

The Company formally documents all relationships between hedges and hedged items as well as its risk management objectives and strategies for undertaking various hedge transactions. The Company primarily enters into two types of derivatives: hedges of fair value exposure and hedges of cash flow exposure. Hedges of fair value exposure are entered into in order to hedge the fair value of a recognized asset, liability, or a firm commitment. Hedges of cash flow exposure are entered into in order to hedge a forecasted transaction (e.g. forecasted revenue) or the variability of cash flows to be paid or received, related to a recognized liability or asset (e.g. floating rate debt).

The Company designates and assigns the derivatives as hedges of forecasted transactions, specific assets or specific liabilities. When hedged assets or liabilities are sold or extinguished or the forecasted transactions being hedged occur or are no longer expected to occur, the Company recognizes the gain or loss on the designated derivatives.

The Company’s hedge positions are measured at fair value on the balance sheet. Realized gains and losses from hedges are classified in the income statement consistent with the accounting treatment of the items being hedged. The Company accrues the differential for interest rate swaps to be paid or received under the agreements as interest rates change as adjustments to interest expense over the lives of the swaps. Gains and losses on the termination of effective swap agreements, prior to their original maturity, are deferred and amortized to interest expense over the remaining term of the underlying hedged transactions.

The Company enters into derivatives that are not designated as hedges and do not qualify for hedge accounting. These derivatives are intended to offset certain economic exposures of the Company and are carried at fair value with changes in value recorded in earnings. Cash flows from hedging activities are classified in the Consolidated Statements of Cash Flows under the same category as the cash flows from the related assets, liabilities or forecasted transactions (see Notes 9 and 18).

Income Taxes

Deferred income tax assets and liabilities are recorded with respect to temporary differences in the accounting treatment of items for financial reporting purposes and for income tax purposes. Where, based on the weight of available evidence, it is

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more likely than not that some amount of recorded deferred tax assets will not be realized, a valuation allowance is established for the amount that, in management’s judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized.

A tax position must meet a minimum probability threshold before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

Redeemable Noncontrolling Interests

The Company consolidates the results of certain subsidiaries that are less than 100% owned and for which the noncontrolling interest shareholders have rights to require the Company to purchase their interests in these subsidiaries. The most significant of these are BAMTech and Hulu.

BAMTech provides streaming technology services to third parties and is owned 75% by the Company, 15% by Major League Baseball (MLB) and 10% by the National Hockey League (NHL), both of which have the right to sell their interests to the Company in the future.

MLB has the right to sell its interest to the Company and the Company has the right to buy MLB’s interest starting five years from and ending ten years after the Company’s September 25, 2017 acquisition date of BAMTech at the greater of fair value or a guaranteed floor value ($563 million accreting at 8% annually for eight years from the date of acquisition). The NHL can sell its interest to the Company in fiscal 2021 for $350 million. The Company has the right to acquire the NHL interest in fiscal 2021 for $500 million.

The MLB and NHL interests are required to be recorded at a minimum value equal to the greater of (i) their acquisition date fair value adjusted for their share (if any) of earnings, losses, or dividends (“adjusted value”) or (ii) an accreted value from the date of the acquisition to the applicable redemption date (“accreted value”). As the accreted value is generally always higher than the adjusted value, the MLB and NHL interests are not allocated their portion of BAMTech losses. Therefore, the MLB and NHL interests are accreted to the estimated redemption value as of the earliest redemption date. As of October 3, 2020, the guaranteed floor value for the MLB interest, accreted from the date of acquisition was $710 million. The NHL previously had a right to sell its interest to the Company in fiscal 2020 for $300 million, which expired unexercised in the fourth quarter. As the NHL’s remaining right to sell its interest to the Company in fiscal 2021 is for $350 million, the Company began accreting the NHL interest to $350 million. As of October 3, 2020, the accreted value of the NHL interest was $313 million.

As part of the TFCF acquisition, the Company acquired TFCF’s 30% interest in Hulu increasing our ownership in Hulu to 60%. Subsequent to the acquisition, Hulu redeemed Warner Media LLC’s (WM) 10% interest in Hulu. The redemption was funded by the Company and Hulu’s remaining noncontrolling interest holder, NBC Universal (NBCU). This resulted in the Company’s and NBCU’s interests in Hulu increasing to 67% and 33%, respectively.

On May 13, 2019, the Company entered into a put/call agreement with NBCU that provided the Company with full operational control of Hulu. Under the agreement, beginning in January 2024, NBCU has the option to require the Company to purchase NBCU’s interest in Hulu and the Company has the option to require NBCU to sell its interest in Hulu to the Company, based on NBCU’s equity ownership percentage of the greater of Hulu’s then fair value or $27.5 billion.

NBCU’s interest will generally not be allocated its portion of Hulu’s losses as the redeemable noncontrolling interest is required to be carried at a minimum value. The minimum value is equal to the fair value as of the May 13, 2019 agreement date accreted to the January 2024 estimated redemption value. At October 3, 2020, NBCU’s interest in Hulu is recorded in the Company’s financial statements at $8.1 billion.

Adjustments to the carrying amount of redeemable noncontrolling interests increase or decrease income available to Company shareholders and are recorded in “Net income from continuing operations attributable to noncontrolling interests” on the Consolidated Statements of Operations.

Earnings Per Share

The Company presents both basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by dividing net income attributable to Disney by the weighted average number of common shares outstanding during the year. Diluted EPS is based upon the weighted average number of common and common equivalent shares outstanding during the year, which is calculated using the treasury-stock method for equity-based awards (Awards). Common equivalent shares are excluded from the computation in periods for which they have an anti-dilutive effect. Stock options for which the exercise price exceeds the average market price over the period are anti-dilutive and, accordingly, are excluded from the calculation.

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A reconciliation of the weighted average number of common and common equivalent shares outstanding and the number of Awards excluded from the diluted earnings per share calculation, as they were anti-dilutive, are as follows:


	2020	2019	2018
Weighted average number of common and common equivalent shares outstanding (basic)	1,808	1,656	1,499
Weighted average dilutive impact of Awards(1)	—	10	8
Weighted average number of common and common equivalent shares outstanding (diluted)	1,808	1,666	1,507
Awards excluded from diluted earnings per share	35	7	12

(1)Amounts exclude all potential common and common equivalent shares for periods when there is a net loss from continuing operations.

3Revenues

The following table presents our revenues by segment and major source:


	2020
	Media Networks		Parks, Experiences and Products		Studio Entertainment		Direct-to-Consumer & International		Eliminations		Consolidated
Affiliate fees	$	15,018	$	—	$	—	$	3,673	$	(762)	$	17,929
Advertising	6,374		4		—		4,477		—		10,855
Subscription fees	—		—		—		7,645		—		7,645
Theme park admissions	—		4,038		—		—		—		4,038
Resort and vacations	—		3,402		—		—		—		3,402
Retail and wholesale sales of merchandise, food and beverage	—		4,952		—		—		—		4,952
TV/SVOD distribution licensing	6,489		—		4,557		745		(5,348)		6,443
Theatrical distribution licensing	—		—		2,134		—		—		2,134
Merchandise licensing	—		2,674		536		32		—		3,242

Home entertainment	—		—		1,528		84		—		1,612
Other	512		1,432		881		311		—		3,136
Total revenues	$	28,393	$	16,502	$	9,636	$	16,967	$	(6,110)	$	65,388


	2019
	Media Networks		Parks, Experiences and Products		Studio Entertainment		Direct-to-Consumer & International		Eliminations		Consolidated
Affiliate fees	$	13,433	$	—	$	—	$	2,768	$	(253)	$	15,948
Advertising	6,965		6		—		3,542		—		10,513
Subscription fees	—		—		—		2,115		—		2,115
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		482		(1,705)		5,743
Theatrical distribution licensing	—		—		4,726		—		—		4,726
Merchandise licensing	—		2,768		561		51		—		3,380

Home entertainment	—		—		1,734		97		—		1,831
Other	383		1,929		1,186		331		—		3,829
Total revenues	$	24,827	$	26,225	$	11,127	$	9,386	$	(1,958)	$	69,607

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	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
Subscription fees	—		—		—		168		—		168
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

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 new revenue guidance.

The following table presents our revenues by segment and primary geographical markets:


	2020
	Media Networks		Parks, Experiences and Products		Studio Entertainment		Direct-to-Consumer & International		Eliminations		Consolidated
Americas	$	26,566	$	12,524	$	5,671	$	12,498	$	(5,267)	$	51,992
Europe	1,378		1,982		2,609		2,016		(652)		7,333
Asia Pacific	449		1,996		1,356		2,453		(191)		6,063

Total revenues	$	28,393	$	16,502	$	9,636	$	16,967	$	(6,110)	$	65,388


	2019
	Media Networks		Parks, Experiences and Products		Studio Entertainment		Direct-to-Consumer & International		Eliminations		Consolidated
Americas	$	23,767	$	19,868	$	6,050	$	5,759	$	(1,639)	$	53,805
Europe	785		3,135		2,956		1,260		(130)		8,006
Asia Pacific	275		3,222		2,121		2,367		(189)		7,796

Total revenues	$	24,827	$	26,225	$	11,127	$	9,386	$	(1,958)	$	69,607

Revenues recognized in the current and prior 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 2020, $1.4 billion was recognized related to performance obligations satisfied as of September 28, 2019. For fiscal 2019, $1.2 billion was recognized related to performance obligations satisfied prior to September 30, 2018.

As of October 3, 2020, 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 2021, $4 billion in fiscal 2022, $2 billion in fiscal 2023 and $3 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 require 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.

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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:


	October 3, 2020		September 28, 2019
Contract assets	$	70	$	150


Accounts Receivable
Current	11,340		12,755
Non-current	1,789		1,962
Allowance for credit losses	(460)		(375)
Deferred revenues
Current	3,688		4,050
Non-current	513		619

Contract assets primarily relate to certain multi-season TV/SVOD licensing contracts. Activity for fiscal 2020 and 2019 related to contract assets was not material. The allowance for credit losses increased from $375 million at September 28, 2019 to $460 million at October 3, 2020 due to additional provisions recorded in fiscal 2020.

For fiscal 2020, the Company recognized revenues of $3.4 billion, primarily related to theme park admissions and vacation packages, licensing advances and content sales included in the deferred revenue balance at September 28, 2019. For fiscal 2019, the Company recognized revenues of $2.7 billion primarily related to theme park admissions and vacation packages and licensing and publishing advances included in the deferred revenue balance at September 30, 2018. As a result of COVID-19, the Company has allowed refunds of certain non-refundable deposits that were previously reported as deferred revenue, the most significant of which related to park admission tickets and deposits for vacation packages. Remaining deferred amounts related to these deposits are now classified in “Accounts payable and other accrued liabilities” in the Consolidated Balance Sheet.

We evaluate our allowance for credit losses and estimate collectability of accounts receivable based on our analysis of historical bad debt experience in conjunction with our assessment of the financial condition of individual companies with which we do business. In times of domestic or global economic turmoil, including COVID-19, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods.

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. 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.

The Company estimates the allowance for credit losses related to receivables from the sale of film and television programs based upon a number of factors, including historical experience and the financial condition of individual companies with whom we do business. The balance of film and television program sales receivables recorded in other non-current assets, net of an immaterial allowance for credit losses, was $1.0 billion as of October 3, 2020. The activity in the allowance for credit loss for fiscal 2020 was not material.

The Company estimates the allowance for credit losses related to receivables from sales of its vacation club properties based primarily on historical collection experience. Estimates of uncollectible amounts also consider the economic environment and the age of receivables. The balance of mortgage receivables recorded in other non-current assets, net of an immaterial allowance for credit losses, was $0.7 billion as of October 3, 2020. The activity in the allowance for credit loss for fiscal 2020 was not material.

4Acquisitions

TFCF Corporation

On March 20, 2019, the Company acquired the outstanding capital stock of TFCF, a diversified global media and entertainment company. The acquisition purchase price totaled $69.5 billion, of which the Company paid $35.7 billion in cash and $33.8 billion in Disney shares (307 million shares at a price of $110.00 per share).

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We acquired TFCF to enhance the Company’s position as a premier, global entertainment company by increasing our portfolio of creative assets and branded content to be monetized through our film and television studio, theme parks and direct-to-consumer offerings.

In connection with the acquisition, outstanding TFCF performance stock units and restricted stock units were either vested upon closing of the acquisition or replaced with new restricted stock units (which require additional service for vesting). The purchase price for TFCF includes $361 million related to TFCF awards that were settled or replaced in connection with the acquisition, and for fiscal 2019, the Company recognized compensation expense of $164 million related to awards that were accelerated to vest upon closing of the acquisition. Additionally, compensation expense of $219 million related to awards that were replaced with new restricted stock units is being recognized over the post-acquisition service period of up to approximately two years.

As part of the TFCF acquisition, the Company acquired TFCF’s 30% interest in Hulu increasing our ownership in Hulu to 60%. As a result, the Company began consolidating Hulu and recorded a one-time gain of $4.8 billion (Hulu Gain) from remeasuring our initial 30% interest to its estimated fair value, which was determined based on a discounted cash flow analysis. On April 15, 2019, Hulu redeemed WM’s 10% interest in Hulu for $1.4 billion. The redemption was funded by the Company and NBCU. This resulted in the Company’s and NBCU’s interests in Hulu increasing to 67% and 33%, respectively.

NBCU’s interest is classified as a redeemable noncontrolling interest on the Company’s Consolidated Balance Sheet. See Note 2 for further discussion of NBCU’s interest.

Upon closing of the TFCF acquisition, the Company exchanged new Disney notes for outstanding notes issued by 21st Century Fox America, Inc. with a principal balance of $16.8 billion (see Note 9).

The Company is required to allocate the TFCF purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over those fair values is recorded as goodwill.

In determining the fair value of assets acquired and liabilities assumed, the Company primarily used discounted cash flow analyses. Inputs to the discounted cash flow analyses and other aspects of the allocation of purchase price require judgment. The more significant inputs used in the discounted cash flow analyses and other areas of judgment include (i) future revenue growth or attrition rates (ii) projected margins (iii) discount rates used to present value future cash flows (iv) the amount of synergies expected from the acquisition (v) the economic useful life of assets and; (vi) the evaluation of historical tax positions of TFCF.

The following table summarizes our allocation of the purchase price (in billions)(1):


Cash and cash equivalents	$	25.7
Receivables	5.1
Film and television costs	17.7
Investments	1.0
Intangible assets	17.9
Net assets held for sale	11.4
Accounts payable and other liabilities	(12.5)
Borrowings	(21.7)
Deferred income taxes(2)	(5.7)
Other net liabilities acquired	(4.0)
Noncontrolling interests	(10.4)
Goodwill(2)	49.8
Fair value of net assets acquired	74.2
Less: Disney’s previously held 30% interest in Hulu	(4.7)
Total purchase price	$	69.5

(1) Total may not equal the sum of the column due to rounding.

(2) In the fourth quarter of fiscal 2020, we adjusted the amount of deferred tax liabilities by $0.6 billion and recorded an offsetting adjustment to increase goodwill for this amount.

Intangible assets primarily consist of MVPD agreements, with a weighted average useful life of 9 years, and advertising networks and trade names, with a weighted average useful life of 16 years.

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The goodwill reflects the value to Disney of increasing our global portfolio of creative assets and branded content to be monetized through our DTC services, film and television studios and theme parks. The amount of goodwill that is deductible for tax purposes is not material.

The fair value of investments acquired in the acquisition primarily consist of a 30% interest in Tata Sky Limited and a 50% interest in Endemol Shine Group (sold in July 2020 for $147 million).

The fair value of the assets acquired included current trade receivables of $5.2 billion. The gross amount due under the contracts is $5.5 billion.

For fiscal 2019, the Company incurred $0.3 billion of acquisition-related expenses, of which $0.2 billion is included in Selling, general, administrative and other, and $0.1 billion related to financing fees is included in “Interest expense, net” in the Company’s Consolidated Statements of Operations.

The following table summarizes the revenues and net loss from continuing operations (including purchase accounting amortization and excluding restructuring and impairment charges and interest income and expense) of TFCF and Hulu included in the Company’s Consolidated Statements of Operations for fiscal 2020 and fiscal 2019. In addition, the table provides the impact of intercompany eliminations of transactions between the Company, TFCF and Hulu:


	Year Ended
	October 3, 2020		September 28, 2019
TFCF (before intercompany eliminations):
Revenues	$	12,999	$	7,228
Net loss from continuing operations	(245)		(958)
Hulu (before intercompany eliminations):
Revenues	$	7,052	$	2,865
Net loss from continuing operations	(1,017)		(695)
Intercompany eliminations:
Revenues	$	(2,956)	$	(1,205)
Net loss from continuing operations	(225)		(151)

The following pro forma summary presents consolidated information of the Company as if the acquisition of TFCF and consolidation of Hulu had occurred on October 1, 2017:


	2019		2018
Revenues	$	78,047	$	76,468
Net income	7,511		13,733
Net income attributable to Disney	7,206		13,923
Earnings per share attributable to Disney:
Diluted	$	3.68	$	7.66
Basic	3.70		7.71

These pro forma results include adjustments for purposes of consolidating the historical financial results of TFCF and Hulu (net of adjustments to eliminate transactions between Disney and TFCF, Disney and Hulu and Hulu and TFCF). These pro formas for fiscal 2019 and 2018 include $3.1 billion and $3.4 billion (of which $0.4 billion and $0.8 billion related to the RSNs), respectively, to reflect the incremental amortization as a result of recording film and television programming and production costs and finite lived intangible assets at fair value. Interest expense of $0.4 billion and $0.5 billion is included to reflect the cost of borrowings to finance the TFCF acquisition for fiscal 2019 and 2018, respectively. The pro forma results also include $0.9 billion and $0.6 billion of net income attributable to Disney for fiscal 2019 and 2018, respectively, related to TFCF businesses that have been or will be divested (see Note 1).

Additionally, fiscal 2018 pro forma results include the Hulu Gain, compensation expense of $0.2 billion related to TFCF equity and cash awards that were accelerated to vest upon closing of the acquisition, and $0.4 billion of acquisition-related expenses. These amounts were recognized by Disney and TFCF in fiscal 2019 but have been excluded from the fiscal 2019 pro forma results.

The pro forma results exclude a $10.8 billion gain on sale and $0.5 billion of equity earnings recorded by TFCF in 2019 and 2018, respectively, related to its 39% interest in Sky plc, which was sold by TFCF in October 2018.

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These pro forma results do not represent financial results that would have been realized had the acquisition actually occurred on October 1, 2017, nor are they intended to be a projection of future results.

Goodwill

The changes in the carrying amount of goodwill are as follows:


	Media Networks		Parks, Experiences and Products			Studio Entertainment		Direct-to-Consumer & International		Total
Balance at Sept. 29, 2018	$	15,989		$	4,487	$	7,094	$	3,699	$	31,269
Acquisitions(1)	17,434			1,048		10,711		19,892		49,085
Dispositions	—			—		—		—		—
Other, net	—			—		(8)		(53)		(61)
Balance at Sept. 28, 2019	$	33,423		$	5,535	$	17,797	$	23,538	$	80,293
Acquisitions(2)	568			15		98		51		732
Dispositions	—			—		—		—		—
Impairments (See Note 19)	—			—		—		(3,074)		(3,074)
Currency translation adjustments and other, net	—			—		(100)		(162)		(262)
Balance at Oct. 3, 2020	$	33,991		$	5,550	$	17,795	$	20,353	$	77,689

(1)Represents the acquisition of TFCF and consolidation of Hulu.

(2)Reflects updates to allocation of purchase price for the acquisition of TFCF.

5Other Income

Other income, net is as follows:


	2020		2019		2018
DraftKings gain	$	973	$	—	$	—
Gain on sale of an investment	65		—		—
Hulu gain (see Note 4)	—		4,794		—
Insurance recoveries related to legal matters	—		46		38
Charge for the extinguishment of a portion of the debt originally assumed in the TFCF acquisition (see Note 9)	—		(511)		—


Gain on sale of real estate, property rights and other	—		28		563

Other income, net	$	1,038	$	4,357	$	601

The Company recognized a non-cash gain to adjust its investment in DraftKings, Inc. to fair value (DraftKings gain).

6Investments

Investments consist of the following:


	October 3, 2020		September 28, 2019
Investments, equity basis	$	2,632	$	2,922
Investments, other	1,271		302
	$	3,903	$	3,224

Investments, Equity Basis

The Company’s significant equity investments primarily consist of media investments and include A+E (50% ownership), CTV Specialty Television, Inc. (30% ownership), Endemol Shine Group (50% ownership until sale of the interest in July 2020), Seven TV (20% ownership) and Tata Sky Limited (30% ownership).

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A summary of combined financial information for equity investments is as follows:


Results of Operations:	2020		2019		2018

Revenues	$	7,849	$	9,405	$	9,085
Net income (loss)	1,187		133		(152)


Balance Sheet	October 3, 2020		September 28, 2019		September 29, 2018

Current assets	$	4,133	$	3,350	$	4,542
Non-current assets	6,776		9,666		9,998
	$	10,909	$	13,016	$	14,540
Current liabilities	$	2,224	$	2,182	$	3,197
Non-current liabilities	3,784		5,452		4,840
Redeemable preferred stock	—		—		1,362
Shareholders’ equity	4,901		5,382		5,141
	$	10,909	$	13,016	$	14,540

As of October 3, 2020, the book value of the Company’s equity method investments exceeded our share of the book value of the investees’ underlying net assets by approximately $0.9 billion, which represents amortizable intangible assets and goodwill arising from acquisitions.

The Company enters into transactions in the ordinary course of business with our equity investees, primarily related to the licensing of television and film programming. Revenues from these transactions were $0.3 billion, $0.5 billion and $0.8 billion in fiscal 2020, 2019 and 2018, respectively. The Company defers a portion of its profits from transactions with investees and recognizes the deferred amounts as the investee expenses the programming cost. The portion that is deferred reflects our ownership interest in the investee.

Investments, Other

As of October 3, 2020, the Company has $1.1 billion of securities recorded at fair value and $215 million of net book value related to non-publicly traded securities without a readily determinable fair value. At September 28, 2019, the Company held $290 million of non-publicly traded securities without a readily determinable fair value. Securities held at fair value at September 28, 2019 were not material.

In fiscal 2020, the Company recognized $973 million of unrealized gains on securities recorded at fair value in “Other income, net” in the Consolidated Statements of Operations. Realized gains on securities in fiscal 2020 were not material. In fiscal 2019 and 2018, realized gains, unrealized gains and losses and impairments on securities were not material. All other gains and losses on securities are reported in “Interest expense, net” in the Consolidated Statements of Operations.

7International Theme Parks

The Company has a 48% ownership interest in the operations of Hong Kong Disneyland Resort and a 43% ownership interest in the operations of Shanghai Disney Resort (together, the Asia Theme Parks), which are both VIEs consolidated in the Company’s financial statements. See Note 2 for the Company’s policy on consolidating VIEs. In addition, the Company has 100% ownership of Disneyland Paris. The Asia Theme Parks and Disneyland Paris are collectively referred to as the International Theme Parks.

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The following table summarizes the carrying amounts of the Asia Theme Parks’ assets and liabilities included in the Company’s Consolidated Balance Sheets:


	October 3, 2020		September 28, 2019
Cash and cash equivalents	$	372	$	655
Other current assets	91		102
Total current assets	463		757
Parks, resorts and other property	6,720		6,608
Other assets	191		9
Total assets	$	7,374	$	7,374

Current liabilities	$	486	$	447
Borrowings - long-term	1,213		1,114
Other long-term liabilities	403		189
Total liabilities	$	2,102	$	1,750

The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s Consolidated Statement of Operations for fiscal 2020:


Revenues	$	1,805
Costs and expenses	(3,032)
Equity in the loss of investees	(19)

Asia Theme Parks’ royalty and management fees of $74 million for fiscal 2020 are eliminated in consolidation, but are considered in calculating earnings attributable to noncontrolling interests.

International Theme Parks’ cash flows included in the Company’s fiscal 2020 Consolidated Statement of Cash Flows were $637 million used in operating activities, $756 million used in investing activities and $172 million generated from financing activities. Approximately a quarter of the cash flows used in operating activities, half of the cash flows used in investing activities and all of the cash flows generated from financing activities were for the Asia Theme Parks.

Hong Kong Disneyland Resort

The Government of the Hong Kong Special Administrative Region (HKSAR) and the Company have a 52% and a 48% equity interest in Hong Kong Disneyland Resort, respectively.

The Company and HKSAR have both provided loans to Hong Kong Disneyland Resort with outstanding balances of $145 million and $97 million, respectively. The interest rate is three month HIBOR plus 2%, and the maturity date is September 2025. The Company’s loan is eliminated in consolidation.

The Company has provided Hong Kong Disneyland Resort with a revolving credit facility of HK $2.1 billion ($271 million), which bears interest at a rate of three month HIBOR plus 1.25% and matures in December 2023. There is no outstanding balance under the line of credit at October 3, 2020.

Hong Kong Disneyland is undergoing a multi-year expansion estimated to cost HK $10.9 billion ($1.4 billion). The Company and HKSAR have agreed to fund the expansion on an equal basis through equity contributions, which totaled $188 million and $160 million in fiscal 2020 and 2019, respectively. To date, the Company and HKSAR have funded a total of $526 million.

HKSAR has the right to receive additional shares over time to the extent Hong Kong Disneyland Resort exceeds certain return on asset performance targets. The amount of additional shares HKSAR can receive is capped on both an annual and cumulative basis and could decrease the Company’s equity interest by up to an additional 6 percentage points over a period no shorter than 12 years. Assuming HK $10.9 billion is contributed in the expansion, the impact to the Company’s equity interest would be limited to 4 percentage points.

Shanghai Disney Resort

Shanghai Shendi (Group) Co., Ltd (Shendi) and the Company have 57% and 43% equity interests in Shanghai Disney Resort, respectively. A management company, in which the Company has a 70% interest and Shendi a 30% interest, operates Shanghai Disney Resort.

The Company has provided Shanghai Disney Resort with loans totaling $863 million, bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. The Company has also provided Shanghai Disney Resort with a $157

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million line of credit bearing interest at 8%. As of October 3, 2020, the total amount outstanding under the line of credit was $65 million. These balances are eliminated in consolidation.

Shendi has provided Shanghai Disney Resort with loans totaling 7.6 billion yuan (approximately $1.1 billion), bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. Shendi has also provided Shanghai Disney Resort with a 1.4 billion yuan (approximately $0.2 billion) line of credit bearing interest at 8%. As of October 3, 2020, the total amount outstanding under the line of credit was $0.6 billion yuan (approximately $90 million).

8Produced and Acquired/Licensed Content Costs and Advances

At the beginning of fiscal 2020, the Company adopted, on a prospective basis, new Financial Accounting Standards Board (FASB) guidance that updates the accounting for film and television content costs. Therefore, reporting periods beginning after September 29, 2019 are presented under the new guidance, while prior periods continue to be reported in accordance with our historical accounting. The new guidance does the following:

Allows for the classification of acquired/licensed television content rights as long-term assets. Previously, we reported a portion of these rights in current assets. The Company has classified approximately $3 billion of these rights as long-term in the Q1 2020 balance sheet. Advances for live programming rights made prior to the live event continue to be reported in current assets.
Aligns the capitalization of production costs for episodic television content with the capitalization of production costs for theatrical content. Previously, theatrical content production costs could be fully capitalized while episodic television production costs were generally limited to the amount of contracted revenues. This change did not have a material impact on the Company’s financial statements for fiscal year 2020.
Introduces the concept of “predominant monetization strategy” to classify capitalized content costs for purposes of amortization and impairment as follows:
Individual - lifetime value is predominantly derived from third-party revenues that are directly attributable to the specific film or television title (e.g. theatrical revenues or sales to third-party television programmers).
Group - lifetime value is predominantly derived from third-party revenues that are attributable only to a bundle of titles (e.g. subscription revenue for a DTC service or affiliate fees for a cable television network).

The determination of the predominant monetization strategy is made at commencement of production on a consolidated basis and is based on the means by which we derive third-party revenues from use of the content. Imputed title by title intersegment license fees that may be necessary for other purposes are established as required by those purposes.

For these accounting purposes, we generally classify content that is initially intended for use on our DTC services or on our linear television networks as group assets. Content initially intended for theatrical release or for sale to third-party licensees, we generally classify as individual assets. Because the new accounting guidance is applied prospectively, the predominant monetization strategy for content released prior to the beginning of fiscal 2020 is determined based on the expected means of monetization over the remaining life of the content. Thus for example, film titles that were released theatrically and in home entertainment prior to fiscal year 2020 and are now distributed on Disney+ are generally considered group content.

The classification of content as individual or group only changes if there is a significant change to the title’s monetization strategy relative to its initial assessment (e.g. content that was initially intended for license to a third-party is instead used on an owned DTC service).

Production costs for content that is predominantly monetized individually will continue to be amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues). For film productions, Ultimate Revenues include revenues from all sources, which may include intersegment license fees, that will be earned within ten years from the date of the initial release for theatrical films. For episodic television series, Ultimate Revenues include revenues that will be earned within ten years from delivery of the first episode, or if still in production, five years from delivery of the most recent episode, if later. Participations and residuals are expensed over the applicable product life cycle based upon the ratio of the current period’s revenues to the estimated remaining total revenues for each production.

Production costs that are predominantly monetized as a group are amortized based on projected usage (which may be, for example, derived from historical viewership patterns), typically resulting in an accelerated or straight-line amortization pattern. Participations and residuals are generally expensed in line with the pattern of usage.

Licensed rights to film and television content and other programs for broadcast on our linear networks or distribution on our DTC services are expensed on an accelerated or straight-line basis over their useful life or over the number of times the program is expected to be aired, as appropriate. We amortize rights costs for multi-year sports programming arrangements during the applicable seasons based on the estimated relative value of each year in the arrangement. If annual contractual

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payments related to each season approximate each season’s estimated relative value, we expense the related contractual payments during the applicable season.

Acquired film and television libraries are generally amortized on a straight-line basis over 20 years from the date of acquisition. Acquired film and television libraries include content that was initially released three years prior to its acquisition, except it excludes the prior seasons of episodic television programming still in production at the date of its acquisition.

The costs of produced and licensed film and television content are subject to regular recoverability assessments. For content that is predominantly monetized individually, the unamortized costs are compared to the estimated fair value. The fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title. To the extent the unamortized costs exceed the fair value, an impairment charge is recorded for the excess. For content that is predominantly monetized as a group, the aggregate unamortized costs of the group are compared to the present value of the discounted cash flows using the lowest level for which identifiable cash flows are independent of other produced and licensed content. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group. If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written-off immediately. Licensed content is included as part of the group within which it is monetized for purposes of assessing recoverability.

Total capitalized produced, licensed and acquired library content by predominant monetization strategy is as follows:


	As of October 3, 2020
	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Produced and acquired library content
Theatrical film costs
Released, less amortization	$	3,000	$	2,601	$	5,601
Completed, not released	522		210		732
In-process	3,322		259		3,581
In development or pre-production	262		16		278
	$	7,106	$	3,086	10,192
Television costs
Released, less amortization	$	2,090	$	5,584	$	7,674
Completed, not released	33		510		543
In-process	263		1,831		2,094
In development or pre-production	6		87		93
	$	2,392	$	8,012	10,404
Licensed content - Programming rights and advances					6,597
Total produced, licensed and acquired library content					$	27,193

Current portion					$	2,171
Non-current portion					$	25,022

Amortization of produced, licensed and acquired library content is as follows:










	Year Ended October 3, 2020
	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Theatrical film costs	$	1,711	$	962	$	2,673
Television costs	2,594		4,070		6,664
Total produced and acquired library content costs	$	4,305	$	5,032	9,337
Licensed content - Programming rights and advances					11,241
Total produced, licensed and acquired library content costs(1)					$	20,578

(1)Primarily included in “Costs of services” in the Consolidated Statements of Operations.

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Amortization of produced, licensed and acquired library content for the year ended September 28, 2019 was $17.1 billion.

Total expected amortization by fiscal year of completed (released and not released) produced, licensed and acquired library content on the balance sheet as of October 3, 2020 is as follows:


	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Produced content
Theatrical film costs
Released
2021	$	731	$	460	$	1,191
2022	347		387		734
2023	195		207		402
Completed, not released
2021	488		8		496

Television costs
Released
2021	$	893	$	1,476	$	2,369
2022	460		892		1,352
2023	286		570		856
Completed, not released
2021	4		182		186

Licensed content - Television programming rights and advances
2021	$	—	$	3,882	$	3,882
2022	—		1,338		1,338
2023	—		606		606

Approximately $2.3 billion of accrued participations and residual liabilities will be paid in fiscal 2021.

At October 3, 2020, acquired film and television libraries have remaining unamortized costs of $3.7 billion, which are generally being amortized straight-line over a weighted-average remaining period of approximately 18 years.

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9Borrowings

The Company’s borrowings, including the impact of interest rate and cross-currency swaps, are summarized as follows:


					October 3, 2020
	Oct. 3, 2020		Sept. 28, 2019		Stated Interest Rate(1)	Pay Floating Interest rate and Cross- Currency Swaps(2)			Effective Interest Rate(3)	Swap Maturities
Commercial paper	$	2,023	$	5,342	—		$	—		0.96%
U.S. dollar denominated notes(4)	52,736		39,424		3.81%		13,875			3.08%	2021-2031
Foreign currency denominated debt	1,983		1,044		2.99%		1,920			2.47%	2027



Other(5)	583		62				—
	57,325		45,872		3.64%		15,795			2.98%
Asia Theme Parks borrowings	1,303		1,114		2.11%		—			5.51%
Total borrowings	58,628		46,986		3.57%		15,795			3.04%
Less current portion	5,711		8,857		3.24%		750			2.76%
Total long-term borrowings	$	52,917	$	38,129			$	15,045

(1)The stated interest rate represents the weighted-average coupon rate for each category of borrowings. For floating rate borrowings, interest rates are the rates in effect at October 3, 2020; these rates are not necessarily an indication of future interest rates.

(2)Amounts represent notional values of interest rate and cross-currency swaps outstanding as of October 3, 2020.

(3)The effective interest rate includes the impact of existing and terminated interest rate and cross-currency swaps, purchase accounting adjustments and debt issuance premiums, discounts and costs.

(4)Includes net debt issuance discounts, costs and purchase accounting adjustments totaling a net premium of $2.2 billion and a net premium of $2.5 billion at October 3, 2020 and September 28, 2019, respectively.

(5)Includes market value adjustments for debt with qualifying hedges, which increase borrowings by $509 million and $31 million at October 3, 2020 and September 28, 2019, respectively.

Commercial Paper

At October 3, 2020, the Company’s bank facilities, which are with a syndicate of lenders, were as follows:


	Committed Capacity		Capacity Used		Unused Capacity
Facility expiring March 2021	$	5,250	$	—	$	5,250
Facility expiring April 2021	5,000		—		5,000
Facility expiring March 2023	4,000		—		4,000
Facility expiring March 2025	3,000		—		3,000
Total	$	17,250	$	—	$	17,250

These bank facilities (other than the facility expiring April 2021) support commercial paper borrowings. All of the facilities allow for borrowings at LIBOR-based rates plus a spread depending on the credit default swap spread applicable to the Company’s debt, or a fixed spread in the case of the facility expiring in April 2021, subject to a cap and floor that vary with the Company’s debt rating assigned by Moody’s Investors Service and Standard & Poor’s. The spread above LIBOR can range from 0.18% to 1.80%. The bank facilities specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default. The bank facilities contain only one financial covenant, which is interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On October 3, 2020 the financial covenant was met by a significant margin. The Company also has the ability to issue up to $500 million of letters of credit under the facility expiring in March 2023, which if utilized, reduces available borrowings under this facility. As of October 3, 2020, the Company has $988 million of outstanding letters of credit, of which none were issued under this facility.

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Commercial paper activity is as follows:


	Commercial paper with original maturities less than three months, net(1)		Commercial paper with original maturities greater than three months		Total
Balance at Sept. 29, 2018	$	50	$	955	$	1,005
Additions	1,881		6,889		8,770
Payments	—		(4,452)		(4,452)
Other Activity	3		16		19
Balance at Sept. 28, 2019	$	1,934	$	3,408	$	5,342
Additions	—		11,500		11,500
Payments	(1,961)		(12,893)		(14,854)
Other Activity	27		8		35
Balance at Oct. 3, 2020	$	—	$	2,023	$	2,023

(1)Borrowings and reductions of borrowings are reported net.

U.S. Dollar Denominated Notes

At October 3, 2020, the Company had $52.7 billion of U.S. dollar denominated notes with maturities ranging from 1 to 76 years. The debt outstanding includes $51.2 billion of fixed rate notes, which have stated interest rates that range from 1.65% to 9.50% and $1.5 billion of floating rate notes that bear interest at U.S. LIBOR plus or minus a spread. At October 3, 2020, the effective rate on the floating rate notes was 0.61%.

On March 20, 2019, the Company assumed public debt with a fair value of $21.2 billion (principal balance of $17.4 billion) upon completion of the TFCF acquisition. On March 20, 2019, 96% (principal balance of $16.8 billion) of the assumed debt was exchanged for senior notes of TWDC, with essentially the same terms. In September 2019, the Company repurchased previously exchanged debt with a carrying value of approximately $3.5 billion (principal balance of approximately $2.7 billion) and TFCF debt with a carrying value of approximately $280 million (principal balance of approximately $260 million) for $4.3 billion and recognized a charge of $511 million in “Other income, net” in the fiscal 2019 Consolidated Statement of Operations.

Foreign Currency Denominated Debt

In fiscal 2018, the Company issued Canadian $1.3 billion ($0.9 billion) of fixed rate senior notes, which bears interest at 2.76% and matures in October 2024. The Company also entered into pay-floating interest rate and cross currency swaps that effectively convert the borrowing to a variable rate U.S. dollar denominated borrowing indexed to LIBOR.

On March 30, 2020, the Company issued Canadian $1.3 billion ($1.0 billion) of fixed rate senior notes, which bear interest at 3.057% and mature in March 2027. The Company also entered into pay-floating interest rate and cross currency swaps that effectively convert the borrowing to a variable rate U.S. dollar denominated borrowing indexed to LIBOR.

RSN Debt

On March 20, 2019, as part of the TFCF acquisition, the Company assumed $1.1 billion of debt related to one of the RSNs. In August 2019, the RSN was sold and the buyer has assumed the outstanding debt obligation.

Credit Facilities to Acquire TFCF

On March 20, 2019, the Company borrowed $31.1 billion under two 364-day unsecured bridge loan facilities with a bank syndicate to fund the cash component of the TFCF acquisition. On March 21, 2019, the Company repaid one bridge loan facility in the amount of $16.1 billion, utilizing cash acquired in the TFCF transaction, and terminated the facility. The remaining 364-day unsecured bridge loan facility in the amount of $15.0 billion was repaid and terminated during the fourth quarter of fiscal 2019 using the after-tax proceeds from the divestiture of the RSNs and proceeds from new borrowings.

Cruise Ship Credit Facilities

The Company has credit facilities to finance up to 80% of the contract price of three new cruise ships, which were originally scheduled to be delivered in 2021, 2022 and 2023. The impact of COVID-19 on the shipyard has resulted in a delay to the delivery of the cruise ships, which are now scheduled to be delivered in 2022, 2024 and 2025. As a result, the Company revised the availability periods for the credit facilities. Under the facilities, $1.0 billion in financing is available beginning in October 2021, $1.1 billion is available beginning in August 2023 and $1.1 billion is available beginning in August 2024. Each tranche of financing may be utilized for a period of 18 months from the initial availability date. If utilized, the interest rates will

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be fixed at 3.48%, 3.80% and 3.74%, respectively, and the loan and interest will be payable semi-annually over a 12-year period from the borrowing date. Early repayment is permitted subject to cancellation fees.

Asia Theme Parks Borrowings

HKSAR provided Hong Kong Disneyland Resort with loans totaling HK$0.8 billion ($97 million). The interest rate is three month HIBOR plus 2%, and the maturity date is September 2025.

Shendi has provided Shanghai Disney Resort with loans totaling 7.6 billion yuan (approximately $1.1 billion) bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. Shendi has also provided Shanghai Disney Resort with a 1.4 billion yuan (approximately $0.2 billion) line of credit bearing interest at 8%. As of October 3, 2020 the total amount outstanding under the line of credit was 0.6 billion yuan (approximately $90 million).

Total borrowings, excluding market value adjustments and debt issuance premiums, discounts and costs, have the following scheduled maturities:


Fiscal Year:	Before Asia Theme Parks Consolidation		Asia Theme Parks		Total
2021	$	5,620	$	92	$	5,712
2022	3,858		—		3,858
2023	1,242		—		1,242
2024	2,869		—		2,869
2025	3,640		—		3,640
Thereafter	37,387		1,211		38,598
	$	54,616	$	1,303	$	55,919

The Company capitalizes interest on assets constructed for its parks and resorts and on certain film and television productions. In fiscal 2020, 2019 and 2018, total interest capitalized was $157 million, $222 million and $125 million, respectively. Interest expense, net of capitalized interest, for fiscal 2020, 2019 and 2018 was $1,647 million, $1,246 million and $682 million, respectively.

10Income Taxes

U.S. Tax Cuts and Jobs Act

In December 2017, new federal income tax legislation, the “Tax Cuts and Jobs Act” (Tax Act), was signed into law. The most significant impacts on the Company are as follows:

Effective January 1, 2018, the U.S. corporate federal statutory income tax rate was reduced from 35.0% to 21.0%. Because of our fiscal year end, the Company’s fiscal 2018 statutory federal tax rate was 24.5% and is 21.0% in fiscal 2019 and thereafter.
The Company remeasured its U.S. federal deferred tax assets and liabilities at the rate that the Company expects to be in effect when those deferred taxes will be realized (either 24.5% for fiscal 2018 or 21.0% thereafter) (Deferred Remeasurement). In fiscal 2018, the Company recognized a benefit of approximately $2.2 billion from the Deferred Remeasurement.
A one-time tax was due on certain accumulated foreign earnings (Deemed Repatriation Tax), payable over eight years beginning in fiscal 2018. The effective tax rate was generally 15.5% on the portion of the earnings held in cash and cash equivalents and 8% on the remainder. In fiscal 2018, the Company recognized a charge for the Deemed Repatriation Tax of approximately $0.4 billion. Generally there will no longer be a U.S. federal income tax cost arising from the repatriation of foreign earnings.
The Company will generally be eligible to claim an immediate deduction for investments in qualified fixed assets acquired and film and television productions commenced after September 27, 2017 and placed in service by the end of fiscal 2022. The immediate deduction phases out for assets placed in service in fiscal years 2023 through 2027.
The domestic production activity deduction was eliminated in fiscal 2019 and thereafter.
Starting in fiscal 2019, certain foreign derived income may be taxed in the U.S. at an effective rate of approximately 13% (which increases to approximately 16% in 2025) rather than the general statutory rate of 21%.

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Starting in fiscal 2019, certain foreign earnings may be taxed at a minimum effective rate of approximately 13% (which increases to approximately 16% in 2025). The Company’s policy is to expense the tax on these earnings in the period the earnings are taxable in the U.S.

Provision for Income Taxes and Deferred Tax Assets and Liabilities


Income (Loss) Before Income Taxes	2020		2019		2018

Domestic (including U.S. exports)	$	4,706	$	12,389	$	12,914
Foreign subsidiaries(1)	(6,449)		1,534		1,815
Total income (loss) from continuing operations	(1,743)		13,923		14,729
Income (loss) from discontinued operations	(42)		726		—
	$	(1,785)	$	14,649	$	14,729

(1) Includes goodwill and intangible asset impairment in fiscal 2020.


Income Tax Expense (Benefit)
Current	2020		2019		2018
Federal	$	95	$	14	$	2,240
State	148		112		362
Foreign(1)	731		824		642
	974		950		3,244
Deferred
Federal(2)	279		1,829		(1,577)
State	(29)		259		(20)
Foreign(3)	(525)		(12)		16
	(275)		2,076		(1,581)
Income tax expense from continuing operations	699		3,026		1,663
Income tax expense from discontinued operations	(10)		39		—
	$	689	$	3,065	$	1,663

(1)Includes foreign withholding taxes.

(2)Includes the Tax Act Deferred Remeasurement in fiscal 2018.

(3)Includes the tax effect of the intangible impairment in fiscal 2020.

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Components of Deferred Tax (Assets) and Liabilities	October 3, 2020		September 28, 2019

Deferred tax assets
Net operating losses and tax credit carryforwards(1)	$	(3,137)	$	(2,181)
Accrued liabilities	(2,952)		(2,575)

Lease liabilities	(825)		(23)
Other	(652)		(540)
Total deferred tax assets	(7,566)		(5,319)
Deferred tax liabilities
Depreciable, amortizable and other property	8,574		7,710
Investment in U.S. entities	1,956		2,258
Right-of-use assets	740		—
Licensing revenues	189		573
Investment in foreign entities	266		146

Other	390		212
Total deferred tax liabilities	12,115		10,899
Net deferred tax liability before valuation allowance	4,549		5,580
Valuation allowance	2,410		1,912
Net deferred tax liability	$	6,959	$	7,492

(1)As of October 3, 2020 and September 28, 2019, includes approximately $1.4 billion and $1.0 billion, respectively, of International Theme Park net operating losses and approximately $0.7 billion and $0.2 billion, respectively of foreign tax credits in the U.S. The International Theme Park net operating losses are primarily in France and, to a lesser extent, Hong Kong and China. Losses in France and Hong Kong have an indefinite carryforward period and losses in China have a five-year carryforward period. Foreign tax credits in the U.S. have a ten-year carryforward period.

The following table details the change in valuation allowance for fiscal 2020, 2019 and 2018 (in billions):


	Balance at Beginning of Period		Charges to Tax Expense		Changes Due to TFCF Acquisition		Balance at End of Period
Year ended October 3, 2020	$	1.9	$	0.6	$	(0.1)	$	2.4
Year ended September 28, 2019	1.4		(0.1)		0.6		1.9
Year ended September 29, 2018	1.7		(0.3)		—		1.4

Reconciliation of the effective income tax rate to the federal rate for continuing operations


	2020		2019		2018
Federal income tax rate	21.0 %		21.0 %		24.5 %
State taxes, net of federal benefit	3.4		2.2		1.9
Foreign derived income	—		(1.1)		—
Domestic production activity deduction	—		—		(1.4)
Goodwill impairment	(41.1)		—		—
Earnings in jurisdictions taxed at rates different from the statutory U.S. federal rate	(13.2)		0.1		(1.1)
Legislative changes	4.4		(0.3)		(11.5)
Valuation allowance	(14.6)		0.1		0.4
Other, including tax reserves and related interest	—		(0.3)		(1.5)
	(40.1	%)	21.7	%	11.3	%

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Unrecognized tax benefits

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding the related accrual for interest, is as follows:


	2020		2019		2018
Balance at the beginning of the year	$	2,952	$	648	$	832
Increases due to acquisitions	34		2,728		—
Increases for current year tax positions	26		84		64
Increases for prior year tax positions	134		143		48
Decreases in prior year tax positions	(99)		(61)		(135)
Settlements with taxing authorities	(307)		(590)		(161)
Balance at the end of the year	$	2,740	$	2,952	$	648

The fiscal year-end 2020, 2019 and 2018 balances include $2.1 billion, $2.4 billion and $0.5 billion, respectively, that if recognized, would reduce our income tax expense and effective tax rate. These amounts are net of the offsetting benefits from other tax jurisdictions.

At October 3, 2020, September 28, 2019 and September 29, 2018, the Company had $1.1 billion, $1.0 billion and $0.2 billion, respectively, in accrued interest and penalties related to unrecognized tax benefits. During fiscal 2020, 2019 and 2018, the Company recorded additional interest and penalties of $211 million, $802 million (of which the substantial majority is due to the acquisition of TFCF) and $47 million, respectively, and recorded reductions in accrued interest and penalties of $101 million, $96 million and $100 million, respectively, as a result of audit settlements and other prior-year adjustments. The Company’s policy is to report interest and penalties as a component of income tax expense.

The Company is no longer subject to U.S. federal examination for years prior to 2017 for The Walt Disney Company and for years prior to 2014 for TFCF. The Company is no longer subject to examination in any of its major state or foreign tax jurisdictions for years prior to 2008.

In the next twelve months, it is reasonably possible that our unrecognized tax benefits could change due to the resolution of certain tax matters, which could include payments on those tax matters. These resolutions and payments could reduce our unrecognized tax benefits by $334 million.

Intra-Entity Transfers of Assets Other Than Inventory

At the beginning of fiscal 2019, the Company adopted new FASB accounting guidance that requires recognition of the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs instead of when the asset is ultimately sold to an outside party. In the first quarter of fiscal 2019, the Company recorded a $0.2 billion deferred tax asset with an offsetting increase to retained earnings.

Other

In fiscal 2020, 2019 and 2018, the Company recognized income tax benefits of $64 million, $41 million and $52 million, respectively for the excess of equity-based compensation deductions over amounts recorded based on the grant date fair value.

11Pension and Other Benefit Programs

The Company maintains pension and postretirement medical benefit plans covering certain of its employees not covered by union or industry-wide plans. The Company has defined benefit pension plans that cover employees hired prior to January 1, 2012. For employees hired after this date, the Company has a defined contribution plan. Benefits under these pension plans are generally based on years of service and/or compensation and generally require 3 years of vesting service. Employees generally hired after January 1, 1987 for certain of our media businesses and other employees generally hired after January 1, 1994 are not eligible for postretirement medical benefits.

In addition, the Company has a defined benefit plan for TFCF employees for which benefits stopped accruing in June 2017.

Defined Benefit Plans

The Company measures the actuarial value of its benefit obligations and plan assets for its defined benefit pension and postretirement medical benefit plans at September 30 and adjusts for any plan contributions or significant events between September 30 and our fiscal year end.

In connection with our fiscal 2019 acquisition of TFCF, we assumed net pension and postretirement obligations of $237 million ($824 million in obligations and $587 million in plan assets).

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The following chart summarizes the benefit obligations, assets, funded status and balance sheet impacts associated with the defined benefit pension and postretirement medical benefit plans:


	Pension Plans				Postretirement Medical Plans
	October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019
Projected benefit obligations
Beginning obligations	$	(18,531)	$	(14,500)	$	(1,946)	$	(1,609)
Acquisition of TFCF	—		(759)		—		(65)
Service cost	(410)		(345)		(10)		(8)
Interest cost	(527)		(592)		(56)		(67)
Actuarial loss(1)	(1,958)		(2,923)		(127)		(234)
Plan amendments and other	1		32		(12)		(11)
Benefits paid	662		534		47		48
Curtailments	3		22		—		—
Ending obligations	$	(20,760)	$	(18,531)	$	(2,104)	$	(1,946)
Fair value of plans’ assets
Beginning fair value	$	14,878	$	12,728	$	762	$	731
Acquisition of TFCF	—		587		—		—
Actual return on plan assets	770		690		38		33
Contributions	664		1,461		9		37
Benefits paid	(662)		(534)		(47)		(48)
Expenses and other	(52)		(54)		9		9
Ending fair value	$	15,598	$	14,878	$	771	$	762

Underfunded status of the plans	$	(5,162)	$	(3,653)	$	(1,333)	$	(1,184)
Amounts recognized in the balance sheet
Non-current assets	$	20	$	5	$	—	$	—
Current liabilities	(59)		(54)		(5)		(5)
Non-current liabilities	(5,123)		(3,604)		(1,328)		(1,179)
	$	(5,162)	$	(3,653)	$	(1,333)	$	(1,184)

(1)The actuarial loss for both fiscal 2020 and 2019 was primarily due to a reduction in the discount rate from the rate that was used in the preceding fiscal year.

The components of net periodic benefit cost are as follows:


	Pension Plans						Postretirement Medical Plans
	2020		2019		2018		2020		2019		2018
Service cost	$	410	$	345	$	350	$	10	$	8	$	10
Other costs (benefits):
Interest cost	527		592		489		56		67		60
Expected return on plan assets	(1,084)		(978)		(901)		(57)		(56)		(53)
Amortization of prior-year service costs	13		13		13		—		—		—
Recognized net actuarial loss	544		260		348		14		—		14
Total other costs (benefits)	—		(113)		(51)		13		11		21
Net periodic benefit cost	$	410	$	232	$	299	$	23	$	19	$	31

In fiscal 2019, the Company adopted new FASB accounting guidance on the presentation of the components of net periodic pension and postretirement benefit cost (“net periodic benefit cost”). This guidance requires the Company to present the service cost component of net periodic benefit cost in the same line items on the statement of operations as other compensation costs of the related employees (i.e. “Costs and expenses” in the Consolidated Statements of Operations). All of the other components of net periodic benefit cost (“other costs/benefits”) are presented as a component of “Interest expense,

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net” in the Consolidated Statements of Operations. The other costs/benefits in fiscal 2018 were not material and are reported in “Costs and expenses”.

In fiscal 2021, we expect pension and postretirement medical costs to increase by $143 million to $576 million due to the impacts of updated mortality assumptions and a lower discount rate.


Key assumptions are as follows:
	Pension Plans						Postretirement Medical Plans
	2020		2019		2018		2020		2019		2018
Discount rate used to determine the fiscal year‑end benefit obligation	2.82	%	3.22	%	4.31	%	2.80	%	3.22	%	4.31	%
Discount rate used to determine the interest cost component of net periodic benefit cost	2.94	%	4.09	%	3.46	%	2.95	%	4.10	%	3.49	%
Rate of return on plan assets	7.00	%	7.25	%	7.50	%	7.00	%	7.25	%	7.50	%
Weighted average rate of compensation increase to determine the fiscal year‑end benefit obligation	3.20	%	3.20	%	3.20	%	n/a		n/a		n/a
Year 1 increase in cost of benefits	n/a		n/a		n/a		7.00	%	7.00	%	7.00	%
Rate of increase to which the cost of benefits is assumed to decline (the ultimate trend rate)	n/a		n/a		n/a		4.25	%	4.25	%	4.25	%
Year that the rate reaches the ultimate trend rate	n/a		n/a		n/a		2034		2033		2032

AOCI, before tax, as of October 3, 2020 consists of the following amounts that have not yet been recognized in net periodic benefit cost:


	Pension Plans		Postretirement Medical Plans		Total
Prior service cost	$	27	$	—	$	27
Net actuarial loss	8,915		429		9,344
Total amounts included in AOCI	8,942		429		9,371
Prepaid (accrued) pension cost	(3,780)		904		(2,876)
Net balance sheet liability	$	5,162	$	1,333	$	6,495

Plan Funded Status

The projected benefit obligation, accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $19.5 billion, $18.1 billion and $14.4 billion, respectively, as of October 3, 2020 and $17.5 billion, $16.1 billion and $13.9 billion, respectively, as of September 28, 2019.

For pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and aggregate fair value of plan assets were $19.8 billion and $14.6 billion, respectively, as of October 3, 2020 and $18.5 billion and $14.8 billion respectively, as of September 28, 2019.

The Company’s total accumulated pension benefit obligations at October 3, 2020 and September 28, 2019 were $19.1 billion and $17.0 billion, respectively. Approximately 98% was vested as of both October 3, 2020 and September 28, 2019.

The accumulated postretirement medical benefit obligations and fair value of plan assets for postretirement medical plans with accumulated postretirement medical benefit obligations in excess of plan assets were $2.1 billion and $0.8 billion, respectively, at October 3, 2020 and $1.9 billion and $0.8 billion, respectively, at September 28, 2019.

Plan Assets

A significant portion of the assets of the Company’s defined benefit plans are managed in third-party master trusts. The investment policy and allocation of the assets in the master trusts were approved by the Company’s Investment and

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Administrative Committee, which has oversight responsibility for the Company’s retirement plans. The investment policy ranges for the major asset classes are as follows:


Asset Class	Minimum	Maximum

Equity investments	30%	60%
Fixed income investments	20%	40%
Alternative investments	10%	30%
Cash & money market funds	—%	10%

The primary investment objective for the assets within the master trusts is the prudent and cost effective management of assets to satisfy benefit obligations to plan participants. Financial risks are managed through diversification of plan assets, selection of investment managers and through the investment guidelines incorporated in investment management agreements. Investments are monitored to assess whether returns are commensurate with risks taken.

The long-term asset allocation policy for the master trusts was established taking into consideration a variety of factors that include, but are not limited to, the average age of participants, the number of retirees, the duration of liabilities and the expected payout ratio. Liquidity needs of the master trusts are generally managed using cash generated by investments or by liquidating securities.

Assets are generally managed by external investment managers pursuant to investment management agreements that establish permitted securities and risk controls commensurate with the account’s investment strategy. Some agreements permit the use of derivative securities (futures, options, interest rate swaps, credit default swaps) that enable investment managers to enhance returns and manage exposures within their accounts.

Fair Value Measurements of Plan Assets

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and is generally classified in one of the following categories of the fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

Investments that are valued using the net asset value (NAV) (or its equivalent) practical expedient are excluded from the fair value hierarchy disclosure.

The following is a description of the valuation methodologies used for assets reported at fair value. The methodologies used at October 3, 2020 and September 28, 2019 are the same.

Level 1 investments are valued based on reported market prices on the last trading day of the fiscal year. Investments in common and preferred stocks are valued based on an exchange-listed price or a broker’s quote in an active market. Investments in U.S. Treasury securities are valued based on a broker’s quote in an active market.

Level 2 investments in government and federal agency bonds, corporate bonds and mortgage-backed securities (MBS) and asset-backed securities are valued using a broker’s quote in a non-active market or an evaluated price based on a compilation of reported market information, such as benchmark yield curves, credit spreads and estimated default rates. Derivative financial instruments are valued based on models that incorporate observable inputs for the underlying securities, such as interest rates or foreign currency exchange rates.

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The Company’s defined benefit plan assets are summarized by level in the following tables:


	As of October 3, 2020
Description	Level 1		Level 2		Total		Plan Asset Mix

Cash	$	207	$	—	$	207	1%
Common and preferred stocks(1)	3,308		—		3,308		20%
Mutual funds	1,154		—		1,154		7%
Government and federal agency bonds, notes and MBS	2,326		354		2,680		16%
Corporate bonds	—		935		935		6%
Other mortgage- and asset-backed securities	—		106		106		1%
Derivatives and other, net	(2)		7		5		—%
Total investments in the fair value hierarchy	$	6,993	$	1,402	$	8,395

Assets valued at NAV as a practical expedient:
Common collective funds					3,993		24%
Alternative investments					3,375		21%
Money market funds and other					606		4%
Total investments at fair value					$	16,369	100%


	As of September 28, 2019
Description	Level 1		Level 2		Total		Plan Asset Mix

Cash	$	197	$	—	$	197	1%
Common and preferred stocks(1)	3,468		—		3,468		22%
Mutual funds	1,140		—		1,140		7%
Government and federal agency bonds, notes and MBS	2,042		404		2,446		16%
Corporate bonds	—		580		580		4%
Other mortgage- and asset-backed securities	—		127		127		1%
Derivatives and other, net	(6)		(21)		(27)		—%
Total investments in the fair value hierarchy	$	6,841	$	1,090	$	7,931

Assets valued at NAV as a practical expedient:
Common collective funds					3,691		24%
Alternative investments					2,725		17%
Money market funds and other					1,293		8%
Total investments at fair value					$	15,640	100%

(1)Includes 2.9 million shares of Company common stock valued at $355 million (2% of total plan assets) and 2.9 million shares valued at $373 million (2% of total plan assets) at October 3, 2020 and September 28, 2019, respectively.

Uncalled Capital Commitments

Alternative investments held by the master trust include interests in funds that have rights to make capital calls to the investors. In such cases, the master trust would be contractually obligated to make a cash contribution at the time of the capital call. At October 3, 2020, the total committed capital still uncalled and unpaid was $1.0 billion.

Plan Contributions

During fiscal 2020, the Company made $673 million of contributions to its pension and postretirement medical plans. The Company currently expects to make approximately $500 million to $600 million in pension and postretirement medical plan contributions in fiscal 2021. Final minimum funding requirements for fiscal 2021 will be determined based on a January 1, 2021 funding actuarial valuation, which is expected to be received during the fourth quarter of fiscal 2021.

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Estimated Future Benefit Payments

The following table presents estimated future benefit payments for the next ten fiscal years:


	Pension Plans		Postretirement Medical Plans(1)
2021	$	678	$	59
2022	661		63
2023	691		67
2024	729		72
2025	771		76
2026 – 2030	4,433		446

(1)Estimated future benefit payments are net of expected Medicare subsidy receipts of $85 million.

Assumptions

Assumptions, such as discount rates, long-term rate of return on plan assets and the healthcare cost trend rate, have a significant effect on the amounts reported for net periodic benefit cost as well as the related benefit obligations.

Discount Rate — The assumed discount rate for pension and postretirement medical plans reflects the market rates for high-quality corporate bonds currently available. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves. The Company measures service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows.

Long-term rate of return on plan assets — The long-term rate of return on plan assets represents an estimate of long-term returns on an investment portfolio consisting of a mixture of equities, fixed income and alternative investments. When determining the long-term rate of return on plan assets, the Company considers long-term rates of return on the asset classes (both historical and forecasted) in which the Company expects the pension funds to be invested. The following long-term rates of return by asset class were considered in setting the long-term rate of return on plan assets assumption:


Equity Securities	6	%	to	10	%
Debt Securities	2	%	to	4	%
Alternative Investments	6	%	to	11	%

Healthcare cost trend rate — The Company reviews external data and its own historical trends for healthcare costs to determine the healthcare cost trend rates for the postretirement medical benefit plans. The 2020 actuarial valuation assumed a 7.00% annual rate of increase in the per capita cost of covered healthcare claims with the rate decreasing in even increments over fourteen years until reaching 4.25%.

Sensitivity — A one percentage point (ppt) change in the discount rate and expected long-term rate of return on plan assets would have the following effects on the projected benefit obligations for pension and postretirement medical plans as of October 3, 2020 and on cost for fiscal 2021:


	Discount Rate				Expected Long-Term Rate of Return On Assets
Increase (decrease)	Benefit Expense		Projected Benefit Obligations		Benefit Expense
1 ppt decrease	$	351	$	3,988	$	164
1 ppt increase	(303)		(3,380)		(164)

Multiemployer Benefit Plans

The Company participates in a number of multiemployer pension plans under union and industry-wide collective bargaining agreements that cover our union-represented employees and expenses its contributions to these plans as incurred. These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. The risks of participating in these multiemployer plans are different from single-employer plans. For example:

Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

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If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan may become the obligation of the remaining participating employers.
If a participating employer chooses to stop participating in these multiemployer plans, the employer may be required to pay those plans an amount based on the underfunded status of the plan.

The Company also participates in several multiemployer health and welfare plans that cover both active and retired employees. Health care benefits are provided to participants who meet certain eligibility requirements under the applicable collective bargaining unit.

The following table sets forth our contributions to multiemployer pension and health and welfare benefit plans:


	2020		2019		2018
Pension plans	$	221	$	189	$	144
Health & welfare plans	217		218		172
Total contributions	$	438	$	407	$	316

Defined Contribution Plans

The Company has defined contribution retirement plans for domestic employees who began service after December 31, 2011 and are not eligible to participate in the defined benefit pension plans. In general, the Company contributes from 3% to 9% of an employee’s compensation depending on the employee’s age and years of service with the Company up to plan limits. The Company has savings and investment plans that allow eligible employees to contribute up to 50% of their salary through payroll deductions depending on the plan in which the employee participates. The Company matches 50% of the employee’s contribution up to plan limits. In fiscal 2020, 2019 and 2018, the costs of these defined contribution plans were $217 million, $208 million and $162 million, respectively. The Company also has defined contribution retirement plans for employees in our international operations. The costs of these defined contribution plans were $25 million, $25 million and $21 million in fiscal years 2020, 2019 and 2018, respectively.

12Equity

The Company paid the following dividends in fiscal 2020, 2019 and 2018:


Per Share	Total Paid	Payment Timing	Related to Fiscal Period
$0.88	$1.6 billion	Second Quarter of Fiscal 2020	Second Half 2019
$0.88	$1.6 billion	Fourth Quarter of Fiscal 2019	First Half 2019
$0.88	$1.3 billion	Second Quarter of Fiscal 2019	Second Half 2018
$0.84	$1.2 billion	Fourth Quarter of Fiscal 2018	First Half 2018
$0.84	$1.3 billion	Second Quarter of Fiscal 2018	Second Half 2017

The Board of Directors did not declare a dividend with respect to fiscal year 2020 operations.

As a result of the acquisition of TFCF, TWDC became the parent entity of both TFCF and TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company and referred to herein as Legacy Disney). TWDC issued 307 million shares of common stock to acquire TFCF (see Note 4), and all the outstanding shares of Legacy Disney (other than shares of Legacy Disney held in treasury that were not held on behalf of a third party) were converted on a one-for-one basis into new publicly traded shares of TWDC.

In March 2019, Legacy Disney terminated its share repurchase program, and 1.4 billion treasury shares were canceled, which resulted in a decrease to common stock and retained earnings of $17.6 billion and $49.1 billion, respectively. The cost of treasury shares canceled was allocated to common stock based on the ratio of treasury shares to total shares outstanding, with the excess allocated to retained earnings. At October 3, 2020, TWDC held 19 million treasury shares.

TWDC’s authorized share capital consists of 4.6 billion common shares at $0.01 par value and 100 million preferred shares at $0.01 par value, both of which represent the same authorized capital structure in effect prior to the completion of the TFCF acquisition and as of September 29, 2018. As of September 29, 2018, Legacy Disney had 40 thousand preferred series B shares authorized with $0.01 par value, which were eliminated in fiscal 2019.

In fiscal 2018, the Company repurchased 35 million shares of its common stock for $3.6 billion.

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The following table summarizes the changes in each component of accumulated other comprehensive income (loss) (AOCI) including our proportional share of equity method investee amounts:


	Market Value Adjustments(1)		Unrecognized Pension and Postretirement Medical Expense		Foreign Currency Translation and Other		AOCI


AOCI, before tax
Balance at September 30, 2017	$	(93)	$	(4,906)	$	(523)	$	(5,522)
Unrealized gains (losses) arising during the period	259		203		(204)		258
Reclassifications of net (gains) losses to net income	35		380		—		415
Balance at September 29, 2018	$	201	$	(4,323)	$	(727)	$	(4,849)
Unrealized gains (losses) arising during the period	136		(3,457)		(359)		(3,680)
Reclassifications of net (gains) losses to net income	(185)		278		—		93
Reclassifications to retained earnings	(23)		—		—		(23)
Balance at September 28, 2019	$	129	$	(7,502)	$	(1,086)	$	(8,459)
Unrealized gains (losses) arising during the period	(57)		(2,468)		(2)		(2,527)
Reclassifications of net (gains) losses to net income	(263)		547		—		284
Balance at October 3, 2020	$	(191)	$	(9,423)	$	(1,088)	$	(10,702)


	Market Value Adjustments(1)		Unrecognized Pension and Postretirement Medical Expense		Foreign Currency Translation and Other		AOCI


Tax on AOCI
Balance at September 30, 2017	$	39	$	1,839	$	116	$	1,994
Unrealized gains (losses) arising during the period	(68)		(47)		(13)		(128)
Reclassifications of net (gains) losses to net income	(12)		(102)		—		(114)
Balance at September 29, 2018	$	(41)	$	1,690	$	103	$	1,752
Unrealized gains (losses) arising during the period	(31)		797		28		794
Reclassifications of net (gains) losses to net income	43		(64)		—		(21)
Reclassifications to retained earnings(2)	—		(667)		(16)		(683)
Balance at September 28, 2019	$	(29)	$	1,756	$	115	$	1,842
Unrealized gains (losses) arising during the period	8		572		24		604
Reclassifications of net (gains) losses to net income	61		(127)		—		(66)
Balance at October 3, 2020	$	40	$	2,201	$	139	$	2,380

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	Market Value Adjustments(1)		Unrecognized Pension and Postretirement Medical Expense		Foreign Currency Translation and Other		AOCI


AOCI, after tax
Balance at September 30, 2017	$	(54)	$	(3,067)	$	(407)	$	(3,528)
Unrealized gains (losses) arising during the period	191		156		(217)		130
Reclassifications of net (gains) losses to net income	23		278		—		301
Balance at September 29, 2018	$	160	$	(2,633)	$	(624)	$	(3,097)
Unrealized gains (losses) arising during the period	105		(2,660)		(331)		(2,886)
Reclassifications of net (gains) losses to net income	(142)		214		—		72
Reclassifications to retained earnings(2)	(23)		(667)		(16)		(706)
Balance at September 28, 2019	$	100	$	(5,746)	$	(971)	$	(6,617)
Unrealized gains (losses) arising during the period	(49)		(1,896)		22		(1,923)
Reclassifications of net (gains) losses to net income	(202)		420		—		218
Balance at October 3, 2020	$	(151)	$	(7,222)	$	(949)	$	(8,322)

(1)Primarily reflects market value adjustments for cash flow hedges.

(2)At the beginning of fiscal 2019, the Company adopted new FASB accounting guidance, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, and reclassified $691 million from AOCI to retained earnings. In addition, at the beginning of fiscal 2019, the Company adopted new FASB accounting guidance, Recognition and Measurement of Financial Assets and Liabilities, and reclassified $24 million ($15 million after tax) of market value adjustments on investments previously recorded in AOCI to retained earnings.

Details about AOCI components reclassified to net income are as follows:


Gains (losses) in net income:	Affected line item in the Consolidated Statements of Operations:	2020		2019		2018
Market value adjustments, primarily cash flow hedges	Primarily revenue	$	263	$	185	$	(35)
Estimated tax	Income taxes	(61)		(43)		12
		202		142		(23)

Pension and postretirement medical expense	Cost and expenses	—		—		(380)
	Interest expense, net	(547)		(278)		—
Estimated tax	Income taxes	127		64		102
		(420)		(214)		(278)





Total reclassifications for the period		$	(218)	$	(72)	$	(301)

13Equity-Based Compensation

Under various plans, the Company may grant stock options and other equity-based awards to executive, management and creative personnel. The Company’s approach to long-term incentive compensation contemplates awards of stock options and restricted stock units (RSUs). Certain RSUs awarded to senior executives vest based upon the achievement of market or performance conditions (Performance RSUs).

Stock options are generally granted at exercise prices equal to or exceeding the market price at the date of grant and become exercisable ratably over a four-year period from the grant date. The contractual terms for our outstanding stock option grants are 10 years. At the discretion of the Compensation Committee of the Company’s Board of Directors, options can occasionally extend up to 15 years after date of grant. RSUs generally vest ratably over four years and Performance RSUs generally fully vest after three years, subject to achieving market or performance conditions. Equity-based award grants

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generally provide continued vesting, in the event of termination, for employees that reach age 60 or greater, have at least ten years of service and have held the award for at least one year.

Each share granted subject to a stock option award reduces the number of shares available under the Company’s stock incentive plans by one share while each share granted subject to a RSU award reduces the number of shares available by two shares. As of October 3, 2020, the maximum number of shares available for issuance under the Company’s stock incentive plans (assuming all the awards are in the form of stock options) was approximately 160 million shares and the number available for issuance assuming all awards are in the form of RSUs was approximately 77 million shares. The Company satisfies stock option exercises and vesting of RSUs with newly issued shares. Stock options and RSUs are generally forfeited by employees who terminate prior to vesting.

Each year, generally during the first half of the year, the Company awards stock options and restricted stock units to a broad-based group of management, technology and creative personnel. The fair value of options is estimated based on the binomial valuation model. The binomial valuation model takes into account variables such as volatility, dividend yield and the risk-free interest rate. The binomial valuation model also considers the expected exercise multiple (the multiple of exercise price to grant price at which exercises are expected to occur on average) and the termination rate (the probability of a vested option being canceled due to the termination of the option holder) in computing the value of the option.

The weighted average assumptions used in the option-valuation model were as follows:


	2020	2019	2018
Risk-free interest rate	1.8%	2.8%	2.4%
Expected volatility	23%	23%	23%
Dividend yield	1.36%	1.61%	1.57%
Termination rate	5.8%	4.8%	4.8%
Exercise multiple	1.83	1.75	1.75

Although the initial fair value of stock options is not adjusted after the grant date, changes in the Company’s assumptions may change the value of, and therefore the expense related to, future stock option grants. The assumptions that cause the greatest variation in fair value in the binomial valuation model are the expected volatility and expected exercise multiple. Increases or decreases in either the expected volatility or expected exercise multiple will cause the binomial option value to increase or decrease, respectively. The volatility assumption considers both historical and implied volatility and may be impacted by the Company’s performance as well as changes in economic and market conditions.

Compensation expense for RSUs and stock options is recognized ratably over the service period of the award. Compensation expense for RSUs is based on the market price of the shares underlying the awards on the grant date. Compensation expense for Performance RSUs reflects the estimated probability that the market or performance conditions will be met.

Compensation expense related to stock options and RSUs is as follows:


	2020		2019		2018
Stock option	$	101	$	84	$	87
RSUs(1)	424		627		306
Total equity-based compensation expense(2)	525		711		393
Tax impact	(118)		(161)		(99)
Reduction in net income	$	407	$	550	$	294
Equity-based compensation expense capitalized during the period	$	87	$	81	$	70

(1)Fiscal 2019 includes a $164 million charge for acceleration of TFCF performance RSUs converted to Company RSUs in connection with the TFCF acquisition (see Note 4).

(2)Equity-based compensation expense is net of capitalized equity-based compensation and estimated forfeitures and excludes amortization of previously capitalized equity-based compensation costs.

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The following table summarizes information about stock option transactions in fiscal 2020 (shares in millions):



	Shares	Weighted Average Exercise Price
Outstanding at beginning of year	23	$	90.05
Awards forfeited	(1)	127.94
Awards granted	4	147.04
Awards exercised	(3)	80.17

Outstanding at end of year	23	$	101.41
Exercisable at end of year	13	$	84.50

The following tables summarize information about stock options vested and expected to vest at October 3, 2020 (shares in millions):


					Vested
Range of Exercise Prices					Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Years of Contractual Life
$	0	—	$	50	2	$	40.54	1.2
$	51	—	$	80	3	61.03		2.7
$	81	—	$	110	4	98.65		5.3
$	111	—	$	140	4	112.32		6.5
					13


					Expected to Vest
Range of Exercise Prices					Number of Options(1)	Weighted Average Exercise Price		Weighted Average Remaining Years of Contractual Life
$	100	—	$	125	5	$	110.06	7.6
$	126	—	$	150	4	147.84		9.2


					9

(1)Number of options expected to vest is total unvested options less estimated forfeitures.

The following table summarizes information about RSU transactions in fiscal 2020 (shares in millions):



	Units	Weighted Average Grant-Date Fair Value
Unvested at beginning of year	12	$	110.84
Granted(1)	6	142.77
Vested	(5)	108.13
Forfeited	(1)	117.25

Unvested at end of year (2)(3)	12	$	128.56

(1)Includes 0.2 million Performance RSUs.

(2)Includes 1.4 million Performance RSUs.

(3)Excludes Performance RSUs issued in September 2018 and December 2019, for which vesting is subject to service conditions and the number of units vesting is subject to the discretion of the CEO. At October 3, 2020, the maximum number of these Performance RSUs that could be issued upon vesting is 0.1 million.

The weighted average grant-date fair values of options granted during fiscal 2020, 2019 and 2018 were $36.19, $28.76 and $28.01, respectively. The total intrinsic value (market value on date of exercise less exercise price) of options exercised and RSUs vested during fiscal 2020, 2019 and 2018 totaled $989 million, $646 million and $585 million, respectively. The aggregate intrinsic values of stock options vested and expected to vest at October 3, 2020 were $514 million and $63 million, respectively.

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As of October 3, 2020, unrecognized compensation cost related to unvested stock options and RSUs was $140 million and $850 million, respectively. That cost is expected to be recognized over a weighted-average period of 1.6 years for stock options and 1.9 years for RSUs.

Cash received from option exercises for fiscal 2020, 2019 and 2018 was $305 million, $318 million and $210 million, respectively. Tax benefits realized from tax deductions associated with option exercises and RSUs vesting for fiscal 2020, 2019 and 2018 was approximately $220 million, $145 million and $160 million, respectively.

14Detail of Certain Balance Sheet Accounts


Current receivables	October 3, 2020		September 28, 2019

Accounts receivable	$	11,299	$	12,930
Other	1,835		2,894
Allowance for doubtful accounts	(426)		(343)
	$	12,708	$	15,481


Parks, resorts and other property
Attractions, buildings and improvements	$	31,279	$	29,509
Furniture, fixtures and equipment	22,976		21,265
Land improvements	6,828		6,649
Leasehold improvements	1,028		1,166
	62,111		58,589
Accumulated depreciation	(35,517)		(32,415)
Projects in progress	4,449		4,264
Land	1,035		1,165
	$	32,078	$	31,603


Intangible assets
Character/franchise intangibles, copyrights and trademarks	$	10,572	$	10,577
MVPD agreements	8,098		9,900
Other amortizable intangible assets	4,309		4,291
Accumulated amortization	(5,598)		(3,393)
Net amortizable intangible assets	17,381		21,375


Indefinite lived intangible assets	1,792		1,840
	$	19,173	$	23,215


Accounts payable and other accrued liabilities
Accounts payable	$	12,663	$	13,778
Payroll and employee benefits	2,925		3,010
Other	1,213		974
	$	16,801	$	17,762


Other long-term liabilities
Pension and postretirement medical plan liabilities	$	6,451	$	4,783
Other	10,753		8,977
	$	17,204	$	13,760

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15Commitments and Contingencies

Commitments

The Company has various contractual commitments for broadcast rights for sports, films and other programming, totaling approximately $46.4 billion, including approximately $3.1 billion for available programming as of October 3, 2020, and approximately $40.6 billion related to sports programming rights, primarily for college football (including bowl games and the College Football Playoff) and basketball, NBA, NFL, UFC, MLB, Cricket, US Open Tennis, Top Rank Boxing, the PGA Championship and various soccer rights.

The Company has entered into operating leases for various real estate and equipment needs, including office space for general and administrative purposes, production facilities, retail outlets and distribution centers for consumer products, land and content broadcast equipment. In addition, the Company has non-cancelable financing leases, primarily for land and broadcast equipment. See Note 16 for discussion of the Company’s operating and financing lease commitments.

The Company also has contractual commitments for the construction of three new cruise ships, creative talent and employment agreements and unrecognized tax benefits. Creative talent and employment agreements include obligations to actors, producers, sports, television and radio personalities and executives.

Contractual commitments for broadcast programming rights and other commitments including cruise ships and creative talent totaled $58.8 billion at October 3, 2020, payable as follows:


Fiscal Year:	Broadcast Programming		Other		Total
2021	$	12,043	$	3,051	$	15,094
2022	8,632		2,291		10,923
2023	6,030		988		7,018
2024	4,972		1,263		6,235
2025	5,058		1,060		6,118
Thereafter	9,643		3,737		13,380
	$	46,378	$	12,390	$	58,768

Certain broadcast programming rights have payments that are variable based primarily on revenues and are not included in the table above.

Legal Matters

The Company, together with, in some instances, certain of its directors and officers, is a defendant in various legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses. Management does not believe that the Company has incurred a probable material loss by reason of any of those actions.

Contractual Guarantees

The Company has guaranteed bond issuances by the Anaheim Public Authority that were used by the City of Anaheim to finance construction of infrastructure and a public parking facility adjacent to the Disneyland Resort. Revenues from sales, occupancy and property taxes from the Disneyland Resort and non-Disney hotels are used by the City of Anaheim to repay the bonds, which mature in 2037. In the event of a debt service shortfall, the Company will be responsible to fund the shortfall. As of October 3, 2020, the remaining debt service obligation guaranteed by the Company was $232 million. To the extent that tax revenues exceed the debt service payments subsequent to the Company funding a shortfall, the Company would be reimbursed for any previously funded shortfalls. To date, tax revenues have exceeded the debt service payments for these bonds.

16Leases

At the beginning of fiscal 2020, the Company adopted new lease accounting guidance issued by the FASB. The most significant change requires lessees to record the present value of operating lease payments as right-of-use assets and lease liabilities on the balance sheet. The new guidance continues to require lessees to classify leases between operating and finance leases (formerly “capital leases”).

We adopted the new guidance using the modified retrospective method at the beginning of fiscal year 2020. Reporting periods beginning after September 29, 2019 are presented under the new guidance, while prior periods continue to be reported

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in accordance with our historical accounting. The Company adopted the new guidance by applying practical expedients that permit us not to reassess our prior conclusions concerning whether:

Any of our existing arrangements contain a lease;
Our existing lease arrangements are operating or finance leases;
To capitalize indirect costs; and
Existing land easements are leases.

The adoption of the new guidance resulted in the recognition of approximately $3.7 billion of right-of-use assets and lease liabilities, which were measured by the present value of the remaining minimum lease payments. In accordance with the guidance, the Company elected to exclude from the measurement of the right-of-use asset and lease liability leases with a remaining term of one year (“Short-term leases”).

The present value of the lease payments was calculated using the Company’s incremental borrowing rate applicable to the lease, which is determined by estimating what it would cost the Company to borrow a collateralized amount equal to the total lease payments over the lease term based on the contractual terms of the lease and the location of the leased asset.

At adoption, in the Consolidated Balance Sheet we also reclassified:

Deferred rent of approximately $0.3 billion for operating leases at the end of fiscal year 2019 from “Accounts payable and other accrued liabilities” (current portion) and “Other long-term liabilities” (non-current portion) to “Other assets” (right-of-use asset);
A deferred sale leaseback gain of approximately $0.3 billion from “Deferred revenue and other” (current portion) and “Other long-term liabilities” (non-current portion) to “Retained earnings”; and
Capitalized lease assets of approximately $0.2 billion from “Parks, resorts and other property” to “Other assets” related to finance leases.

Lessee Arrangements

The Company’s operating leases primarily consist of real estate and equipment, including office space for general and administrative purposes, production facilities, retail outlets and distribution centers for consumer products, land and content broadcast equipment. The Company also has finance leases, primarily for land and broadcast equipment.

We determine whether a new contract is a lease at contract inception or for a modified contract at the modification date. Our leases may require us to make fixed rental payments, variable lease payments based on usage or sales and fixed non-lease costs relating to the leased asset. Variable lease payments are generally not included in the measurement of the right-of-use asset and lease liability. Fixed non-lease costs, for example common-area maintenance costs, are included in the measurement of the right-of-use asset and lease liability as the Company does not separate lease and non-lease components.

Some of our leases include renewal and/or termination options. If it is reasonably certain that a renewal or termination option will be exercised, the exercise of the option is considered in calculating the term of the lease. As of October 3, 2020, our operating leases have a weighted-average remaining lease term of approximately 10 years, and our finance leases have a weighted-average remaining lease term of approximately 23 years. The weighted-average incremental borrowing rate is 2.5% and 6.3%, for our operating leases and finance leases, respectively. Additionally, as of October 3, 2020, the Company had signed non-cancelable lease agreements with total estimated future lease payments of approximately $277 million that had not yet commenced and therefore are not included in the measurement of the right-of-use asset and lease liability.

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The Company’s operating and finance right-of-use assets and lease liabilities are as follows:


	October 3, 2020
Right-of-use assets(1)
Operating leases	$	3,687
Finance leases	361
Total right-of-use assets	4,048

Short-term lease liabilities(2)
Operating leases	747
Finance leases	37
	784
Long-term lease liabilities(3)
Operating leases	2,640
Finance leases	271
	2,911
Total lease liabilities	$	3,695

(1)Included in “Other assets” in the Consolidated Balance Sheet. Includes approximately $0.6 billion of long-term prepaid rent that was presented as a right-of-use asset upon adoption.

(2)Included in “Accounts payable and other accrued liabilities” in the Consolidated Balance Sheet.

(3)Included in “Other long-term liabilities” in the Consolidated Balance Sheet.

The components of lease expense for the year ended October 3, 2020 are as follows:


Finance lease cost
Amortization of right-of-use assets	$	37
Interest on lease liabilities	16
Operating lease cost	899
Variable fees and other(1)	491
Total lease cost	$	1,443

(1)Includes variable lease payments related to our operating and finance leases and costs of Short-term leases, net of sublease income.

Rental expense for operating leases during fiscal 2019 and 2018, including common-area maintenance and contingent rentals, was $1.1 billion and $0.9 billion, respectively.

Cash paid during the year ended October 3, 2020 for amounts included in the measurement of lease liabilities as of the beginning of the reporting period is as follows:


Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	879
Operating cash flows for finance leases	16
Financing cash flows for finance leases	37
Total	$	932

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Future minimum lease payments, as of October 3, 2020, are as follows:


	Operating		Financing
Fiscal year:
2021	$	840	$	56
2022	635		56
2023	494		51
2024	367		40
2025	310		35
Thereafter	1,565		482
Total undiscounted future lease payments	4,211		720
Less: Imputed interest	(824)		(412)
Total reported lease liability	$	3,387	$	308

Future minimum lease payments under non-cancelable operating leases and non-cancelable capital leases at September 28, 2019, presented based on our historical accounting prior to the adoption of the new lease guidance, are as follows:


	Operating Leases		Capital Leases
Fiscal year:
2020	$	982	$	19
2021	849		20
2022	670		19
2023	532		17
2024	407		16
Thereafter	2,491		458
Total minimum obligations	$	5,931	549
Less: amount representing interest			(398)
Present value of net minimum obligations			$	151

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17Fair Value Measurement

The Company’s assets and liabilities measured at fair value are summarized in the following tables by fair value measurement Level. See Note 11 for definitions of fair value measures and the Levels within the fair value hierarchy.


	Fair Value Measurement at October 3, 2020
Description	Level 1		Level 2		Level 3		Total
Assets
Investments	$	—	$	1,057	$	—	$	1,057
Derivatives
Interest rate	—		515		—		515
Foreign exchange	—		505		—		505
Other	—		1		—		1
Liabilities
Derivatives
Interest rate	—		(4)		—		(4)
Foreign exchange	—		(549)		—		(549)
Other	—		(22)		—		(22)
Total recorded at fair value	$	—	$	1,503	$	—	$	1,503
Fair value of borrowings	$	—	$	63,370	$	1,448	$	64,818


	Fair Value Measurement at September 28, 2019
Description	Level 1		Level 2		Level 3		Total
Assets
Investments	$	13	$	—	$	—	$	13
Derivatives
Interest rate	—		89		—		89
Foreign exchange	—		771		—		771
Other	—		1		—		1
Liabilities
Derivatives
Interest rate	—		(93)		—		(93)
Foreign exchange	—		(544)		—		(544)
Other	—		(4)		—		(4)
Total recorded at fair value	13		220		—		233
Fair value of borrowings	$	—	$	48,709	$	1,249	$	49,958

The fair values of Level 2 investments are based on quoted market prices, adjusted for trading restrictions.

The fair values of Level 2 derivatives are primarily determined by internal discounted cash flow models that use observable inputs such as interest rates, yield curves and foreign currency exchange rates. Counterparty credit risk, which is mitigated by master netting agreements and collateral posting arrangements with certain counterparties, did not have a material impact on derivative fair value estimates.

Level 2 borrowings, which include commercial paper, U.S. dollar denominated notes and certain foreign currency denominated borrowings, are valued based on quoted prices for similar instruments in active markets or identical instruments in markets that are not active.

Level 3 borrowings include the Asia Theme Park borrowings, which are valued based on the current borrowing cost and credit risk of the Asia Theme Parks as well as prevailing market interest rates.

The Company’s financial instruments also include cash, cash equivalents, receivables and accounts payable. The carrying values of these financial instruments approximate the fair values.

The Company also has assets that are required to be recorded at fair value on a non-recurring basis. These assets are evaluated when certain triggering events occur (including a decrease in estimated future cash flows) that indicate the asset

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should be evaluated for impairment. In the third quarter of fiscal 2020, the Company recorded impairment charges for goodwill and intangible assets as disclosed in Note 19. The fair value of these assets reflected the estimated discounted future cash flows, which is a Level 3 valuation technique (see Note 19 for a discussion of the more significant inputs used in our discounted cash flow analysis).

Credit Concentrations

The Company monitors its positions with, and the credit quality of, the financial institutions that are counterparties to its financial instruments on an ongoing basis and does not currently anticipate nonperformance by the counterparties.

The Company does not expect that it would realize a material loss, based on the fair value of its derivative financial instruments as of October 3, 2020, in the event of nonperformance by any single derivative counterparty. The Company generally enters into derivative transactions only with counterparties that have a credit rating of A- or better and requires collateral in the event credit ratings fall below A- or aggregate exposures exceed limits as defined by contract. In addition, the Company limits the amount of investment credit exposure with any one institution.

The Company does not have material cash and cash equivalent balances with financial institutions that have below investment grade credit ratings and maintains short-term liquidity needs in high quality money market funds. As of October 3, 2020, the Company’s balances with individual financial institutions that exceeded 10% of the Company’s total cash and cash equivalents were 26% of total cash and cash equivalents. At October 3, 2020, the Company did not have balances (excluding money market funds) with individual financial institutions that exceeded 10% of the Company’s total cash and cash equivalents.

The Company’s trade receivables and financial investments do not represent a significant concentration of credit risk at October 3, 2020 due to the wide variety of customers and markets in which the Company’s products are sold, the dispersion of our customers across geographic areas and the diversification of the Company’s portfolio among financial institutions.

18Derivative Instruments

The Company manages its exposure to various risks relating to its ongoing business operations according to a risk management policy. The primary risks managed with derivative instruments are interest rate risk and foreign exchange risk.

The Company’s derivative positions measured at fair value are summarized in the following tables:


	As of October 3, 2020
	Current Assets		Other Assets		Other Current Liabilities		Other Long- Term Liabilities
Derivatives designated as hedges
Foreign exchange	$	184	$	132	$	(77)	$	(273)
Interest rate	—		515		(4)		—
Other	1		—		(15)		(4)
Derivatives not designated as hedges
Foreign exchange	53		136		(98)		(101)
Interest Rate	—		—		—		—
Other	—		—		(3)		—
Gross fair value of derivatives	238		783		(197)		(378)
Counterparty netting	(143)		(378)		184		338
Cash collateral (received) paid	(26)		(142)		—		9
Net derivative positions	$	69	$	263	$	(13)	$	(31)

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	As of September 28, 2019
	Current Assets		Other Assets		Other Current Liabilities		Other Long- Term Liabilities
Derivatives designated as hedges
Foreign exchange	$	302	$	241	$	(67)	$	(244)
Interest rate	—		89		(82)		—
Other	1		—		(3)		(1)
Derivatives not designated as hedges
Foreign exchange	65		163		(107)		(126)
Interest Rate	—		—		—		(11)
Gross fair value of derivatives	368		493		(259)		(382)
Counterparty netting	(231)		(345)		258		318
Cash collateral (received) paid	(55)		(6)		—		7
Net derivative positions	$	82	$	142	$	(1)	$	(57)

Interest Rate Risk Management

The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows and on the market value of its borrowings. In accordance with its policy, the Company targets its fixed-rate debt as a percentage of its net debt between a minimum and maximum percentage. The Company primarily uses pay-floating and pay-fixed interest rate swaps to facilitate its interest rate risk management activities.

The Company designates pay-floating interest rate swaps as fair value hedges of fixed-rate borrowings effectively converting fixed-rate borrowings to variable rate borrowings indexed to LIBOR. As of October 3, 2020 and September 28, 2019, the total notional amount of the Company’s pay-floating interest rate swaps was $15.8 billion and $9.9 billion, respectively.

The following table summarizes fair value hedge adjustments to hedged borrowings:


	Carrying Amount of Hedged Borrowings(1)				Fair Value Adjustments Included in Hedged Borrowings(1)
	October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019
Borrowings:
Current	$	753	$	1,121	$	4	$	(3)
Long-term	16,229		9,562		505		34
	$	16,982	$	10,683	$	509	$	31

(1)Includes $34 million and $37 million of gains on terminated interest rate swaps as of October 3, 2020 and September 28, 2019, respectively.

The following amounts are included in “Interest expense, net” in the Consolidated Statements of Operations:


	2020		2019		2018
Gain (loss) on:
Pay-floating swaps	$	479	$	337	$	(230)
Borrowings hedged with pay-floating swaps	(479)		(337)		230
Benefit (expense) associated with interest accruals on pay-floating swaps	28		(58)		(15)

The Company may designate pay-fixed interest rate swaps as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed swaps effectively convert floating rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these cash flow hedges are deferred in AOCI and recognized in interest expense as the interest payments occur. The Company did not have pay-fixed interest rate swaps that were designated as cash flow hedges of interest payments at October 3, 2020 or at September 28, 2019, and gains and losses related to pay-fixed swaps recognized in earnings for fiscal 2020, 2019 and 2018 were not material.

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To facilitate its interest rate risk management activities, the Company sold options in November 2016, October 2017 and April 2018 to enter into future pay-floating interest rate swaps indexed to LIBOR for $2.0 billion in future borrowings. The Company repurchased these options in July 2020 for $2 million. The fair values of these contracts were $1 million and $11 million at June 27, 2020 and September 28, 2019, respectively. The options were not designated as hedges and did not qualify for hedge accounting; accordingly, changes in their fair value were recorded in earnings. Gains and losses on the options for fiscal 2020, 2019 and 2018 were not material.

Foreign Exchange Risk Management

The Company transacts business globally and is subject to risks associated with changing foreign currency exchange rates. The Company’s objective is to reduce earnings and cash flow fluctuations associated with foreign currency exchange rate changes, enabling management to focus on core business issues and challenges.

The Company enters into option and forward contracts that change in value as foreign currency exchange rates change to protect the value of its existing foreign currency assets, liabilities, firm commitments and forecasted but not firmly committed foreign currency transactions. In accordance with policy, the Company hedges its forecasted foreign currency transactions for periods generally not to exceed four years within an established minimum and maximum range of annual exposure. The gains and losses on these contracts offset changes in the U.S. dollar equivalent value of the related forecasted transaction, asset, liability or firm commitment. The principal currencies hedged are the euro, Japanese yen, British pound, Chinese yuan and Canadian dollar. Cross-currency swaps are used to effectively convert foreign currency denominated borrowings into U.S. dollar denominated borrowings.

The Company designates foreign exchange forward and option contracts as cash flow hedges of firmly committed and forecasted foreign currency transactions. As of October 3, 2020 and September 28, 2019, the notional amounts of the Company’s net foreign exchange cash flow hedges were $4.6 billion and $6.3 billion, respectively. Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of the foreign currency transactions. Net deferred gains recorded in AOCI for contracts that will mature in the next twelve months total $106 million. The following table summarizes the effect of foreign exchange cash flow hedges on AOCI:


	2020		2019
Gain (loss) recognized in Other Comprehensive Income	$	(63)	$	156
Gain (loss) reclassified from AOCI into the Statement of Operations(1)	269		183

(1)Primarily recorded in revenue.

The Company designates cross currency swaps as fair value hedges of foreign currency denominated borrowings. The impact of the designated exposure is recorded to “Interest Expense, net” to offset the foreign currency impact of the foreign currency denominated borrowing. The non-hedged exposure is recorded to AOCI and is amortized over the life of the cross currency swap. As of October 3, 2020, the total notional amount of the Company’s designated cross currency swaps was Canadian $1.3 billion ($979 million). There were no designated cross currency swaps as of September 28, 2019. Fiscal 2020, gains and losses on cross currency swaps and related hedged items were not material, and there were no gains or losses in fiscal 2019 and 2018.

Foreign exchange risk management contracts with respect to foreign currency denominated assets and liabilities are not designated as hedges and do not qualify for hedge accounting. The notional amounts of these foreign exchange contracts at October 3, 2020 and September 28, 2019 were $3.5 billion and $3.8 billion, respectively. The following table summarizes the net foreign exchange gains or losses recognized on foreign currency denominated assets and liabilities and the net foreign exchange gains or losses on the foreign exchange contracts we entered into to mitigate our exposure with respect to foreign currency denominated assets and liabilities by the corresponding line item in which they are recorded in the Consolidated Statements of Operations:


	Costs and Expenses						Interest expense, net						Income Tax Expense
	2020		2019		2018		2020		2019		2018		2020		2019		2018
Net gains (losses) on foreign currency denominated assets and liabilities	$	10	$	(188)	$	(146)	$	1	$	16	$	39	$	(35)	$	50	$	29
Net gains (losses) on foreign exchange risk management contracts not designated as hedges	(56)		123		104		—		(19)		(46)		33		(51)		(19)
Net gains (losses)	$	(46)	$	(65)	$	(42)	$	1	$	(3)	$	(7)	$	(2)	$	(1)	$	10

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Commodity Price Risk Management

The Company is subject to the volatility of commodities prices, and the Company designates certain commodity forward contracts as cash flow hedges of forecasted commodity purchases. Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of commodity purchases. The notional amount of these commodities contracts at October 3, 2020 and September 28, 2019 and related gains or losses recognized in earnings were not material for fiscal 2020, 2019 and 2018.

Risk Management – Other Derivatives Not Designated as Hedges

The Company enters into certain other risk management contracts that are not designated as hedges and do not qualify for hedge accounting. These contracts, which include certain swap contracts, are intended to offset economic exposures of the Company and are carried at market value with any changes in value recorded in earnings. The notional amount and fair value of these contracts at October 3, 2020 and September 28, 2019 were not material. The related gains or losses recognized in earnings were not material for fiscal 2020, 2019 and 2018.

Contingent Features and Cash Collateral

The Company has master netting arrangements by counterparty with respect to certain derivative financial instrument contracts. The Company may be required to post collateral in the event that a net liability position with a counterparty exceeds limits defined by contract and that vary with the Company’s credit rating. In addition, these contracts may require a counterparty to post collateral to the Company in the event that a net receivable position with a counterparty exceeds limits defined by contract and that vary with the counterparty’s credit rating. If the Company’s or the counterparty’s credit ratings were to fall below investment grade, such counterparties or the Company would also have the right to terminate our derivative contracts, which could lead to a net payment to or from the Company for the aggregate net value by counterparty of our derivative contracts. The aggregate fair values of derivative instruments with credit-risk-related contingent features in a net liability position by counterparty were $53 million and $65 million at October 3, 2020 and September 28, 2019, respectively.

19Restructuring and Impairment Charges

Goodwill and Intangible Asset Impairment

Our International Channels reporting unit, which is part of the Direct-to-Consumer & International segment, comprises the Company’s international television networks. Our international television networks primarily derive revenues from affiliate fees charged to multi-channel video programming distributors (i.e. cable, satellite, telecommunications and digital over-the-top service providers) (MVPDs) for the right to deliver our programming under multi-year licensing agreements and the sales of advertising time/space on the networks. A majority of the operations in this reporting unit were acquired in the TFCF acquisition, and therefore the fair value of these businesses approximated the carrying value at the date of the acquisition of TFCF.

The International Channels business has been negatively impacted by the COVID-19 pandemic resulting in decreased viewership and lower advertising revenue related to the availability of content, including the deferral of certain live sporting events. The Company’s increased focus on DTC distribution in international markets is expected to negatively impact the International Channels business as we shift the primary means of monetizing our film and television content from licensing of linear channels to use on our DTC services because the International Channels reporting unit valuation does not include the value derived from this shift, which is reflected in other reporting units. In addition, the industry shift to DTC, including by us and many of our distributors, who are pursuing their own DTC strategies, has changed the competitive dynamics for the International Channels business and resulted in unfavorable renewal terms for certain of our distribution agreements.

Due to these circumstances, in the third quarter of fiscal 2020, we tested the International Channels’ goodwill and long-lived assets (including intangible assets) for impairment.

The impairment test requires a comparison of cash flows expected to be generated over the useful life of an asset group to the carrying value of the asset group. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets. If the carrying value of an asset group exceeds the estimated undiscounted future cash flows, an impairment is measured as the difference between the fair value of the group’s long-lived assets and the carrying value of the group’s long-lived assets.

We determined the appropriate asset groups for our International Channels to be the regions in which they operate. We estimated the projected undiscounted cash flows over the remaining useful life of an asset group. The more significant inputs used in determining our estimate of the projected undiscounted cash flows included future revenue growth and projected margins as well as the estimate of the remaining useful life of an asset group.

If the carrying value of an asset group exceeded the estimated undiscounted cash flows, the impairment loss is the excess of the carrying value over the fair value. The determination of fair value requires us to make assumptions and estimates about

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how market participants would value the asset groups. The most sensitive factors affecting the fair value of an asset group are the future revenue growth and projected margins for these businesses as well as the discount rates used to calculate the present value of future cash flows.

In the third quarter of fiscal 2020, we recorded a non-cash impairment charge primarily on our MVPD agreement intangible assets of $1.9 billion. As of October 3, 2020, the remaining balance of the International Channels MVPD agreement intangible assets is approximately $3.0 billion.

We tested the International Channels reporting unit goodwill for impairment on an interim basis by comparing the fair value of the International Channels reporting unit to its carrying value. The fair value was determined using a discounted cash flow analysis. The determination of fair value requires us to make assumptions and estimates about how market participants would value the International Channels. The more sensitive inputs used in the discounted cash flow analysis include future revenue growth and projected margins as well as the discount rates used to calculate the present value of future cash flows. Given the ongoing impacts of COVID-19, the projected cash flows and underlying assumptions are subject to greater uncertainty than normal.

In the third quarter of fiscal 2020, the carrying value of the International Channels exceeded the fair value, and we recorded a non-cash impairment charge of $3.1 billion to fully impair the International Channels reporting unit goodwill.

The $1.9 billion impairment of our MVPD relationships and $3.1 billion impairment of goodwill are recorded in “Restructuring and impairment charges” in the Consolidated Statements of Operations.

TFCF Integration

In fiscal 2019, the Company implemented a restructuring and integration plan as a part of its initiative to realize cost synergies from the acquisition of TFCF. The restructuring plan is substantially complete as of the end of fiscal 2020. In connection with this plan, during fiscal 2020, the Company recorded $0.5 billion of restructuring charges, which included $0.4 billion of severance (including employee contract terminations). To date, we have recorded restructuring charges of $1.7 billion, including $1.2 billion related to severance and $0.3 billion of equity based compensation costs, primarily for TFCF awards that were accelerated to vest upon the closing of the TFCF acquisition. These charges are recorded in “Restructuring and impairment charges” in the Consolidated Statements of Operations. With the TFCF integration efforts nearly complete, the Company expects that total severance and other restructuring charges will remain at approximately $1.7 billion.

The changes in restructuring reserves related to the TFCF integration for fiscal 2019 and 2020 are as follows:




Balance at September 29, 2018	$	—
Additions in fiscal 2019:
Media Networks	90
Parks, Experiences and Products	11
Studio Entertainment	197
Direct-to-Consumer & International	426
Corporate	182
Total additions in fiscal 2019	906
Payments in fiscal 2019	(230)
Balance at September 28, 2019	676
Additions in fiscal 2020:
Media Networks	26
Parks, Experiences and Products	9
Studio Entertainment	92
Direct-to-Consumer & International	264
Corporate	62
Total additions in fiscal 2020	453
Payments in fiscal 2020	(772)

Balance at October 3, 2020	$	357

Other

In the fourth quarter of fiscal 2020, the Company approved a workforce reduction plan, primarily at the Parks, Experiences and Products segment, which we expect to be completed by the end of fiscal 2021. The Company recorded

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$287 million of restructuring charges for severance related to this plan in fiscal 2020. These charges are recorded in “Restructuring and impairment charges” in the Consolidated Statements of Operations.

20New Accounting Pronouncements

Accounting Pronouncements Adopted in Fiscal 2020

Leases - See Note 16
Improvements to Accounting for Costs of Films and License Agreements for Program Materials - See Note 8

Facilitation of the Effects of Reference Rate Reform

In March 2020, the FASB issued guidance which provides optional expedients and exceptions for applying current GAAP to contracts, hedging relationships, and other transactions affected by the transition from the use of LIBOR to an alternative reference rate. We are currently evaluating our contracts and hedging relationships that reference LIBOR and the potential effects of adopting this new guidance. The guidance can be adopted immediately and is applicable to contracts entered into on or before December 31, 2022.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued guidance which simplifies the accounting for income taxes. The guidance amends the rules for recognizing deferred taxes for investments, performing intraperiod tax allocations and calculating income taxes in interim periods. It also reduces complexity in certain areas, including the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating taxes to members of a consolidated group. The guidance is effective at the beginning of the Company’s 2022 fiscal year (with early adoption permitted). We currently do not expect the new guidance will have a material impact on our financial statements.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued new accounting guidance which modifies existing guidance related to the measurement of credit losses on financial instruments, including trade and loan receivables. The new guidance requires the allowance for credit losses to be measured based on expected losses over the life of the asset rather than incurred losses. The guidance is effective at the beginning of the Company’s 2021 fiscal year. The adoption will not have a material impact on our financial statements.

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QUARTERLY FINANCIAL SUMMARY

(in millions, except per share data)


(unaudited)	Q1(1)			Q2(1)			Q3(1)			Q4(1)
2020
Revenues	$	20,877		$	18,025		$	11,779		$	14,707
Income (loss) from continuing operations before income taxes	2,626			1,051			(4,840)			(580)
Segment operating income(9)	3,996			2,407			1,099			606
Net income (loss) from continuing operations	2,168			528			(4,509)			(629)
Net income (loss) attributable to Disney	2,107			460			(4,721)			(710)
Loss from discontinued operations, net of tax	(21)			(8)			(3)			—
Earnings (loss) per share:
Diluted - continuing operations	$	1.17	(2)	$	0.26	(3)	$	(2.61)	(5)	$	(0.39)	(7)
Diluted - total	1.16			0.25			(2.61)			(0.39)
Basic - continuing operations	1.18			0.26			(2.61)			(0.39)
Basic - total	1.17			0.25			(2.61)			(0.39)
2019
Revenues	$	15,303		$	14,924		$	20,262		$	19,118
Income from continuing operations before income taxes	3,431			7,236			2,009			1,247
Segment operating income(9)	3,655			3,815			3,952			3,425
Net income from continuing operations	2,786			5,589			1,616			906
Net income attributable to Disney	2,788			5,452			1,760			1,054
Income from discontinued operations, net of tax	—			22			366			299
Earnings per share:
Diluted - continuing operations	$	1.86		$	3.53	(4)	$	0.79	(6)	$	0.43	(8)
Diluted - total	1.86			3.55			0.97			0.58
Basic - continuing operations	1.87			3.55			0.79			0.43
Basic	1.87			3.56			0.98			0.58

(1)On March 20, 2019, the Company began consolidating the results of TFCF and Hulu (see Note 4). As a result, revenues and operating results in fiscal 2020 and the third and fourth quarter of fiscal 2019 reflected the impact of this transaction.

(2)Results included amortization related to TFCF and Hulu intangible assets and fair value step-up on film and television costs (adverse impact of $0.30 on diluted earnings (loss) per share (EPS)) and restructuring and impairment charges (adverse impact of $0.06 on EPS).

(3)Results included amortization related to TFCF and Hulu intangible assets and fair value step-up on film and television costs (adverse impact of $0.27 on EPS) and restructuring and impairment charges (adverse impact of $0.06 on EPS).

(4)Results included the Hulu gain (favorable impact of $2.46 on EPS), restructuring and impairment charges (adverse impact of $0.33 on EPS), an impairment in our investment in Vice (adverse impact of $0.18 on EPS), and amortization related to TFCF and Hulu intangible assets and fair value step-up on film and television costs (adverse impact of $0.05 on EPS).

(5)Results included goodwill and intangible asset impairments at our International Channels business (adverse impact of $2.53 on EPS), amortization related to TFCF and Hulu intangible assets and fair value step-up on film and television costs (adverse impact of $0.28 on EPS), restructuring and impairment charges (adverse impact of $0.04 on EPS), and the DraftKings gain (favorable impact of $0.16 on EPS).

(6)Results included amortization related to TFCF and Hulu intangible assets and fair value step-up on film and television costs (adverse impact of $0.34 on EPS), restructuring and impairment charges (adverse impact of $0.09 on EPS), equity investment impairments (adverse impact of $0.08 on EPS), and an adjustment to the Hulu gain (adverse impact of $0.05 on EPS).

(7)Results included amortization related to TFCF and Hulu intangible assets and fair value step-up on film and television costs (adverse impact of $0.30 on EPS), restructuring and impairment charges (adverse impact of $0.17 on EPS), the DraftKings gain (favorable impact of $0.25 on EPS), and a non-cash gain on the sale of an investment (favorable impact of $0.03 on EPS).

(8)Results included amortization related to TFCF and Hulu intangible assets and fair value step-up on film and television costs (adverse impact of $0.30 on EPS), a charge for the settlement of a portion of the debt originally assumed in the TFCF acquisition (adverse impact of $0.22 on EPS), and restructuring and impairment charges (adverse impact of $0.13), and a gain on the deemed settlement of preexisting relationships with TFCF as part of the accounting for the acquisition (favorable impact of $0.01 on EPS).

(9)Segment operating results reflect earnings before the corporate and unallocated shared expenses, restructuring and impairment charges, other income, net, interest expense, net, income taxes and noncontrolling interests.

Previous: Item 15. Exhibits and Financial Statement Schedules