Pepsi 2008 Annual Report Download - page 76

74 PepsiCo, Inc. 2008 Annual Report
Notes to Consolidated Financial Statements
RESEARCH AND DEVELOPMENT
We engage in a variety of research and development activities.
These activities principally involve the development of new
products, improvement in the quality of existing products,
improvement and modernization of production processes, and
the development and implementation of new technologies to
enhance the quality and value of both current and proposed
product lines. Consumer research is excluded from research
and development costs and included in other marketing costs.
Research and development costs were $388 million in 2008,
$364 million in 2007 and $282 million in 2006 and are reported
within selling, general and administrative expenses.
OTHER SIGNIFICANT ACCOUNTING POLICIES
Our other signicant accounting policies are disclosed as follows:
•฀ Property, Plant and Equipment and Intangible Assets – Note 4,
and for additional unaudited information on brands and good-
will, see “Our Critical Accounting Policies” in Management’s
Discussion and Analysis.
•฀ Income Taxes – Note 5, and for additional unaudited informa-
tion, see “Our Critical Accounting Policies” in Management’s
Discussion and Analysis.
•฀ Stock-Based Compensation – Note 6.
•฀ Pension, Retiree Medical and Savings Plans – Note 7, and for
additional unaudited information, see “Our Critical Accounting
Policies” in Management’s Discussion and Analysis.
•฀ Financial Instruments – Note 10, and for additional unaudited
information, see “Our Business Risks” in Management’s
Discussion and Analysis.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2007, the FASB issued SFAS 159 which permits
entities to choose to measure many nancial instruments and
certain other items at fair value. We adopted SFAS 159 as of
the beginning of our 2008 scal year and our adoption did not
impact our nancial statements.
In December 2007, the FASB issued SFAS 141R, to improve,
simplify and converge internationally the accounting for business
combinations. SFAS 141R continues the movement toward the
greater use of fair value in nancial reporting and increased trans-
parency through expanded disclosures. It changes how business
acquisitions are accounted for and will impact nancial statements
both on the acquisition date and in subsequent periods. The
provisions of SFAS 141R are effective as of the beginning of
our 2009 scal year, with the exception of adjustments made to
valuation allowances on deferred taxes and acquired tax contin-
gencies. Adjustments made to valuation allowances on deferred
taxes and acquired tax contingencies associated with acquisitions
that closed prior to the beginning of our 2009 scal year would
apply the provisions of SFAS 141R. Future adjustments made to
valuation allowances on deferred taxes and acquired tax contin-
gencies associated with acquisitions that closed prior to the
beginning of our 2009 scal year would apply the provisions of
SFAS 141R and will be evaluated based on the outcome of these
matters. We do not expect the adoption of SFAS 141R to have a
material impact on our nancial statements.
In December 2007, the FASB issued SFAS 160. SFAS 160
amends ARB 51 to establish new standards that will govern the
accounting for and reporting of (1) noncontrolling interests in par-
tially owned consolidated subsidiaries and (2) the loss of control
of subsidiaries. The provisions of SFAS 160 are effective as of the
beginning of our 2009 scal year on a prospective basis. We do
not expect our adoption of SFAS 160 to have a signicant impact
on our nancial statements. In the rst quarter of 2009, we will
include the required disclosures for all periods presented.
In March 2008, the FASB issued SFAS 161 which amends
and expands the disclosure requirements of SFAS 133 to provide
an enhanced understanding of the use of derivative instruments,
how they are accounted for under SFAS 133 and their effect
on nancial position, nancial performance and cash ows. The
disclosure provisions of SFAS 161 are effective as of the begin-
ning of our 2009 scal year.
Note 3 Restructuring and Impairment
Charges
2008 RESTRUCTURING AND IMPAIRMENT CHARGE
In 2008, we incurred a charge of $543 million ($408 million
after-tax or $0.25 per share) in conjunction with our Productivity
for Growth program. The program includes actions in all divisions
of the business that we believe will increase cost competitiveness
across the supply chain, upgrade and streamline our product
portfolio, and simplify the organization for more effective and
timely decision-making. Approximately $455 million of the charge
was recorded in selling, general and administrative expenses,
with the remainder recorded in cost of sales. Substantially all
cash payments related to this charge are expected to be paid
by the end of 2009.