Kellogg‘s included the following note in its fiscal 2015 10-K report. The Company’s fiscal year normally ends on the Saturday closest to December 31 and as a result, a 53rd week is added approximately every sixth year. The Company’s 2014 fiscal year ended on January 3, 2015, and included a 53rd week. While quarters normally consist of 13-week periods, the fourth quarter of fiscal 2014 included a 14th week. a. Why does Kellogg’s disclose this issue? b. How are year-over-year growth rates affected by the 53rd week? c. What pro forma adjustment could Kellogg (or we) make to facilitate the analysis of revenue trends?
Kellogg's discloses this issue because if they have not disclosed it then it would have been a question on transparency, shareholder trust and it is legally mandatory to disclose every material information to the shareholders and to avoid any legal repercussion.
Year on year growth rates are affeced in such a way that every 6th year growth rates are high and overestimated due to an extra week used in calculation and for subsequent years they are lower.
Pro Forma adjustment would be to exclude figures from 53rd week to facilitate the analysis of revenue trends.
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