Item 16. Form 10-K Summary

None.

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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 24, 2021						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 24, 2021
(Robert A. Chapek)
Principal Financial and Accounting Officers
/s/ CHRISTINE M. MCCARTHY						Senior Executive Vice President and Chief Financial Officer						November 24, 2021
(Christine M. McCarthy)
/s/ BRENT A. WOODFORD						Executive Vice President-Controllership, Financial Planning and Tax						November 24, 2021
(Brent A. Woodford)
Directors
/s/ SUSAN E. ARNOLD						Director						November 24, 2021
(Susan E. Arnold)
/s/ MARY T. BARRA						Director						November 24, 2021
(Mary T. Barra)
/s/ SAFRA A. CATZ						Director						November 24, 2021
(Safra A. Catz)
/s/ AMY L. CHANG						Director						November 24, 2021
(Amy L. Chang)
/s/ FRANCIS A. DESOUZA						Director						November 24, 2021
(Francis A. deSouza)
/s/ MICHAEL B.G. FROMAN						Director						November 24, 2021
(Michael B.G. Froman)
/s/ ROBERT A. IGER						Executive Chairman, Chairman of the Board and Director						November 24, 2021
(Robert A. Iger)
/s/ MARIA ELENA LAGOMASINO						Director						November 24, 2021
(Maria Elena Lagomasino)
/s/ CALVIN R. MCDONALD						Director						November 24, 2021
(Calvin R. McDonald)
/s/ MARK G. PARKER						Director						November 24, 2021
(Mark G. Parker)
/s/ DERICA W. RICE						Director						November 24, 2021
(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			64
Report of Independent Registered Public Accounting Firm			65
Consolidated Financial Statements of The Walt Disney Company and Subsidiaries
Consolidated Statements of Operations for the Years Ended October 2, 2021, October 3, 2020 and September 28, 2019			67
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended October 2, 2021, October 3, 2020 and September 28, 2019			68
Consolidated Balance Sheets as of October 2, 2021 and October 3, 2020			69
Consolidated Statements of Cash Flows for the Years Ended October 2, 2021, October 3, 2020 and September 28, 2019			70
Consolidated Statements of Shareholders’ Equity for the Years Ended October 2, 2021, October 3, 2020 and September 28, 2019			71
Notes to Consolidated Financial Statements			72

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 2, 2021.

The effectiveness of our internal control over financial reporting as of October 2, 2021 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 2, 2021 and October 3, 2020, 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 2, 2021, 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 2, 2021, 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 2, 2021 and October 3, 2020, and the results of its operations and its cash flows for each of the three years in the period ended October 2, 2021 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 2, 2021, 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 matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Amortization of Production Costs

As described in Note 2 and 8 to the consolidated financial statements and disclosed by management, capitalized film and television production costs are amortized based on whether the content is predominantly monetized individually or as a group. Production costs for content that is predominantly monetized individually is 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 imputed license fees for content that is used by the Company’s DTC streaming services, 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, including imputed license fees for content that is used on the Company’s DTC streaming services, from delivery of the first episode, or if still in production, five years from delivery of the most recent episode, if later. 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. For the year ended October 2, 2021, the Company recognized $8,175 million of amortization of produced content costs, 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 production costs is a critical audit matter are the significant auditor effort in performing procedures and evaluating audit evidence used in the amortization calculation for production costs monetized individually and as a group, and management’s estimates of Ultimate Revenues and projected usage.

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 amortization of production costs, including controls over the estimation of Ultimate Revenues and projected usage. These procedures also included, among others, (i) testing management’s process for determining the amortization of production costs, (ii) evaluating whether ultimate revenues for certain content titles were reasonable considering information such as past performance of comparable titles, future firm commitments to license programs, and current market trends, (iii) evaluating the accelerated amortization pattern for content predominately monetized as a group, and (iv) testing the completeness and accuracy of the underlying data used in the amortization calculation for certain titles and for historical viewership data used to calculate the estimate of projected usage for certain groups.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

November 24, 2021

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

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CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

			2021						2020						2019
Revenues:
Services			$	61,768					$	59,265					$	60,579
Products			5,650						6,123						9,028
Total revenues			67,418						65,388						69,607
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)			(41,129)						(39,406)						(36,493)
Cost of products (exclusive of depreciation and amortization)			(4,002)						(4,474)						(5,568)
Selling, general, administrative and other			(13,517)						(12,369)						(11,549)
Depreciation and amortization			(5,111)						(5,345)						(4,167)
Total costs and expenses			(63,759)						(61,594)						(57,777)
Restructuring and impairment charges			(654)						(5,735)						(1,183)
Other income, net			201						1,038						4,357
Interest expense, net			(1,406)						(1,491)						(978)
Equity in the income (loss) of investees			761						651						(103)
Income (loss) from continuing operations before income taxes			2,561						(1,743)						13,923
Income taxes on continuing operations			(25)						(699)						(3,026)
Net income (loss) from continuing operations			2,536						(2,442)						10,897
Income (loss) from discontinued operations, net of income tax benefit (expense) of $9, $10 and ($39), respectively			(29)						(32)						687
Net income (loss)			2,507						(2,474)						11,584
Net income from continuing operations attributable to noncontrolling and redeemable noncontrolling interests			(512)						(390)						(472)
Net income from discontinued operations attributable to noncontrolling interests			—						—						(58)
Net income (loss) attributable to The Walt Disney Company (Disney)			$	1,995					$	(2,864)					$	11,054
Earnings (loss) per share attributable to Disney(1):
Diluted
Continuing operations			$	1.11					$	(1.57)					$	6.26
Discontinued operations			(0.02)						(0.02)						0.38
			$	1.09					$	(1.58)					$	6.64
Basic
Continuing operations			$	1.11					$	(1.57)					$	6.30
Discontinued operations			(0.02)						(0.02)						0.38
			$	1.10					$	(1.58)					$	6.68
Weighted average number of common and common equivalent shares outstanding:
Diluted			1,828						1,808						1,666
Basic			1,816						1,808						1,656

(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)

			2021						2020						2019
Net income (loss)			$	2,507					$	(2,474)					$	11,584
Other comprehensive income (loss), net of tax:
Market value adjustments, primarily for hedges			41						(251)						(37)
Pension and postretirement medical plan adjustments			1,850						(1,476)						(2,446)
Foreign currency translation and other			77						115						(396)
Other comprehensive income (loss)			1,968						(1,612)						(2,879)
Comprehensive income (loss)			4,475						(4,086)						8,705
Net income from continuing operations attributable to noncontrolling interests			(512)						(390)						(530)
Other comprehensive income (loss) attributable to noncontrolling interests			(86)						(93)						65
Comprehensive income (loss) attributable to Disney			$	3,877					$	(4,569)					$	8,240

See Notes to Consolidated Financial Statements

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CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

			October 2, 2021						October 3, 2020
ASSETS
Current assets
Cash and cash equivalents			$	15,959					$	17,914
Receivables, net			13,367						12,708
Inventories			1,331						1,583
Content advances			2,183						2,171
Other current assets			817						875
Total current assets			33,657						35,251
Produced and licensed content costs			29,549						25,022
Investments			3,935						3,903
Parks, resorts and other property
Attractions, buildings and equipment			64,892						62,111
Accumulated depreciation			(37,920)						(35,517)
			26,972						26,594
Projects in progress			4,521						4,449
Land			1,131						1,035
			32,624						32,078
Intangible assets, net			17,115						19,173
Goodwill			78,071						77,689
Other assets			8,658						8,433
Total assets			$	203,609					$	201,549
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities			$	20,894					$	16,801
Current portion of borrowings			5,866						5,711
Deferred revenue and other			4,317						4,116
Total current liabilities			31,077						26,628
Borrowings			48,540						52,917
Deferred income taxes			7,246						7,288
Other long-term liabilities			14,522						17,204
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests			9,213						9,249
Equity
Preferred stock			—						—
Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.8 billion shares			55,471						54,497
Retained earnings			40,429						38,315
Accumulated other comprehensive loss			(6,440)						(8,322)
Treasury stock, at cost, 19 million shares			(907)						(907)
Total Disney Shareholders’ equity			88,553						83,583
Noncontrolling interests			4,458						4,680
Total equity			93,011						88,263
Total liabilities and equity			$	203,609					$	201,549

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

			2021						2020						2019
OPERATING ACTIVITIES
Net income (loss) from continuing operations			$	2,536					$	(2,442)					$	10,897
Depreciation and amortization			5,111						5,345						4,167
Goodwill and intangible asset impairments			—						4,953						—
Net gain on investments, acquisitions and dispositions			(332)						(920)						(4,733)
Deferred income taxes			(1,241)						(392)						117
Equity in the (income) loss of investees			(761)						(651)						103
Cash distributions received from equity investees			754						774						754
Net change in produced and licensed content costs and advances			(4,301)						397						(542)
Net change in operating lease right of use assets / liabilities			46						31						—
Equity-based compensation			600						525						711
Pension and postretirement medical amortization			816						547						278
Other, net			144						94						(124)
Changes in operating assets and liabilities, net of business acquisitions:
Receivables			(357)						1,943						55
Inventories			252						14						(223)
Other assets			171						(157)						932
Accounts payable and other liabilities			2,410						(2,293)						191
Income taxes			(282)						(152)						(6,599)
Cash provided by operations - continuing operations			5,566						7,616						5,984
INVESTING ACTIVITIES
Investments in parks, resorts and other property			(3,578)						(4,022)						(4,876)
Acquisitions			—						—						(9,901)
Other			407						172						(319)
Cash used in investing activities - continuing operations			(3,171)						(3,850)						(15,096)
FINANCING ACTIVITIES
Commercial paper borrowings (payments), net			(26)						(3,354)						4,318
Borrowings			64						18,120						38,240
Reduction of borrowings			(3,737)						(3,533)						(38,881)
Dividends			—						(1,587)						(2,895)
Proceeds from exercise of stock options			435						305						318
Contributions from / sales of noncontrolling interests			91						94						737
Acquisition of noncontrolling and redeemable noncontrolling interests			(350)						—						(1,430)
Other			(862)						(1,565)						(871)
Cash provided by (used in) financing activities - continuing operations			(4,385)						8,480						(464)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash provided by operations - discontinued operations			1						2						622
Cash provided by investing activities - discontinued operations			8						213						10,978
Cash used in financing activities - discontinued operations			—						—						(626)
Cash provided by discontinued operations			9						215						10,974
Impact of exchange rates on cash, cash equivalents and restricted cash			30						38						(98)
Change in cash, cash equivalents and restricted cash			(1,951)						12,499						1,300
Cash, cash equivalents and restricted cash, beginning of year			17,954						5,455						4,155
Cash, cash equivalents and restricted cash, end of year			$	16,003					$	17,954					$	5,455
Supplemental disclosure of cash flow information:
Interest paid			$	1,892					$	1,559					$	1,142
Income taxes paid			$	1,638					$	738					$	9,259

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 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						—						—						(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
Comprehensive income (loss)						—						—						1,995						1,882						—						3,877						284						4,161
Equity compensation activity						8						904						—						—						—						904						—						904
Contributions						—						—						—						—						—						—						89						89
Cumulative effect of accounting change						—						—						109						—						—						109						—						109
Distributions and other						—						70						10						—						—						80						(595)						(515)
Balance at October 2, 2021						1,818						$	55,471					$	40,429					$	(6,440)					$	(907)					$	88,553					$	4,458					$	93,011

(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 Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP) segments (see additional information below on the recast of fiscal 2020 and 2019 segment information as a result of the media and entertainment reorganization). 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). As a result of the acquisition, the Company’s ownership in Hulu LLC (Hulu) increased from 30% to 60% (currently 67%). The acquired TFCF operations and Hulu have been consolidated since the acquisition (See Note 4).

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

Since early 2020, the world has been, and continues to be, impacted by the novel coronavirus (COVID-19) and its variants. COVID-19 and measures to prevent its spread has impacted our segments in a number of ways, most significantly at the DPEP segment where our theme parks were closed and cruise ship sailings and guided tours were suspended. These operations resumed, generally at reduced capacity, at various points since May 2020. We have delayed, or in some cases, shortened or cancelled theatrical releases, and stage play performances were suspended as of March 2020. Stage play operations resumed, generally at reduced capacity, in the first quarter of fiscal 2021. Theaters have been subject to capacity limitations and shifting government mandates or guidance regarding COVID-19. We experienced significant disruptions in the production and availability of content, including the delay of key live sports programming during fiscal 2020 and fiscal 2021, as well as the suspension of most film and television production in March 2020. Although film and television production generally resumed beginning in the fourth quarter of 2020, we continue to see disruption of production activities depending on local circumstances. Fewer theatrical releases and production delays have limited the availability of film content to be sold in distribution windows subsequent to the theatrical release.

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 its variants, 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. We have incurred and will continue to incur additional costs to address government regulations and the safety of our employees, guests and talent.

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).

DESCRIPTION OF THE BUSINESS

Disney Media and Entertainment Distribution

The DMED segment encompasses the Company’s global film and episodic television content production and distribution

activities. Content is distributed by a single organization across three significant lines of business: Linear Networks, Direct-to-Consumer and Content Sales/Licensing and is generally created by three production/content licensing groups: Studios, General Entertainment and Sports. The distribution organization has full accountability for the financial results of the entire media and entertainment business.

The operations of DMED’s significant lines of business are as follows:

• Linear Networks

◦Domestic Channels: ABC Television Network and eight owned ABC television stations (Broadcasting), and Disney, ESPN (80% interest), Freeform, FX and National Geographic (73% interest) branded domestic television networks (Cable)

◦International Channels: Disney, ESPN, Fox, National Geographic and Star branded television networks outside the U.S.

◦A 50% equity investment in A+E Television Networks (A+E), which operates a variety of cable channels including A&E, HISTORY and Lifetime

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• Direct-to-Consumer

◦Disney+, Disney+ Hotstar, ESPN+ (68% effective interest), Hulu and Star+ direct-to-consumer (DTC) streaming services

• Content Sales/Licensing

◦Sale of film and television content to third-party television and subscription video-on-demand (TV/SVOD) services

◦Theatrical distribution

◦Home entertainment distribution (DVD, Blu-ray discs and electronic home video licenses)

◦Music distribution

◦Staging and licensing of live entertainment events on Broadway and around the world (Stage Plays)

DMED also includes the following activities that are reported with Content Sales/Licensing:

• Post-production services by Industrial Light & Magic and Skywalker Sound

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

The significant revenues of DMED are as follows:

• Affiliate fees - Fees charged by our Linear Networks to multi-channel video programming distributors (i.e. cable, satellite, telecommunications and digital over-the-top (e.g. YouTube TV) service providers) (MVPDs) and 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 Linear Networks and Direct-to-Consumer

• Subscription fees - Fees charged to customers/subscribers for our DTC streaming services

• TV/SVOD distribution - Licensing fees and other revenue for the right to use our film and television productions and revenue from fees charged to customers to view our sports programming (“pay-per-view”) and streaming access to films that are also playing in theaters (“Premier Access”). TV/SVOD distribution revenue is primarily reported in Content Sales/Licensing, except for pay-per-view and Premier Access revenue, which is reported in Direct-to-Consumer

• Theatrical distribution - Rentals from licensing our film productions to theaters

• Home entertainment - Sale of our film and television content to retailers and distributors in home video formats

• Other content sales/licensing revenue - Revenues from licensing our music, ticket sales from stage play performances and fees from licensing our intellectual properties (“IP”) for use in stage plays

• Other revenue - Fees from sub-licensing of sports programming rights (reported in Linear Networks) and post-production services (reported with Content Sales/Licensing)

The significant expenses of DMED are as follows:

• Operating expenses consist primarily of programming and production costs, technical support costs, operating labor, distribution costs and costs of sales. Programming and production costs include amortization of acquired licensed programming rights (including sports rights), amortization of capitalized production costs (including participations and residuals) and production costs related to live programming such as news and sports. Programming and production costs are generally allocated across the DMED businesses based on the estimated relative value of the distribution windows. These costs are largely incurred across three content creation groups, as follows:

◦Studios - Primarily capitalized production costs related to feature films produced under the Walt Disney Pictures, Twentieth Century Studios, Marvel, Lucasfilm, Pixar and Searchlight Pictures banners

◦General Entertainment - Primarily acquisition of rights to and internal production of episodic television programs and news content. Internal content is generally produced by the following television studios: ABC Signature; 20th Television; Disney Television Animation, FX Productions and various studios for which we commission productions for our branded channels and DTC streaming services

◦Sports - Primarily acquisition of professional and college sports programming rights and related production costs

• Selling, general and administrative costs

• Depreciation and amortization

Disney Parks, Experiences and Products

The operations of DPEP’s significant lines of business are as follows:

• 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 IP to a third party to operate Tokyo Disney Resort

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◦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 IP 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 DMED)

The significant revenues of DPEP are as follows:

• 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

• Merchandise licensing and retail:

◦Merchandise licensing - Royalties from licensing our IP for use on consumer goods

◦Retail - Sales of merchandise at The Disney Store and through internet shopping sites generally branded shopDisney, 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

The significant expenses of DPEP are as follows:

• Operating expenses consist 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

SEGMENT INFORMATION

Our operating segments report separate financial information, which is evaluated regularly by the Chief Executive Officer in order to decide how to allocate resources and to assess performance.

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 acquisition accounting amortization of TFCF Corporation (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 in fiscal 2019 (TFCF and Hulu acquisition amortization). 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.

In fiscal 2021, we changed the presentation of segment operating results as discussed below and have recast our fiscal 2020 and fiscal 2019 segment operating results to align with the fiscal 2021 presentation.

Media and Entertainment Reorganization

In October 2020, the Company reorganized its media and entertainment operations, which had been previously reported in three segments: Media Networks, Studio Entertainment and Direct-to-Consumer & International. As a result of the reorganization, the operations of the media and entertainment businesses are reported as one segment, DMED.

Intersegment Transfer Pricing

Under our previous segment structure, in certain instances production and distribution activities were in different segments. In these situations, for segment financial accounting purposes, the producer segment would recognize revenue based on an intersegment transfer price that included a “mark-up”. These transactions were reported “gross” (i.e. the segment producing the content reported revenue and the mark-up from intersegment transactions, and the required eliminations were reported on a separate “Eliminations” line when presenting a summary of our segment results). Under our new segment structure, the operating results of the production and distribution activities are reported in the same segment, and the fully loaded production cost is allocated across the distribution platforms which are utilizing the content.

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Elimination of Consumer Products Revenue Share

Under our legacy segment financial reporting, the Studio Entertainment segment received a revenue share related to the consumer products business, which is included in the DPEP segment. Under the new reporting structure, DMED does not receive a revenue share from DPEP related to the consumer products business.

Segment revenues and segment operating income are as follows:

			2021						2020						2019
Revenues
Disney Media and Entertainment Distribution			$	50,866					$	48,350					$	42,821
Disney Parks, Experiences and Products			16,552						17,038						26,786
Total consolidated revenues			$	67,418					$	65,388					$	69,607
Segment operating income
Disney Media and Entertainment Distribution			$	7,295					$	7,653					$	7,528
Disney Parks, Experiences and Products			471						455						7,319
Total segment operating income(1)			$	7,766					$	8,108					$	14,847

(1)Equity in the income (loss) of investees is included in segment operating income as follows:

			2021						2020						2019
Disney Media and Entertainment Distribution			$	795					$	696					$	463
Disney Parks, Experiences and Products			(19)						(19)						(13)
Equity in the income of investees included in segment operating income			776						677						450
Impairment of equity investments			—						—						(538)
Amortization of TFCF intangible assets related to equity investees			(15)						(26)						(15)
Equity in the income (loss) of investees			$	761					$	651					$	(103)

A reconciliation of segment operating income to income from continuing operations before income taxes is as follows:

			2021						2020						2019
Segment operating income			$	7,766					$	8,108					$	14,847
Corporate and unallocated shared expenses			(928)						(817)						(987)
Restructuring and impairment charges			(654)						(5,735)						(1,183)
Other income, net			201						1,038						4,357
Interest expense, net			(1,406)						(1,491)						(978)
TFCF and Hulu acquisition amortization(1)			(2,418)						(2,846)						(1,595)
Impairment of equity investments(2)			—						—						(538)
Income (loss) from continuing operations before income taxes			$	2,561					$	(1,743)					$	13,923

(1)For fiscal 2021, amortization of intangible assets, fair value step-up on film and television costs and intangibles related to TFCF equity investees were $1,757 million, $646 million and $15 million, respectively. 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.

(2)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).

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Capital expenditures, depreciation expense and amortization expense are as follows:

Capital expenditures			2021						2020						2019
Disney Media and Entertainment Distribution			$	862					$	783					$	520
Disney Parks, Experiences and Products
Domestic			1,597						2,145						3,294
International			675						759						852
Corporate			444						335						210
Total capital expenditures			$	3,578					$	4,022					$	4,876
Depreciation expense
Disney Media and Entertainment Distribution			$	613					$	638					$	479
Disney Parks, Experiences and Products
Domestic			1,551						1,634						1,474
International			718						694						724
Amounts included in segment operating income			2,269						2,328						2,198
Corporate			186						174						167
Total depreciation expense			$	3,068					$	3,140					$	2,844
Amortization of intangible assets
Disney Media and Entertainment Distribution			$	178					$	175					$	172
Disney Parks, Experiences and Products			108						109						108
Amounts included in segment operating income			286						284						280
TFCF and Hulu			1,757						1,921						1,043
Total amortization of intangible assets			$	2,043					$	2,205					$	1,323

Identifiable assets(1) are as follows:

			October 2, 2021						October 3, 2020
Disney Media and Entertainment Distribution			$	144,675					$	139,538
Disney Parks, Experiences and Products			41,763						42,320
Corporate(2)			17,171						19,691
Total consolidated assets			$	203,609					201,549

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

			October 2, 2021						October 3, 2020
Disney Media and Entertainment Distribution			$	2,578					$	2,574
Disney Parks, Experiences and Products			2						3
Corporate			58						55
			$	2,638					$	2,632

Intangible assets, which include character/franchise intangibles, copyrights, trademarks, MVPD agreements and FCC licenses (see Note 14), included in identifiable assets by segment are as follows:

			October 2, 2021						October 3, 2020
Disney Media and Entertainment Distribution			$	14,143					$	16,087
Disney Parks, Experiences and Products			2,952						3,066
Corporate			20						20
			$	17,115					$	19,173

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

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

			2021						2020						2019
Revenues
Americas			$	54,157					$	51,992					$	53,805
Europe			6,690						7,333						8,006
Asia Pacific			6,571						6,063						7,796
			$	67,418					$	65,388					$	69,607
Segment operating income
Americas			$	6,314					$	5,819					$	10,247
Europe			800						1,273						2,433
Asia Pacific			652						1,016						2,167
			$	7,766					$	8,108					$	14,847

Long-lived assets(1) by geographical markets are as follows:

			October 2, 2021						October 3, 2020
Americas			$	144,788					$	141,674
Europe			8,215						7,672
Asia Pacific			12,012						12,235
			$	165,015					$	161,581

(1)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 2021 and 2019 were fifty-two week years. Fiscal 2020 was 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 2020 and fiscal 2019 financial statements and notes to conform to the fiscal 2021 presentation.

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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.

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

• Royalties from licensing our IP for use on consumer goods, published materials and in multi-platform games

Significant operating costs related to the sale of services include:

• Programming and production 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

• Programming and production 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 and recorded a net reduction of $116 million to opening fiscal 2019 retained earnings.

The Company’s revenue recognition policies are as follows:

• Affiliate fees 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 are recognized ratably over the term of the subscription.

• Advertising sales 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

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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 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 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.

• Merchandise, food and beverage sales 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 fixed license fees 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 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 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 in physical formats 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 collected from customers and remitted to governmental authorities are excluded from revenue.

• Shipping and handling fees collected from customers 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 Credit Losses

We evaluate our allowance for credit losses and estimate collectability of current and non-current accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions and reasonable supportable forecasts of future economic conditions.

Advertising Expense

Advertising costs are expensed as incurred. Advertising expense for fiscal 2021, 2020 and 2019 was $5.5 billion, $4.7 billion and $4.3 billion, respectively. The increase in advertising expense for fiscal 2021 compared to fiscal 2020 was due to higher spend for our DTC streaming services. 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 for our theatrical, home entertainment and parks and experiences businesses.

Cash and Cash Equivalents

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

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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.

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 Statements of Cash Flows.

						October 2, 2021						October 3, 2020						September 28, 2019
Cash and cash equivalents						$	15,959					$	17,914					5,418
Restricted cash included in:
Other current assets						3						3						26
Other assets						41						37						11
Total cash, cash equivalents and restricted cash in the statement of cash flows						$	16,003					$	17,954					$	5,455

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 and DTC streaming services. Generally, the local currency is the functional currency for the Asia Theme Parks, Disneyland Paris, the Star branded channels in India, international sports channels and international locations of The Disney Store.

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, on a prospective basis, new 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 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.

Capitalized content cost, whether produced or acquired/licensed rights are recognized as “Produced and licensed content costs” in the Consolidated Balance Sheet. Advances for live programming rights made prior to the live event are reported in “Content advances” in the Consolidated Balance Sheet. The new guidance introduced 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).

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• 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 license fees that may be necessary for other purposes and are established as required by those purposes.

We generally classify content that is initially intended for use on our DTC streaming services or Linear 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 was 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). When there is a significant change in monetization strategy, the title’s capitalized content costs are tested for impairment.

Production costs for content that is predominantly monetized individually is 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 imputed license fees for content that is used on our DTC streaming services, 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, including imputed license fees for content that is used on our DTC streaming services, 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 DTC streaming 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 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.

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 2, 2021 and October 3, 2020, capitalized software costs, net of accumulated depreciation, totaled $1,186 million and $778 million, respectively. The capitalized costs are amortized on a straight-line basis over the estimated useful life of the software up to 7 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 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. We adopted the new guidance using the modified retrospective method at the beginning of fiscal year 2020, 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.

We determine whether a contract is a lease at contract inception or for a modified contract at the modification date. At inception or modification, the Company calculates the present value of operating lease payments 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. 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.

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. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.

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 the consideration of factors such as 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 2021, the Company bypassed the qualitative test and performed a quantitative 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 apply what we believe to be the most appropriate valuation methodology for each of our reporting units. We generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. 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. We believe our estimates are consistent with how a marketplace participant would value our reporting units. 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.

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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 value of an indefinite-lived intangible asset to its carrying amount. 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, which are our most significant indefinite-lived intangible assets.

Finite-lived 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.

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 Company’s 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 the estimated undiscounted future cash flows expected to be generated over the relevant useful life of an asset group to the carrying amount of the asset group. An asset group is generally 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. 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 $0.3 billion, $5.2 billion, and $0.6 billion in fiscal 2021, 2020 and 2019, respectively.

The fiscal 2021 charges primarily related to the closure of an animation studio and a substantial number of our Disney-branded retail stores in North America and Europe.

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 of these impairment charges.

The fiscal 2019 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 finite-lived intangible assets for fiscal 2022 through 2026 to be as follows:

2022			$	2,005
2023			1,806
2024			1,567
2025			1,469
2026			976

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.

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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 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 the rights to require the Company to purchase their interests in these subsidiaries. The most significant of these are Hulu and BAMTech LLC (BAMTech).

Hulu provides DTC streaming services and is owned 67% by the Company and 33% by NBCU. In May 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, at a redemption value based on NBCU’s equity ownership percentage of the greater of Hulu’s then equity fair value or a guaranteed floor value of $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 2, 2021, NBCU’s interest in Hulu is recorded in the Company’s financial statements at $8.4 billion.

BAMTech provides streaming technology services to third parties and is owned 85% by the Company and 15% by the MLB. Prior to September 2021, BAMTech was owned 75% by the Company, 15% by MLB and 10% by the NHL. The NHL interest included a right to require the Company to purchase the NHL interest for $350 million in 2021. In August 2021, the NHL exercised its right and the Company purchased the NHL interest for $350 million in September 2021.

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 a redemption value equal to 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 MLB interest is required to be carried at a minimum value equal to its acquisition date fair value accreted to its estimated redemption value through the applicable redemption date. Therefore, the MLB interest is generally not allocated its portion of BAMTech losses. As of October 2, 2021, the MLB interest was recorded in the Company’s financial statements at $820 million.

Our estimate of the redemption value of noncontrolling interests requires management to make significant judgments with respect to the future value of the noncontrolling interests. We are accreting the noncontrolling interests of both BAMTech and Hulu to their guaranteed floor values. If our estimate of the future redemption value increased above either of the guaranteed floor values, we would change our rate of accretion, which would generally increase earnings recorded in “Net income from continuing operations attributable to noncontrolling interests and redeemable noncontrolling interests” and thus reduce “Net income (loss) attributable to The Walt Disney Company (Disney)” on the Consolidated Statements of Operations.

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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.

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:

			2021						2020						2019
Weighted average number of common and common equivalent shares outstanding (basic)			1,816						1,808						1,656
Weighted average dilutive impact of Awards(1)			12						—						10
Weighted average number of common and common equivalent shares outstanding (diluted)			1,828						1,808						1,666
Awards excluded from diluted earnings per share			4						35						7

(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:

			2021																		2020																		2019
			DMED						DPEP						Total						DMED						DPEP						Total						DMED						DPEP						Total
Affiliate fees			$	17,760					$	—					$	17,760					$	17,929					$	—					$	17,929					$	15,948					$	—					$	15,948
Advertising			12,425						4						12,429						10,851						4						10,855						10,507						6						10,513
Subscription fees			12,020						—						12,020						7,645						—						7,645						2,115						—						2,115
Theme park admissions			—						3,848						3,848						—						4,038						4,038						—						7,540						7,540
Resort and vacations			—						2,701						2,701						—						3,402						3,402						—						6,266						6,266
Retail and wholesale sales of merchandise, food and beverage			—						4,957						4,957						—						4,952						4,952						—						7,716						7,716
TV/SVOD distribution licensing			5,266						—						5,266						6,253						—						6,253						5,555						—						5,555
Theatrical distribution licensing			920						—						920						2,134						—						2,134						4,726						—						4,726
Merchandise licensing			12						3,586						3,598						32						3,210						3,242						51						3,329						3,380
Home entertainment			1,014						—						1,014						1,802						—						1,802						1,961						—						1,961
Other			1,449						1,456						2,905						1,704						1,432						3,136						1,958						1,929						3,887
Total revenues			$	50,866					$	16,552					$	67,418					$	48,350					$	17,038					$	65,388					$	42,821					$	26,786					$	69,607

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

			2021																		2020																		2019
			DMED						DPEP						Total						DMED						DPEP						Total						DMED						DPEP						Total
Americas			$	41,754					$	12,403					$	54,157					$	39,163					$	12,829					$	51,992					$	33,602					$	20,203					$	53,805
Europe			5,022						1,668						6,690						5,240						2,093						7,333						4,762						3,244						8,006
Asia Pacific			4,090						2,481						6,571						3,947						2,116						6,063						4,457						3,339						7,796
Total revenues			$	50,866					$	16,552					$	67,418					$	48,350					$	17,038					$	65,388					$	42,821					$	26,786					$	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 licensee sales on titles made available to the licensee in previous reporting periods. For fiscal 2021, $1.3 billion was recognized related to performance obligations satisfied prior to October 3, 2020. For fiscal 2020, $1.4 billion was recognized related to performance obligations satisfied prior to September 30, 2019. For fiscal 2019, $1.2 billion was recognized related to performance obligations satisfied prior to September 30, 2018.

As of October 2, 2021, revenue for unsatisfied performance obligations expected to be recognized in the future is $14 billion, which primarily relates to content to be delivered in the future under existing agreements with television station

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affiliates and TV/SVOD licensees. Of this amount, we expect to recognize approximately $6 billion in fiscal 2022, $4 billion in fiscal 2023, $2 billion in fiscal 2024 and $2 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.

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 2, 2021						October 3, 2020
Contract assets			$	155					$	70
Accounts Receivable
Current			11,190						11,340
Non-current			1,359						1,789
Allowance for credit losses			(194)						(460)
Deferred revenues
Current			4,067						3,688
Non-current			581						513

Contract assets primarily relate to certain multi-season TV/SVOD licensing contracts. Activity for fiscal 2021 and 2020 related to contract assets was not material. The allowance for credit losses decreased from $460 million at October 3, 2020 to $194 million at October 2, 2021 primarily due to the adoption of new accounting guidance on the measurement of credit losses (see Note 20).

For fiscal 2021, the Company recognized revenues of $2.9 billion, primarily related to content sales, including subscription revenue, and licensing advances included in the deferred revenue balance at October 3, 2020. For fiscal 2020, the Company recognized revenues of $3.4 billion primarily related to theme park admissions and vacation packages and licensing and publishing advances 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 29, 2018.

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 contract inception, and the related revenues are recognized at the discounted amount.

The balance of film and television program sales receivables recorded in other non-current assets, net of an allowance for credit losses that is not material, was $0.8 billion as of October 2, 2021. The activity in the allowance for credit loss for fiscal 2021 was not material.

The balance of mortgage receivables recorded in other non-current assets, net of an allowance for credit loss that is not material, was $0.6 billion as of October 2, 2021. The activity in the allowance for credit loss for fiscal 2021 was not material.

4.Acquisitions

TFCF Corporation

On March 20, 2019, the Company acquired the outstanding capital stock of TFCF for $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). Prior to the acquisition, TFCF and a newly-formed subsidiary of TFCF (New Fox) entered into a separation agreement,

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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. 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.

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.

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

In 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 Consolidated Statements of Operations.

In fiscal 2019, the Company remeasured its initial 30% interest in Hulu to its estimated fair value and recorded a one-time gain of $4.8 billion (Hulu Gain), which was determined based on a discounted cash flow analysis. On April 15, 2019, Hulu redeemed Warner Media LLC’s (WM) 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 in the Consolidated Balance Sheets. See Note 2 for further discussion of NBCU’s interest.

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 received regulatory approval to retain the sports media operation in Brazil. In May 2021, the Company entered into an agreement to sell the Fox sports media business in Mexico for an amount that is not material. The transaction received regulatory approval and closed in November 2021. The RSNs and sports media operation in Mexico, along with certain other divested businesses, are presented as discontinued operations in the Consolidated Statements of Operations. At October 2, 2021 and October 3, 2020, 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 following pro forma summary presents consolidated information of the Company for fiscal 2019 as if the acquisition of TFCF and consolidation of Hulu had occurred on October 1, 2017:

Revenues			$	78,047
Net income			7,511
Net income attributable to Disney			7,206
Earnings per share attributable to Disney:
Diluted			$	3.68
Basic			3.70

The 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). The pro forma results include $3.1 billion (of which $0.4 billion related to the RSNs) 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 is included to reflect the cost of borrowings to finance the TFCF acquisition. The pro forma results also include $0.9 billion of net income attributable to Disney related to TFCF businesses that have been divested.

The pro forma results exclude 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.

The pro forma results exclude a $10.8 billion gain on the sale of TFCF’s 39% interest in Sky plc in October 2018.

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The 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						DPEP						Studio Entertainment						Direct-to-Consumer & International						DMED						Total
Balance at Sept. 28, 2019			$	33,423					$	5,535					$	17,797					$	23,538					$	—					$	80,293
Acquisitions(1)			568						15						98						51						—						732
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
Segment recast(2)			(33,991)						—						(17,795)						(20,353)						72,139						—
Currency translation adjustments and other, net			—						—						—						—						382						382
Balance at Oct. 2, 2021			$	—					$	5,550					$	—					$	—					$	72,521					$	78,071

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

(2)Reflects the reallocation of goodwill as a result of the Company recasting its segments.

5Other Income, Net

Other income, net is as follows:

			2021						2020						2019
DraftKings gain (loss)			$	(111)					$	973					$	—
fuboTV gain			186						—						—
German FTA gain			126						—						—
Endemol Shine gain			—						65						—
Hulu gain (see Note 4)			—						—						4,794
Insurance recoveries related to legal matters			—						—						46
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
Other income, net			$	201					$	1,038					$	4,357

In fiscal 2021, the Company recognized a non-cash loss of $111 million from the adjustment of its investment in DraftKings, Inc. (DraftKings) to fair value (DraftKings gain (loss)). In fiscal 2020, the Company recognized a $973 million DraftKings gain.

In fiscal 2021, the Company recognized a $186 million gain from the sale of our investment in fuboTV Inc. (fuboTV gain) and a $126 million gain on the sale of its 50% interest in a German free-to-air (FTA) television network (German FTA gain).

In fiscal 2020, the Company recognized a $65 million gain on the sale of its 50% interest in Endemol Shine Group (Endemol Shine gain).

6Investments

Investments consist of the following:

			October 2, 2021						October 3, 2020
Investments, equity basis			$	2,638					$	2,632
Investments, other			1,297						1,271
			$	3,935					$	3,903

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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) and Tata Sky Limited (30% ownership). As of October 2, 2021, 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 $0.8 billion, which represents amortizable intangible assets and goodwill arising from acquisitions.

As of October 2, 2021 and October 3, 2020, the Company had securities recorded at fair value of $1.0 billion and $1.1 billion, respectively. As of October 2, 2021 and October 3, 2020, the Company had securities recorded at book value related to non-publicly traded securities without a readily determinable fair value of $0.3 billion and $0.2 billion, respectively.

Gains, losses and impairments on securities are generally recorded in “Interest expense, net” in the Consolidated Statements of Operations. See Note 5 for fiscal 2021 realized gains and unrealized losses on securities and fiscal 2020 unrealized gains recorded in “Other income, net” in the Consolidated Statements of Operations. Fiscal 2021 and fiscal 2020 impairments on securities and fiscal 2020 realized gains were not material. In fiscal 2019, realized gains, unrealized gains and losses and impairments on securities were not material.

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 together with Disneyland Paris are collectively referred to as the International Theme Parks.

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

			October 2, 2021						October 3, 2020
Cash and cash equivalents			$	287					$	372
Other current assets			95						91
Total current assets			382						463
Parks, resorts and other property			6,928						6,720
Other assets			176						191
Total assets			$	7,486					$	7,374
Current liabilities			$	473					$	486
Borrowings - long-term			1,331						1,213
Other long-term liabilities			422						403
Total liabilities			$	2,226					$	2,102

The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s Consolidated Statements of Operations for fiscal 2021:

Revenues			$	1,698
Costs and expenses			(2,845)
Equity in the loss of investees			(19)

Asia Theme Parks’ royalty and management fees of $119 million for fiscal 2021 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 2021 Consolidated Statements of Cash Flows were $292 million used in operating activities, $668 million used in investing activities and $74 million used in financing activities.

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.

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The Company and HKSAR have provided loans to Hong Kong Disneyland Resort with outstanding balances of $149 million and $100 million, respectively. The interest rate on both loans 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 ($270 million), which bears interest at a rate of three month HIBOR plus 1.25% and matures in December 2023. The outstanding balance under the line of credit at October 2, 2021 was $124 million. The Company’s line of credit is eliminated in consolidation.

Hong Kong Disneyland Resort 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 $42 million and $188 million in fiscal 2021 and 2020, respectively. To date, the Company and HKSAR have funded a total of $568 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 11 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 $895 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 1.0 billion yuan (approximately $0.2 billion) line of credit bearing interest at 8%. There is no outstanding balance under the line of credit as of October 2, 2021. These balances are eliminated in consolidation.

Shendi has provided Shanghai Disney Resort with loans totaling 7.9 billion yuan (approximately $1.2 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%. There is no outstanding balance under the line of credit as of October 2, 2021.

8Produced and Acquired/Licensed Content Costs and Advances

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

			As of October 2, 2021																		As of October 3, 2020
			Predominantly Monetized Individually						Predominantly Monetized as a Group						Total						Predominantly Monetized Individually						Predominantly Monetized as a Group						Total
Produced content
Released, less amortization			$	4,944					$	9,779					$	14,723					$	5,090					$	8,185					$	13,275
Completed, not released			630						762						1,392						555						720						1,275
In-process			4,371						4,623						8,994						3,585						2,090						5,675
In development or pre-production			351						162						513						268						103						371
			$	10,296					$	15,326					25,622						$	9,498					$	11,098					20,596
Licensed content - Programming rights and advances															6,110																		6,597
Total produced and licensed content															$	31,732																	$	27,193
Current portion															$	2,183																	$	2,171
Non-current portion															$	29,549																	$	25,022

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Amortization of produced and licensed content is as follows:

			2021						2020
Produced content
Predominantly monetized individually			$	2,947					$	4,305
Predominantly monetized as a group			5,228						5,032
			8,175						9,337
Licensed programming rights and advances			12,784						11,241
Total produced and licensed content costs(1)			$	20,959					$	20,578

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

Amortization of produced and licensed content for fiscal 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 2, 2021 is as follows:

			Predominantly Monetized Individually						Predominantly Monetized as a Group						Total
Produced content
Released
2022			$	1,459					$	3,127					$	4,586
2023			764						1,987						2,751
2024			473						1,254						1,727
Completed, not released
2022			334						312						646
Licensed content - Programming rights and advances
2022															$	3,663
2023															1,125
2024															585

Approximately $2.4 billion of accrued participations and residual liabilities will be paid in fiscal 2022.

At October 2, 2021, acquired film and television libraries have remaining unamortized costs of $3.5 billion, which are generally being amortized straight-line over a weighted-average remaining period of approximately 16 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 2, 2021
						Oct. 2, 2021						Oct. 3, 2020						Stated Interest Rate(1)			Pay Floating Interest rate and Cross- Currency Swaps(2)									Effective Interest Rate(3)						Swap Maturities
Commercial paper						$	1,992					$	2,023					—						$	—											0.31%
U.S. dollar denominated notes(4)						49,090						52,736						3.86%						13,125												3.08%						2022-2031
Foreign currency denominated debt						2,011						1,983						2.92%						2,016												2.83%						2027
Other(5)						(18)						583												—
						53,075						57,325						3.68%						15,141												2.96%
Asia Theme Parks borrowings						1,331						1,303						1.53%						—												5.32%
Total borrowings						54,406						58,628						3.63%						15,141												3.02%
Less current portion						5,866						5,711						2.23%						500												2.10%
Total long-term borrowings						$	48,540					$	52,917											$	14,641

(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 2, 2021; 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 2, 2021.

(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 $2.1 billion and a net premium of $2.2 billion at October 2, 2021 and October 3, 2020, respectively.

(5)Includes market value adjustments for debt with qualifying hedges, which reduces borrowings by $99 million and increases borrowings by $509 million at October 2, 2021 and October 3, 2020, respectively.

Commercial Paper

At October 2, 2021, the Company’s bank facilities, which are with a syndicate of lenders and support our commercial paper borrowings, were as follows:

			Committed Capacity						Capacity Used						Unused Capacity
Facility expiring March 2022			$	5,250					$	—					$	5,250
Facility expiring March 2023			4,000						—						4,000
Facility expiring March 2025			3,000						—						3,000
Total			$	12,250					$	—					$	12,250

The facilities expiring in March 2023 and March 2025 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 March 2022, 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 1.63%. 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 2, 2021 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 2, 2021, the Company has $1.4 billion 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. 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
Additions			—						2,221						2,221
Payments			—						(2,247)						(2,247)
Other Activity			—						(5)						(5)
Balance at Oct. 2, 2021			$	—					$	1,992					$	1,992

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

U.S. Dollar Denominated Notes

At October 2, 2021, the Company had $49.1 billion of U.S. dollar denominated notes with maturities ranging from 1 to 75 years. The debt outstanding includes $48.1 billion of fixed rate notes, which have stated interest rates that range from 1.65% to 9.50% and $1.0 billion of floating-rate notes that bear interest at U.S. LIBOR plus or minus a spread. At October 2, 2021, the effective rate on the floating-rate notes was 0.54%.

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

Prior to 2019, the Company issued Canadian $1.3 billion ($1.0 billion) of fixed rate senior notes, which bear interest at 2.76% and mature 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.

In fiscal 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 are scheduled to be delivered in 2022, 2024 and 2025. 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 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.

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Asia Theme Parks Borrowings

HKSAR provided Hong Kong Disneyland Resort with loans totaling HK$0.8 billion ($100 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 7.9 billion yuan (approximately $1.2 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 2, 2021 there was no outstanding balance.

The following table provides total borrowings, excluding market value adjustments and debt issuance premiums, discounts and costs, by scheduled maturity date as of October 2, 2021. The table also provides the estimated interest payments on these borrowings as of October 2, 2021 although actual future payments will differ for floating-rate borrowings:

			Borrowings
Fiscal Year:			Before Asia Theme Parks Consolidation						Asia Theme Parks						Total Borrowings						Interest(1)						Total Borrowings and Interest
2022			$	5,861					$	10					$	5,871					$	1,846					$	7,717
2023			1,241						25						1,266						1,804						3,070
2024			2,872						30						2,902						1,738						4,640
2025			3,685						35						3,720						1,728						5,448
2026			4,578						—						4,578						1,700						6,278
Thereafter			32,861						1,231						34,092						20,602						54,694
			$	51,098					$	1,331					$	52,429					$	29,418					$	81,847

(1) In 2023, the Company has the ability to call a debt instrument prior to its scheduled maturity, which if exercised by the Company would reduce future interest payments by $1.1 billion.

The Company capitalizes interest on assets constructed for its parks and resorts and on certain film and television productions. In fiscal 2021, 2020 and 2019, total interest capitalized was $187 million, $157 million and $222 million, respectively. Interest expense, net of capitalized interest, for fiscal 2021, 2020 and 2019 was $1,546 million, $1,647 million and $1,246 million, respectively.

10Income Taxes

Provision for Income Taxes and Deferred Tax Assets and Liabilities

Income (Loss) Before Income Taxes			2021						2020						2019
Domestic (including U.S. exports)			$	5,241					$	4,706					$	12,389
Foreign subsidiaries(1)			(2,680)						(6,449)						1,534
Total income (loss) from continuing operations			2,561						(1,743)						13,923
Income (loss) from discontinued operations			(38)						(42)						726
			$	2,523					$	(1,785)					$	14,649

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

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Income Tax Expense (Benefit)
Current			2021						2020						2019
Federal			$	594					$	95					$	14
State			129						148						112
Foreign(1)			554						731						824
			1,277						974						950
Deferred
Federal			(526)						279						1,829
State			(220)						(29)						259
Foreign			(506)						(525)						(12)
			(1,252)						(275)						2,076
Income tax expense from continuing operations			25						699						3,026
Income tax expense from discontinued operations			(9)						(10)						39
			$	16					$	689					$	3,065

(1)Includes foreign withholding taxes.

Components of Deferred Tax (Assets) and Liabilities			October 2, 2021						October 3, 2020
Deferred tax assets
Net operating losses and tax credit carryforwards(1)			$	(3,944)					$	(3,137)
Accrued liabilities			(2,544)						(2,952)
Lease liabilities			(764)						(825)
Licensing revenues			(202)						—
Other			(725)						(652)
Total deferred tax assets			(8,179)						(7,566)
Deferred tax liabilities
Depreciable, amortizable and other property			7,916						8,256
Investment in U.S. entities			2,775						2,514
Right-of-use assets			697						740
Licensing revenues			—						189
Investment in foreign entities			392						266
Other			164						150
Total deferred tax liabilities			11,944						12,115
Net deferred tax liability before valuation allowance			3,765						4,549
Valuation allowance			2,795						2,410
Net deferred tax liability			$	6,560					$	6,959

(1)Balances as of October 2, 2021 and October 3, 2020 include approximately $1.6 billion and $1.4 billion, respectively, of International Theme Park net operating losses and approximately $1.0 billion and $0.7 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. China theme park net operating losses of $0.1 billion may expire between fiscal 2022 and fiscal 2027. Foreign tax credits in the U.S. have a ten-year carryforward period. Foreign tax credits of $1.0 billion may expire beginning fiscal 2028.

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The following table details the change in valuation allowance for fiscal 2021, 2020 and 2019 (in billions):

			Balance at Beginning of Period						Charges to Tax Expense(1)						Changes Due to TFCF Acquisition						Balance at End of Period
Year ended October 2, 2021			$	2.4					$	0.4					$	—					$	2.8
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

(1) Charges to tax expense in fiscal 2021 and fiscal 2020 are primarily due to International Theme Parks net operating losses.

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

			2021						2020(1)						2019
Federal income tax rate			21.0		%				21.0		%				21.0		%
State taxes, net of federal benefit			1.9						4.3						1.9
Tax rate differential on foreign income			12.0						(16.5)						0.3
Foreign derived intangible income			(6.4)						—						(1.1)
Excess tax benefits from equity awards			(5.3)						3.7						(0.3)
Legislative changes			(12.2)						4.4						(0.3)
Income tax audits and reserves			(4.8)						(6.1)						(0.6)
Goodwill impairment			—						(41.1)						—
Valuation allowance			2.6						(14.6)						0.1
Other			(7.8)						4.8						0.7
			1.0		%				(40.1		%)				21.7		%

(1)In fiscal 2020, the Company had a pre-tax loss. Positive amounts reflect tax benefits, whereas negative amounts reflect tax expense.

The effective income tax rate in the current year was lower than the U.S. statutory rate due to favorable adjustments related to prior years and excess tax benefits on employee share-based awards, partially offset by an unfavorable impact from foreign losses for which we are unable to recognize a tax benefit. The effective income tax rate in the prior year included an unfavorable impact of the goodwill impairment, which was not tax deductible, the impact of higher tax rates on foreign earnings than U.S. statutory rates and an unfavorable impact from foreign losses for which we are unable to recognize a tax benefit.

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:

			2021						2020						2019
Balance at the beginning of the year			$	2,740					$	2,952					$	648
Increases due to acquisitions			—						34						2,728
Increases for current year tax positions			51						26						84
Increases for prior year tax positions			556						134						143
Decreases in prior year tax positions			(174)						(99)						(61)
Settlements with taxing authorities			(532)						(307)						(590)
Balance at the end of the year			$	2,641					$	2,740					$	2,952

The fiscal year-end 2021, 2020 and 2019 balances include $2.0 billion, $2.1 billion and $2.4 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 2, 2021, October 3, 2020 and September 28, 2019, the Company had $1.0 billion, $1.1 billion and $1.0 billion, respectively, in accrued interest and penalties related to unrecognized tax benefits. During fiscal 2021, 2020 and 2019, the Company recorded additional interest and penalties of $191 million, $211 million and $802 million (of which the substantial majority is due to the acquisition of TFCF), respectively, and recorded reductions in accrued interest and penalties of $256

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million, $101 million and $96 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 2018 for The Walt Disney Company and for years prior to 2016 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 $0.4 billion.

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 2021, 2020 and 2019, the Company recognized income tax benefits of $135 million, $64 million and $41 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.

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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 2, 2021						October 3, 2020						October 2, 2021						October 3, 2020
Projected benefit obligations
Beginning obligations			$	(20,760)					$	(18,531)					$	(2,104)					$	(1,946)
Service cost			(434)						(410)						(10)						(10)
Interest cost			(457)						(527)						(47)						(56)
Actuarial gain (loss)(1)			15						(1,958)						(13)						(127)
Plan amendments and other			20						1						(14)						(12)
Benefits paid			661						662						67						47
Curtailments			—						3						—						—
Ending obligations			$	(20,955)					$	(20,760)					$	(2,121)					$	(2,104)
Fair value of plans’ assets
Beginning fair value			$	15,598					$	14,878					$	771					$	762
Actual return on plan assets			2,653						770						137						38
Contributions			565						664						47						9
Benefits paid			(661)						(662)						(67)						(47)
Expenses and other			(79)						(52)						1						9
Ending fair value			$	18,076					$	15,598					$	889					$	771
Underfunded status of the plans			$	(2,879)					$	(5,162)					$	(1,232)					$	(1,333)
Amounts recognized in the balance sheet
Non-current assets			$	88					$	20					$	—					$	—
Current liabilities			(63)						(59)						(4)						(5)
Non-current liabilities			(2,904)						(5,123)						(1,228)						(1,328)
			$	(2,879)					$	(5,162)					$	(1,232)					$	(1,333)

(1)The actuarial loss for 2020 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
			2021						2020						2019						2021						2020						2019
Service cost			$	434					$	410					$	345					$	10					$	10					$	8
Other costs (benefits):
Interest cost			457						527						592						47						56						67
Expected return on plan assets			(1,100)						(1,084)						(978)						(55)						(57)						(56)
Amortization of prior-year service costs			11						13						13						—						—						—
Recognized net actuarial loss			777						544						260						30						14						—
Total other costs (benefits)			145						—						(113)						22						13						11
Net periodic benefit cost			$	579					$	410					$	232					$	32					$	23					$	19

In fiscal 2022, we expect pension and postretirement medical costs to decrease by $260 million to $350 million driven by lower amortization of previously deferred losses.

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Key assumptions are as follows:
			Pension Plans																		Postretirement Medical Plans
			2021						2020						2019						2021						2020						2019
Discount rate used to determine the fiscal year‑end benefit obligation			2.88		%				2.82		%				3.22		%				2.89		%				2.80		%				3.22		%
Discount rate used to determine the interest cost component of net periodic benefit cost			2.28		%				2.94		%				4.09		%				2.28		%				2.95		%				4.10		%
Rate of return on plan assets			7.00		%				7.00		%				7.25		%				7.00		%				7.00		%				7.25		%
Weighted average rate of compensation increase to determine the fiscal year‑end benefit obligation			3.10		%				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						4.00		%				4.25		%				4.25		%
Year that the rate reaches the ultimate trend rate			n/a						n/a						n/a						2040						2034						2033

AOCI, before tax, as of October 2, 2021 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			$	18					$	—					$	18
Net actuarial loss			6,628						333						6,961
Total amounts included in AOCI			6,646						333						6,979
Prepaid (accrued) pension cost			(3,767)						899						(2,868)
Net balance sheet liability			$	2,879					$	1,232					$	4,111

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 $9.0 billion, $8.5 billion and $6.9 billion, respectively, as of October 2, 2021 and $19.5 billion, $18.1 billion and $14.4 billion, respectively, as of October 3, 2020.

For pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and aggregate fair value of plan assets were $19.9 billion and $16.9 billion, respectively, as of October 2, 2021 and $19.8 billion and $14.6 billion respectively, as of October 3, 2020.

The Company’s total accumulated pension benefit obligations at October 2, 2021 and October 3, 2020 were $19.4 billion and $19.1 billion, respectively. Approximately 98% was vested as of both October 2, 2021 and October 3, 2020.

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 $0.9 billion, respectively, at October 2, 2021 and $2.1 billion and $0.8 billion, respectively, at October 3, 2020.

Plan Assets

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

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The primary investment objective for the assets within the master trust 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 trust 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 trust 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 2, 2021 and October 3, 2020 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 and mutual funds are valued based on the securities’ 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 and notes (excluding U.S. Treasury securities), corporate bonds, 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 2, 2021
Description						Level 1						Level 2						Total						Plan Asset Mix
Cash						$	77					$	—					$	77					—%
Common and preferred stocks(1)						4,407						—						4,407						23%
Mutual funds						1,326						—						1,326						7%
Government and federal agency bonds, notes and MBS						2,437						349						2,786						15%
Corporate bonds						—						1,098						1,098						6%
Other mortgage- and asset-backed securities						—						96						96						1%
Derivatives and other, net						8						21						29						—%
Total investments in the fair value hierarchy						$	8,255					$	1,564					$	9,819
Assets valued at NAV as a practical expedient:
Common collective funds																		4,550						24%
Alternative investments																		4,342						23%
Money market funds and other																		254						1%
Total investments at fair value																		$	18,965					100%

						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%

(1)Includes 2.9 million shares of Company common stock valued at $489 million (3% of total plan assets) and 2.9 million shares valued at $355 million (2% of total plan assets) at October 2, 2021 and October 3, 2020, 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 2, 2021, the total committed capital still uncalled and unpaid was $1.2 billion.

Plan Contributions

During fiscal 2021, the Company made $612 million of contributions to its pension and postretirement medical plans. The Company currently expects to make approximately $100 million to $150 million in pension and postretirement medical plan contributions in fiscal 2022. Final minimum funding requirements for fiscal 2022 will be determined based on a January 1, 2022 funding actuarial valuation, which is expected to be received during the fourth quarter of fiscal 2022.

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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)
2022			$	692					$	61
2023			692						65
2024			728						70
2025			769						74
2026			811						79
2027 – 2031			4,626						459

(1)Estimated future benefit payments are net of expected Medicare subsidy receipts of $81 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 2021 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 nineteen years until reaching 4.00%.

Sensitivity — A one percentage point 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 2, 2021 and on cost for fiscal 2022:

			Discount Rate												Expected Long-Term Rate of Return On Assets
Increase (decrease)			Benefit Expense						Projected Benefit Obligations						Benefit Expense
1 percentage point decrease			$	341					$	4,011					$	175
1 percentage point increase			(292)						(3,402)						(175)

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:

			2021						2020						2019
Pension plans			$	289					$	221					$	189
Health & welfare plans			272						217						218
Total contributions			$	561					$	438					$	407

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 4% to 10% 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. The Company also has defined contribution retirement plans for employees in our international operations. In fiscal 2021, 2020 and 2019, the costs of our domestic and international defined contribution plans were $254 million, $242 million and $233 million, respectively.

12Equity

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

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

The Company did not pay a dividend with respect to fiscal year 2020 operations and has not declared or paid a dividend with respect to fiscal 2021 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 2, 2021, 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.

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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 for Hedges						Unrecognized Pension and Postretirement Medical Expense						Foreign Currency Translation and Other						AOCI
AOCI, before tax
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)
Unrealized gains (losses) arising during the period			70						1,582						41						1,693
Reclassifications of net (gains) losses to net income			(31)						816						—						785
Balance at October 2, 2021			$	(152)					$	(7,025)					$	(1,047)					$	(8,224)

			Market Value Adjustments for Hedges						Unrecognized Pension and Postretirement Medical Expense						Foreign Currency Translation and Other						AOCI
Tax on AOCI
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(1)			—						(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
Unrealized gains (losses) arising during the period			(8)						(358)						(50)						(416)
Reclassifications of net (gains) losses to net income			10						(190)						—						(180)
Balance at October 2, 2021			$	42					$	1,653					$	89					$	1,784

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			Market Value Adjustments for Hedges						Unrecognized Pension and Postretirement Medical Expense						Foreign Currency Translation and Other						AOCI
AOCI, after tax
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(1)			(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)
Unrealized gains (losses) arising during the period			62						1,224						(9)						1,277
Reclassifications of net (gains) losses to net income			(21)						626						—						605
Balance at October 2, 2021			$	(110)					$	(5,372)					$	(958)					$	(6,440)

(1)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:						2021						2020						2019
Market value adjustments, primarily cash flow hedges						Primarily revenue						$	31					$	263					$	185
Estimated tax						Income taxes						(10)						(61)						(43)
												21						202						142
Pension and postretirement medical expense						Interest expense, net						(816)						(547)						(278)
Estimated tax						Income taxes						190						127						64
												(626)						(420)						(214)
Total reclassifications for the period												$	(605)					$	(218)					$	(72)

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 stock’s market price at the date of grant and become exercisable ratably over a three-year period from the grant date (exercisable ratably over four-year period from the grant date prior to fiscal 2021). 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 three years (four years for grants prior to fiscal 2021) and Performance RSUs generally fully vest after three years, subject to achieving market or performance conditions. Equity-based award grants 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.

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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 2, 2021, 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 148 million shares and the number available for issuance assuming all awards are in the form of RSUs was approximately 71 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:

			2021						2020						2019
Risk-free interest rate			1.2%						1.8%						2.8%
Expected volatility			30%						23%						23%
Dividend yield			0.03%						1.36%						1.61%
Termination rate			5.8%						5.8%						4.8%
Exercise multiple			1.83						1.83						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:

			2021						2020						2019
Stock option			$	95					$	101					$	84
RSUs(1)			505						424						627
Total equity-based compensation expense(2)			600						525						711
Tax impact			(136)						(118)						(161)
Reduction in net income			$	464					$	407					$	550
Equity-based compensation expense capitalized during the period			$	112					$	87					$	81

(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 2021 (shares in millions):

			Shares						Weighted Average Exercise Price
Outstanding at beginning of year			23						$	101.41
Awards forfeited			(1)						141.97
Awards granted			2						177.27
Awards exercised			(6)						79.21
Outstanding at end of year			18						$	113.99
Exercisable at end of year			12						$	98.04

The following tables summarize information about stock options vested and expected to vest at October 2, 2021 (shares in millions):

																					Vested
						Range of Exercise Prices															Number of Options						Weighted Average Exercise Price						Weighted Average Remaining Years of Contractual Life
						$	0		—			$	50								1						$	43.76					0.6
						$	51		—			$	100								4						76.09						2.4
						$	101		—			$	150								7						113.70						5.9
																					12

																					Expected to Vest
						Range of Exercise Prices															Number of Options(1)						Weighted Average Exercise Price						Weighted Average Remaining Years of Contractual Life
						$	100		—			$	135								2						$	111.16					7.0
						$	136		—			$	170								2						148.02						8.2
						$	171		—			$	200								2						177.74						9.4
																					6

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

The following table summarizes information about RSU transactions in fiscal 2021 (shares in millions):

			Units**(3)**						Weighted Average Grant-Date Fair Value
Unvested at beginning of year			12						$	128.56
Granted(1)			6						179.44
Vested			(4)						122.72
Forfeited			(1)						151.54
Unvested at end of year(2)			13						$	151.61

(1)Includes 0.2 million Performance RSUs.

(2)Includes 1.5 million Performance RSUs.

(3)Excludes Performance RSUs for which vesting is subject to service conditions and the number of units vesting is subject to the discretion of the CEO. At October 2, 2021, 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 2021, 2020 and 2019 were $57.05, $36.19 and $28.76, respectively. The total intrinsic value (market value on date of exercise less exercise price) of options exercised and RSUs vested during fiscal 2021, 2020 and 2019 totaled $1,175 million, $989 million and $646 million, respectively. The aggregate intrinsic values of stock options vested and expected to vest at October 2, 2021 were $885 million and $217 million, respectively.

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As of October 2, 2021, unrecognized compensation cost related to unvested stock options and RSUs was $114 million and $1,202 million, respectively. That cost is expected to be recognized over a weighted-average period of 1.4 years for stock options and 1.6 years for RSUs.

Cash received from option exercises for fiscal 2021, 2020 and 2019 was $435 million, $305 million and $318 million, respectively. Tax benefits realized from tax deductions associated with option exercises and RSUs vesting for fiscal 2021, 2020 and 2019 was approximately $256 million, $220 million and $145 million, respectively.

14Detail of Certain Balance Sheet Accounts

Current receivables						October 2, 2021						October 3, 2020
Accounts receivable						$	11,177					$	11,299
Other						2,360						1,835
Allowance for credit losses						(170)						(426)
						$	13,367					$	12,708

Parks, resorts and other property
Attractions, buildings and improvements						$	32,765					$	31,279
Furniture, fixtures and equipment						24,008						22,976
Land improvements						7,061						6,828
Leasehold improvements						1,058						1,028
						64,892						62,111
Accumulated depreciation						(37,920)						(35,517)
Projects in progress						4,521						4,449
Land						1,131						1,035
						$	32,624					$	32,078

Intangible assets
Character/franchise intangibles, copyrights and trademarks						$	10,572					$	10,572
MVPD agreements						8,089						8,098
Other amortizable intangible assets						4,303						4,309
Accumulated amortization						(7,641)						(5,598)
Net amortizable intangible assets						15,323						17,381
Indefinite lived intangible assets(1)						1,792						1,792
						$	17,115					$	19,173

(1)Indefinite lived intangible assets consist of ESPN, Pixar and Marvel trademarks and television FCC licenses.

Accounts payable and other accrued liabilities
Accounts and accrued payables						$	16,357					$	13,183
Payroll and employee benefits						3,482						2,925
Other						1,055						693
						$	20,894					$	16,801

Other long-term liabilities
Pension and postretirement medical plan liabilities						$	4,132					$	6,451
Operating and financing lease liabilities						3,229						2,911
Other						7,161						7,842
						$	14,522					$	17,204

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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 $77.4 billion, including approximately $2.7 billion for available programming as of October 2, 2021. 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 sports programming rights, other broadcast programming rights and other commitments including cruise ships and creative talent are as follows:

Fiscal Year:			Sports Programming						Broadcast Programming						Other						Total
2022			$	10,305					$	3,105					$	4,469					$	17,879
2023			9,658						1,739						1,624						13,021
2024			8,406						852						1,735						10,993
2025			8,663						520						1,384						10,567
2026			5,863						314						165						6,342
Thereafter			27,501						428						3,477						31,406
			$	70,396					$	6,958					$	12,854					$	90,208

Sports programming primarily relates to rights for NFL, college football (including bowl games and the College Football Playoff) and basketball, NBA, NHL, UFC, MLB, soccer, cricket, tennis, golf and Top Rank Boxing. Certain sports programming rights have payments that are variable based primarily on revenues and are not included in the table above.

See Note 16 for discussion of the Company’s operating and financing lease commitments.

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 2, 2021, the remaining debt service obligation guaranteed by the Company was $220 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

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

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 2, 2021, 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 27 years. The weighted-average incremental borrowing rate is 2.4% and 6.3%, for our operating leases and finance leases, respectively. At October 2, 2021 total estimated future lease payments for signed non-cancelable leases agreements that have not commenced are not material.

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

						October 2, 2021						October 3, 2020
Right-of-use assets(1)
Operating leases						$	3,895					$	3,687
Finance leases						336						361
Total right-of-use assets						4,231						4,048
Short-term lease liabilities(2)
Operating leases						637						747
Finance leases						41						37
						678						784
Long-term lease liabilities(3)
Operating leases						2,983						2,640
Finance leases						246						271
						3,229						2,911
Total lease liabilities						$	3,907					$	3,695

(1)Included in “Other assets” in the Consolidated Balance Sheet.

(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 costs are as follows:

						October 2, 2021						October 3, 2020
Finance lease cost
Amortization of right-of-use assets						$	42					$	37
Interest on lease liabilities						20						16
Operating lease cost						853						899
Variable fees and other(1)						414						491
Total lease cost						$	1,329					$	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, including common-area maintenance and contingent rentals, was $1.1 billion.

Cash paid during the year for amounts included in the measurement of lease liabilities is as follows:

						October 2, 2021						October 3, 2020
Operating cash flows for operating leases						$	925					$	879
Operating cash flows for finance leases						20						16
Financing cash flows for finance leases						25						37
Total						$	970					$	932

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Future minimum lease payments, as of October 2, 2021, are as follows:

						Operating						Financing
Fiscal Year:
2022						$	707					$	59
2023						601						52
2024						467						42
2025						415						38
2026						298						32
Thereafter						2,057						443
Total undiscounted future lease payments						4,545						666
Less: Imputed interest						(925)						(379)
Total reported lease liability						$	3,620					$	287

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 2, 2021
Description						Level 1						Level 2						Level 3						Total
Assets
Investments						$	950					$	—					$	—					$	950
Derivatives
Interest rate						—						186						—						186
Foreign exchange						—						707						—						707
Other						—						10						—						10
Liabilities
Derivatives
Interest rate						—						(287)						—						(287)
Foreign exchange						—						(618)						—						(618)
Other						—						(8)						—						(8)
Other						—						(375)						—						(375)
Total recorded at fair value						$	950					$	(385)					$	—					$	565
Fair value of borrowings						$	—					$	58,913					$	1,411					$	60,324

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						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)
Other						—						(294)						—						(294)
Total recorded at fair value						—						1,209						—						1,209
Fair value of borrowings						$	—					$	63,370					$	1,448					$	64,818

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, had an impact on derivative fair value estimates that was not material.

Level 2 other liabilities are primarily arrangements that are valued based on the fair value of underlying investments, which are generally measured using Level 1 and Level 2 fair value techniques.

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 should be evaluated for impairment. In fiscal 2020, the Company recorded impairment charges for goodwill and intangible assets as disclosed in Note 19. The fair value of these assets was determined using 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 2, 2021, 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. At October 2, 2021, 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.

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The Company’s trade receivables and financial investments do not represent a significant concentration of credit risk at October 2, 2021 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 2, 2021
			Current Assets						Other Assets						Other Current Liabilities						Other Long- Term Liabilities
Derivatives designated as hedges
Foreign exchange			$	165					$	240					$	(122)					$	(83)
Interest rate			—						186						(287)						—
Other			10						—						—						—
Derivatives not designated as hedges
Foreign exchange			183						119						(208)						(205)
Other			(8)						—						—						—
Gross fair value of derivatives			350						545						(617)						(288)
Counterparty netting			(301)						(360)						460						201
Cash collateral (received) paid			(3)						(51)						157						73
Net derivative positions			$	46					$	134					$	—					$	(14)

			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)
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)

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 2, 2021 and October 3, 2020, the total notional amount of the Company’s pay-floating interest rate swaps was $15.1 billion and $15.8 billion, respectively.

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

			Carrying Amount of Hedged Borrowings												Fair Value Adjustments Included in Hedged Borrowings
			October 2, 2021						October 3, 2020						October 2, 2021						October 3, 2020
Borrowings:
Current			$	505					$	753					$	5					$	4
Long-term			15,136						16,229						(103)						505
			$	15,641					$	16,982					$	(98)					$	509

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

			2021						2020						2019
Gain (loss) on:
Pay-floating swaps			$	(603)					$	479					$	337
Borrowings hedged with pay-floating swaps			603						(479)						(337)
Benefit (expense) associated with interest accruals on pay-floating swaps			143						28						(58)

The Company may designate pay-fixed interest rate swaps as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed interest rate 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 2, 2021 or at October 3, 2020, and gains and losses related to pay-fixed swaps recognized in earnings for fiscal 2021, 2020 and 2019 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 2, 2021 and October 3, 2020, the notional amounts of the Company’s net foreign exchange cash flow hedges were $6.9 billion and $4.6 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 $68 million. The following table summarizes the effect of foreign exchange cash flow hedges on AOCI:

			2021						2020
Gain (loss) recognized in Other Comprehensive Income			$	61					$	(63)
Gain (loss) reclassified from AOCI into the Statement of Operations(1)			24						269

(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 2, 2021 and October 3, 2020, the total notional amounts of the Company’s designated cross currency swaps were Canadian $1.3 billion ($1.0 billion) and Canadian $1.3 billion ($1.0 billion), respectively.

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

			October 2, 2021						October 3, 2020
Gain (loss) on:
Cross currency swaps			$	47					$	53
Borrowings hedged with cross currency swaps			(47)						(53)

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 both October 2, 2021 and October 3, 2020 was $3.5 billion. 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
			2021						2020						2019						2021						2020						2019						2021						2020						2019
Net gains (losses) on foreign currency denominated assets and liabilities			$	(30)					$	10					$	(188)					$	(47)					$	1					$	16					$	(7)					$	(35)					$	50
Net gains (losses) on foreign exchange risk management contracts not designated as hedges			(83)						(56)						123						47						—						(19)						2						33						(51)
Net gains (losses)			$	(113)					$	(46)					$	(65)					$	—					$	1					$	(3)					$	(5)					$	(2)					$	(1)

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 2, 2021 and October 3, 2020 and related gains or losses recognized in earnings were not material for fiscal 2021, 2020 and 2019.

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 of these contracts at October 2, 2021 and October 3, 2020 were $0.4 billion and $0.3 billion, respectively. The related gains or losses recognized in earnings were not material for fiscal 2021, 2020 and 2019.

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 $244 million and $53 million at October 2, 2021 and October 3, 2020, respectively.

19Restructuring and Impairment Charges

Goodwill and Intangible Asset Impairment

Prior to the Company’s reorganization in October 2020 (see Note 1 for additional information), the former Direct-to-Consumer & International segment included the International Channels reporting unit, which comprised 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

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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 distributing it on our DTC platforms. 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 fiscal 2020, we tested the International Channels’ goodwill and long-lived assets (including intangible assets) for impairment.

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 the significant assets of the asset group. 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 tested the International Channels reporting unit goodwill for impairment by comparing the fair value of the International Channels reporting unit to its carrying value.

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 discount rates used to calculate the present value of the future cash flows (fair value). The determination of fair value requires us to make assumptions and estimates about how market participants would value the business or asset group. Given the ongoing impacts of COVID-19, the projected cash flows and underlying assumptions are subject to greater uncertainty than normal.

In fiscal 2020, we recorded a non-cash impairment charge primarily on our MVPD agreement intangible assets of $1.9 billion and we recorded a $3.1 billion non-cash impairment charge to fully impair the International Channels reporting unit goodwill. These charges are recorded in “Restructuring and impairment charges” in the Consolidated Statements of Operations.

As of October 2, 2021, the remaining balance of our international MVPD agreement intangible assets was $2.2 billion, primarily related to our channel businesses in Latin America and India.

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, which was substantially complete as of the end of fiscal 2020. We have recorded restructuring charges of $1.7 billion since the TFCF acquisition primarily related to the DMED segment. These charges included $1.3 billion related to severance (including employee contract terminations) 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.

The changes in restructuring reserves related to the TFCF integration for fiscal 2021, 2020 and 2019 are as follows:

Balance at September 29, 2018															$	—
Additions in fiscal 2019															906
Payments in fiscal 2019															(230)
Balance at September 28, 2019															676
Additions in fiscal 2020															453
Payments in fiscal 2020															(772)
Balance at October 3, 2020															357
Additions in fiscal 2021															44
Payments in fiscal 2021															(351)
Balance at October 2, 2021															$	50

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Other

In fiscal 2021, the Company recognized restructuring and impairment charges of $0.6 billion, primarily related to the planned closure of an animation studio and a substantial number of our Disney-branded retail stores in North America and Europe as well as severance at our parks and experiences businesses. In fiscal 2020, the Company recognized restructuring and impairment charges of $0.3 billion, primarily for severance at our parks and experiences businesses. Other restructuring and impairment charges in fiscal 2019 were not material. These charges are recorded in “Restructuring and impairment charges” in the Consolidated Statements of Operations.

20New Accounting Pronouncements

Accounting Pronouncements Adopted in Fiscal 2021

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 Company adopted the new guidance in the first quarter of fiscal 2021 without restating prior periods by recording the impact of adoption as an adjustment to retained earnings at the beginning of fiscal 2021. The adoption did not have a material impact on our financial statements.

Accounting Pronouncements Not Yet Adopted

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 before January 1, 2023.

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. The new guidance will not have a material impact on our financial statements.