Pepsi 2007 Annual Report Download - page 47

Sensitivity of Assumptions
A decrease in the discount rate or in
the expected rate of return assumptions
would increase pension expense. The
estimated impact of a 25-basis-point
decrease in the discount rate on 2008
pension expense is an increase of approxi-
mately $36 million. The estimated impact
on 2008 pension expense of a 25-basis-
point decrease in the expected rate of
return is an increase of approximately
$17 million.
See Note 7 regarding the sensitivity of
our retiree medical cost assumptions.
Future Funding
We make contributions to pension trusts
maintained to provide plan benefi ts for
certain pension plans. These contributions
are made in accordance with applicable
tax regulations that provide for current tax
deductions for our contributions, and tax-
ation to the employee only upon receipt of
plan benefi ts. Generally, we do not fund
our pension plans when our contributions
would not be currently deductible.
Our pension contributions for 2007
were $230 million, of which $92 million
was discretionary. In 2008, we expect
to make contributions of up to
$150 million with up to $75 million
expected to be discretionary. Our cash
payments for retiree medical are esti-
mated to be approximately $85 million
in 2008. As our retiree medical plans
are not subject to regulatory funding
requirements, we fund these plans on
a pay-as-you-go basis. Our pension and
retiree medical contributions are subject
to change as a result of many factors,
such as changes in interest rates, devia-
tions between actual and expected asset
returns, and changes in tax or other
benefi t laws. For estimated future benefi t
payments, including our pay-as-you-go
payments as well as those from trusts,
see Note 7.
Recent Accounting Pronouncements
In September 2006, the SEC issued Staff
Accounting Bulletin No. 108, Considering
the Effects of Prior Year Misstatements
when Quantifying Misstatements in
Current Year Financial Statements (SAB
108), to address diversity in practice
in quantifying fi nancial statement
misstatements. SAB 108 requires that
we quantify misstatements based on
their impact on each of our fi nancial
statements and related disclosures. On
December 30, 2006, we adopted SAB
108. Our adoption of SAB 108 did not
impact our fi nancial statements.
In September 2006, the FASB issued
SFAS 157, Fair Value Measurements (SFAS
157), which defi nes fair value, establishes
a framework for measuring fair value,
and expands disclosures about fair value
measurements. The provisions of SFAS
157 are effective as of the beginning of
our 2008 fi scal year. However, the FASB
deferred the effective date of SFAS 157,
until the beginning of our 2009 fi scal
year, as it relates to fair value measure-
ment requirements for nonfi nancial
assets and liabilities that are not remea-
sured at fair value on a recurring basis.
We are currently evaluating the impact
of adopting SFAS 157 on our fi nancial
statements. We do not expect our adop-
tion to have a material impact on our
fi nancial statements.
In February 2007, the FASB issued SFAS
159, The Fair Value Option for Financial
Assets and Financial Liabilities Including
an amendment of FASB Statement No.
115 (SFAS 159), which permits entities
to choose to measure many fi nancial
instruments and certain other items at
fair value. The provisions of SFAS 159 are
effective as of the beginning of our 2008
fi scal year. Our adoption of SFAS 159 will
not impact our fi nancial statements.
In December 2007, the FASB issued
SFAS 141 (revised 2007), Business
Combinations (SFAS 141R), and SFAS 160,
Noncontrolling Interests in Consolidated
Financial Statements (SFAS 160), to
improve, simplify, and converge inter-
nationally the accounting for business
combinations and the reporting of
noncontrolling interests in consolidated
fi nancial statements. The provisions of
SFAS 141R and SFAS 160 are effective as
of the beginning of our 2009 fi scal year.
We are currently evaluating the impact of
adopting SFAS 141R and SFAS 160 on our
fi nancial statements.
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