Summary
PepsiCo, Inc. (PEP) filed an 8-K on October 18, 2006, to report the conclusion of its consolidated income tax returns examination by the IRS for the years 1998-2002. The company has reached an agreement with the IRS on most adjustments, including those related to transfer pricing, acquisitions, the public offering of The Pepsi Bottling Group, and international snack food restructuring. This resolution is expected to result in a significant non-cash tax benefit for PepsiCo.
Key Highlights
- 1IRS examination for tax years 1998-2002 concluded with a Revenue Agent's Report (RAR) issued on October 17, 2006.
- 2PepsiCo has agreed to almost all adjustments proposed by the IRS in the RAR.
- 3Agreed adjustments cover significant areas including transfer pricing, acquisitions, the IPO of The Pepsi Bottling Group, and international snack food restructuring.
- 4One specific matter remains an exception to the agreed adjustments.
- 5PepsiCo expects to record a non-cash tax benefit of approximately $600 million in Q4 2006.
- 6This tax benefit is due to the reversal of previously established tax reserves following the IRS RAR issuance.
Frequently Asked Questions
The main event is the conclusion of the IRS's examination of PepsiCo's consolidated income tax returns for the years 1998 through 2002, and PepsiCo's agreement with most of the IRS's proposed adjustments.
PepsiCo expects to record a non-cash tax benefit of approximately $600 million in the fourth quarter of 2006. This is due to the reversal of tax reserves that were previously set aside.
Yes, while PepsiCo agreed with most adjustments, there is one specific matter that remains an exception to the agreement with the IRS.
The agreed adjustments pertained to several key areas, including transfer pricing, various acquisition transactions, the public offering of The Pepsi Bottling Group, Inc., and the restructuring of PepsiCo's international snack foods operations.