Pepsi 2012 Annual Report Download - page 82

In June 2011, the FASB amended its accounting guidance
on the presentation of comprehensive income in financial
statements to improve the comparability, consistency and
transparency of financial reporting and to increase the promi-
nence of items that are recorded in other comprehensive
income. The new accounting guidance requires entities to
report components of comprehensive income in either (1) a
continuous statement of comprehensive income or (2) two
separate but consecutive statements. The provisions of the
guidance were effective as of the beginning of our 2012
fiscal year. Accordingly, we have presented the components
of net income and other comprehensive income for the fiscal
years ended December29, 2012, December 31, 2011 and
December25, 2010 as separate but consecutive statements.
In February 2013, the FASB issued guidance that would
require an entity to provide enhanced footnote disclosures
to explain the effect of reclassification adjustments on other
comprehensive income by component and provide tabular
disclosure in the footnotes showing the effect of items reclas-
sified from accumulated other comprehensive income on the
line items of net income. The provisions of this new guidance
are effective as of the beginning of our 2013 fiscal year. We do
not expect the adoption of this new guidance to have a mate-
rial impact on our financial statements.
In the second quarter of 2010, the Patient Protection and
Affordable Care Act (PPACA) was signed into law. The PPACA
changes the tax treatment related to an existing retiree drug
subsidy (RDS) available to sponsors of retiree health benefit
plans that provide a benefit that is at least actuarially equiva-
lent to the benefits under Medicare Part D. As a result of
the PPACA, RDS payments will effectively become taxable
in tax years beginning in 2013, by requiring the amount of
the subsidy received to be offset against our deduction for
health care expenses. The provisions of the PPACA required
us to record the effect of this tax law change beginning in our
second quarter of 2010, and consequently we recorded a one-
time related tax charge of $41million in the second quarter of
2010. In the first quarter of 2012, we began pre-paying funds
within our 401(h) voluntary employee beneficiary associations
(VEBA) trust to fully cover prescription drug benefit liabilities
for Medicare eligible retirees. As a result, the receipt of future
Medicare subsidy payments for prescription drugs will not be
taxable and consequently we recorded a $55million tax ben-
efit reflecting this change in the first quarter of 2012.
Note— Restructuring, Impairment and
Integration Charges
In 2012, we incurred restructuring charges of $279million
($215 million after-tax or $0.14 per share) in conjunction
with our Productivity Plan. In 2011, we incurred restructuring
charges of $383 million ($286million after-tax or $0.18 per
share) in conjunction with our Productivity Plan. All of these
charges were recorded in selling, general and administrative
expenses and primarily relate to severance and other employee
related costs, asset impairments, and consulting and contract
termination costs. The Productivity Plan includes actions in
every aspect of our business that we believe will strengthen
our complementary food, snack and beverage businesses by
leveraging new technologies and processes across PepsiCo’s
operations; go-to-market and information systems; height-
ening the focus on best practice sharing across the globe;
consolidating manufacturing, warehouse and sales facilities;
and implementing simplified organization structures, with
wider spans of control and fewer layers of management.
The Productivity Plan is expected to enhance PepsiCo’s
cost-competitiveness, provide a source of funding for future
brand-building and innovation initiatives, and serve as a financial
cushion for potential macroeconomic uncertainty.
A summary of our Productivity Plan charges in 2012 was
as follows:
Severance
and Other
Employee Costs
Asset
Impairments
Other
Costs Total
FLNA $ 14 $ 8 $ 16 $ 38
QFNA – – 9 9
LAF 15 8 27 50
PAB 34 43 25 102
Europe 14 16 12 42
AMEA 18 – 10 28
Corporate (6) – 16 10
$ 89 $ 75 $ 115 $ 279
A summary of our Productivity Plan charges in 2011 was
as follows:
Severance
and Other
Employee Costs
Other
Costs Total
FLNA $ 74 $ 2 $ 76
QFNA 18 – 18
LAF 46 2 48
PAB 75 6 81
Europe 65 12 77
AMEA 9 – 9
Corporate 40 34 74
$ 327 $ 56 $ 383
2012 PEPSICO ANNUAL REPORT80
Notes to Consolidated Financial Statements