Basis of Presentation

6 Months Ended

Jun. 11, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Basis of Presentation and Our Divisions

Basis of Presentation

When used in this report, the terms “we,” “us,” “our,” “PepsiCo” and the “Company” mean PepsiCo, Inc. and its consolidated subsidiaries, collectively.

Our Condensed Consolidated Balance Sheet as of June 11, 2016 and Condensed Consolidated Statements of Income and Comprehensive Income for the 12 and 24 weeks ended June 11, 2016 and June 13, 2015, and the Condensed Consolidated Statements of Cash Flows and Equity for the 24 weeks ended June 11, 2016 and June 13, 2015 have not been audited. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended December 26, 2015. This report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 26, 2015. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 and 24 weeks ended June 11, 2016 are not necessarily indicative of the results expected for the full year.

Effective as of the end of the third quarter of 2015, we did not meet the accounting criteria for control over our wholly-owned Venezuelan subsidiaries and we no longer had significant influence over our beverage joint venture with our franchise bottler in Venezuela, and therefore we deconsolidated our Venezuelan subsidiaries from our consolidated financial statements and began accounting for our investments in our wholly-owned Venezuelan subsidiaries and our joint venture using the cost method of accounting. See further unaudited information in “Our Business Risks” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

While our financial results in the United States and Canada (North America) are reported on a 12-week basis, most of our international operations report on a monthly calendar basis for which the months of March, April and May are reflected in our second quarter results.

Our significant interim accounting policies include the recognition of a pro rata share of certain estimated annual sales incentives and certain advertising and marketing costs in proportion to revenue or volume, as applicable, and the recognition of income taxes using an estimated annual effective tax rate. Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw materials handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product are included in selling, general and administrative expenses.

The following information is unaudited. Tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Reclassifications were made to the prior year’s amounts to conform to the current year presentation, including the presentation of certain functional support costs associated with the manufacturing and production of our products within cost of sales. These costs were previously included in selling, general and administrative expenses. In the 12 and 24 weeks ended June 13, 2015, these reclassifications resulted in an increase in cost of sales of $84 million and $145 million, respectively, with a corresponding reduction to gross profit and selling, general and administrative expenses in the same periods. These reclassifications reflect changes in how we are classifying costs of certain support functions as a result of ongoing productivity and efficiency initiatives. These reclassifications had no impact on our consolidated net revenue, operating profit, net interest expense, provision for income taxes, net income or earnings per share.

Our Divisions

We are organized into six reportable segments (also referred to as divisions), as follows:


1)	Frito-Lay North America (FLNA);


2)	Quaker Foods North America (QFNA);


3)	North America Beverages (NAB), which includes all of our beverage businesses in North America;


4)	Latin America, which includes all of our beverage, food and snack businesses in Latin America;


5)	Europe Sub-Saharan Africa (ESSA), which includes all of our beverage, food and snack businesses in Europe and Sub-Saharan Africa; and


6)	Asia, Middle East and North Africa (AMENA), which includes all of our beverage, food and snack businesses in Asia, Middle East and North Africa.

Net revenue and operating profit of each division are as follows:



	12 Weeks Ended				24 Weeks Ended
Net Revenue	6/11/2016		6/13/2015		6/11/2016		6/13/2015
FLNA	$	3,564	$	3,452	$	6,982	$	6,771
QFNA	561		546		1,178		1,185
NAB	5,145		5,113		9,506		9,411
Latin America ^(a)	1,717		2,224		2,759		3,638
ESSA	2,660		2,813		4,019		4,309
AMENA	1,748		1,775		2,813		2,826
Total division	$	15,395	$	15,923	$	27,257	$	28,140



	12 Weeks Ended						24 Weeks Ended
Operating Profit	6/11/2016			6/13/2015			6/11/2016			6/13/2015
FLNA	$	1,083		$	1,007		$	2,101		$	1,927
QFNA ^(b)	146			132			312			231
NAB	881			833			1,366			1,286
Latin America ^(a)	242			355			417			574
ESSA	337			350			404			462
AMENA ^(c)	383			373			235			603
Total division	3,072			3,050			4,835			5,083
Corporate Unallocated
Mark-to-market net gains	100			39			146			38
Restructuring and impairment charges	(1		)	(1		)	(4		)	(7		)
Other	(207		)	(188		)	(394		)	(417		)
	$	2,964		$	2,900		$	4,583		$	4,697


(a)	Effective at the end of the third quarter of 2015, we deconsolidated our Venezuelan subsidiaries and began accounting for our investments using the cost method of accounting. Beginning with the fourth quarter of 2015, our financial results have not included the results of our Venezuelan businesses.


(b)	Operating profit for QFNA for the 24 weeks ended June 13, 2015 included a pre-tax impairment charge of $65 million associated with our Müller Quaker Dairy (MQD) joint venture investment.

(c)

Operating profit for AMENA for the 24 weeks ended June 11, 2016 includes a pre- and after-tax impairment charge of $373 million to reduce the value of our 5% indirect equity interest in Tingyi-Asahi Beverages Holding Co. Ltd. (TAB) to its estimated fair value. Operating profit for AMENA for the 24 weeks ended June 13, 2015 included a pre-tax gain of $39 million associated with refranchising a portion of our bottling operations in India.

Total assets of each division are as follows:



	Total Assets
	6/11/2016		12/26/2015
FLNA	$	5,640	$	5,375
QFNA	847		872
NAB	29,291		28,128
Latin America	4,505		4,284
ESSA	12,894		12,225
AMENA	5,628		5,901
Total division	58,805		56,785
Corporate ^(a)	13,906		12,882
	$	72,711	$	69,667


(a)	Corporate assets consist principally of certain cash and cash equivalents, short-term investments, derivative instruments, property, plant and equipment, and pension and tax assets.