Pepsi 2014 Annual Report Download - page 109

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89
For additional unaudited information on our income tax policies, including our reserves for income taxes,
see “Our Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
Reserves
A number of years may elapse before a particular matter, for which we have established a reserve, is audited
and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. Our
major taxing jurisdictions and the related open tax audits are as follows:
Jurisdiction Years Open to
Audit
Years Currently
Under Audit
United States 2010-2013 2010-2011
Mexico 2009-2013 None
United Kingdom 2012-2013 None
Canada (Domestic) 2010-2013 2010-2012
Canada (International) 2008-2013 2008-2012
Russia 2009-2013 2009-2013
While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter,
we believe that our reserves reflect the probable outcome of known tax contingencies. We adjust these
reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any
particular issue would usually require the use of cash. Favorable resolution would be recognized as a reduction
to our annual tax rate in the year of resolution. For further unaudited information on the impact of the resolution
of open tax issues, see “Other Consolidated Results” in Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
We believe that it is reasonably possible that our reserves for uncertain tax positions could decrease by
approximately $300 million within the next 12 months as a result of the completion of audits in various
jurisdictions.
In the fourth quarter of 2013, we reached an agreement with the IRS resolving all open matters related to
the audits for taxable years 2003 through 2009. As a result, we made U.S. Federal net cash tax payments of
$758 million, including interest. The settlement reduced our 2013 net cash provided by operating activities
and our reserves for uncertain tax positions for the tax years 2003 through 2012 and resulted in a non-cash
tax benefit of $209 million in the fourth quarter of 2013. In addition, payments for other U.S. Federal, state
and local tax matters related to open tax years totaling $226 million were made in 2013. In 2012, we received
a favorable tax court decision related to the classification of financial instruments resulting in a non-cash tax
benefit of $217 million in the fourth quarter of 2012. See additional unaudited information in “Items Affecting
Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As of December 27, 2014, the total gross amount of reserves for income taxes, reported in other liabilities,
was $1,587 million. We accrue interest related to reserves for income taxes in our provision for income taxes
and any associated penalties are recorded in selling, general and administrative expenses. The gross amount
of interest accrued, reported in other liabilities, was $141 million as of December 27, 2014, of which $31
million of expense was recognized in 2014. The gross amount of interest accrued, reported in other liabilities,
was $164 million as of December 28, 2013, of which $36 million of expense was recognized in 2013.