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Gain on Sale of Asset

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    Situation

    • PepsiCo will from time to time sell equipment stemming from plant closures as well as fleet (vans, truck, trailers)
    • These assets are often fully depreciated before being sold, however there are certain times where book value remains. 
    • Procurement is heavily involved in the process of selling assets often acting as the broker e.g., finding buyers and negotiating the best price and recently in some cases, have eliminated brokers completely. 

    Complication

    • The value of the sale is inconsistently reported as Productivity across Regions and across Opex and Capex.
    • Historically this has been accepted as productivity.
    • These savings are built into run rates & base spend. 
    • LATAM has created their own specific framework on asset sales for productivity recognition. 

    Question

    • Can the income from asset sales be reported as Productivity? 
    • If yes - would this belong under Other Income/Other Expense?
    • If no - how do we track these savings as part of their performance reporting?

    Recommendation

    • Productivity refers to how efficiently inputs are used to produce outputs. 
    • Gain on sales isn't Productivity: just an accounting gain. The rationale that it's non-recurring in nature; its non-operating income and it doesn't reflect the efficiency improvement (it might simply reflect market appreciation). It could potentially be recorded as other value in PoweerSteering. 
    • In case there is an asset sale which is of recurring in nature, determine correct baseline, apply YoY concept, strip out the market gain component and engage the finance team for appropriate interpretation of Productivity.