Pepsi 2015 Annual Report Download - page 104

Table of Contents
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flows or income consistent with management’s strategic business plans, annual sales growth rates, perpetuity
growth assumptions and the selection of assumptions underlying a discount rate (weighted average cost of
capital) based on market data available at the time. Significant management judgment is necessary to estimate
the impact of competitive operating, macroeconomic and other factors to estimate future levels of sales,
operating profit or cash flows. All assumptions used in our impairment evaluations for nonamortizable
intangible assets, such as forecasted growth rates and weighted-average cost of capital, are based on the best
available market information and are consistent with our internal forecasts and operating plans.
Amortizable intangible assets are only evaluated for impairment upon a significant change in the operating
or macroeconomic environment. If an evaluation of the undiscounted future cash flows indicates impairment,
the asset is written down to its estimated fair value, which is based on its discounted future cash flows.
For additional unaudited information on goodwill and other intangible assets, see “Our Critical Accounting
Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Other Significant Accounting Policies
Our other significant accounting policies are disclosed as follows:
• Basis of Presentation - See Note 1 - Basis of Presentation for a description of our policies regarding
use of estimates, basis of presentation and consolidation.
• Property, Plant and Equipment and Intangible Assets – Note 4.
• Income Taxes – Note 5, and for additional unaudited information see, “Our Critical Accounting
Policies” in Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
• Share-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 of Financial Condition
and Results of Operations.
• Financial Instruments – Note 10, and for additional unaudited information, see “Our Business Risks”
in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
• Inventories – Note 14. Inventories are valued at the lower of cost or market. Cost is determined using
the average; first-in, first-out (FIFO) or last-in, first-out (LIFO) methods.
• Translation of Financial Statements of Foreign Subsidiaries – Financial statements of foreign
subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities
and weighted-average exchange rates for revenues and expenses. Adjustments resulting from
translating net assets are reported as a separate component of accumulated other comprehensive loss
within common shareholders’ equity as currency translation adjustment.
Recently Issued Accounting Pronouncements - Adopted
In 2015, the Financial Accounting Standards Board (FASB) issued guidance which requires that debt issuance
costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the
carrying amount of that debt liability. We adopted the provisions of this guidance as of the beginning of our
second quarter of 2015, and that adoption did not have a material impact on our financial statements.
Recently Issued Accounting Pronouncements - Not Yet Adopted
In 2016, the FASB issued guidance that generally requires companies to measure investments in other entities,
except those accounted for under the equity method, at fair value and recognize any changes in fair value in
net income. The standard is effective in 2018 and early adoption is not permitted. We are currently evaluating
the impact of this guidance on our financial statements.