For periods prior to the Spin-off, PepsiCo calculated income tax expense, to the extent possible, as if we had filed separate income tax returns. As PepsiCo managed its tax position on a consolidated basis, which takes into account the results of all of its businesses, our historical effective tax rates prior to 1998 are not indicative of our future tax rates.

COMPREHENSIVE INCOME. Effective December 28, 1997, we adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This Statement requires that all items recognized under accounting standards as components of comprehensive earnings be reported in the financial statements. We have included these disclosures in the accompanying Consolidated Statement of Shareholders’ (Deficit) Equity and Comprehensive Income. We have classified items of other comprehensive earnings by their nature in our financial statements. Prior years’ financial statements have been reclassified to conform to these requirements.

Accumulated Other Comprehensive Income includes reclassification amounts as follows:

Accumulated Other Comprehensive Income consisted of the following components as of December 26, 1998 and December 27, 1997:

SEGMENT DISCLOSURES.    Effective December 28, 1997, we adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"). This Statement supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise" and requires that a public company report annual and interim financial and descriptive information about its reportable operating segments. Operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. This Statement allows aggregation of similar operating segments into a single operating segment if the businesses are considered similar under the criteria of this Statement. For purposes of applying this Statement, we consider our U.S. Core Businesses to be similar and therefore have aggregated them. As required, our financial information has been reported on the basis that we use internally for evaluating segment performance and deciding how to allocate resources to segments. Upon adoption of SFAS 131, certain corporate expenses PepsiCo previously allocated to our business segments are now reported as unallocated expenses. We have restated prior year amounts to be comparable to the current year presentation.


INTERNAL DEVELOPMENT COSTS.   Effective March 18, 1998, we adopted Emerging Issues Task Force Issue No. 97-11 ("EITF 97-11"), "Accounting for Internal Costs Relating to Real Estate Property Acquisitions." EITF 97-11 limits the capitalization of internal real estate acquisition costs to those site-specific costs incurred subsequent to the time that the real estate acquisition is considered probable. We consider acquisition of the property probable upon final site approval. Prior to the adoption of EITF 97-11, all preacquisition real estate activities were considered capitalizable. The adoption of EITF 97-11 resulted in additional expenses of $6 million ($3 million after-tax) in 1998 for internal development costs no longer capitalizable.

FISCAL YEAR. Our fiscal year ends on the last Saturday in December and, as a result, a fifty-third week is added every five or six years. Fiscal years 1998, 1997 and 1996 comprised 52 weeks. The first, second and third quarters of each year include 12 weeks each, while the fourth quarter includes 16 weeks. Our subsidiaries operate on similar fiscal calendars with period end dates suited to their businesses. Period end dates are within one week of TRICON’s period end date with the exception of our international businesses, which close one period or month earlier to facilitate consolidated reporting.

DIRECT MARKETING COSTS. We report substantially all of our direct marketing costs in occupancy and other operating expenses in the Consolidated Statement of Operations, which include costs of advertising and other marketing activities. We charge direct marketing costs to expense ratably in relation to revenues over the year in which incurred. Direct marketing costs deferred at year-end consist of media and related ad production costs. We expense these costs in the first year the media or ad is used. Our advertising expenses were $462 million, $544 million and $571 million in 1998, 1997 and 1996, respectively.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses, which we expense as incurred, were $21 million, $21 million and $20 million in 1998, 1997 and 1996, respectively.