Basis of Presentation and Significant Accounting Policies

In this Form 10-Q, unless otherwise stated, the terms “we,” “us,” “our” and the “company” refer to Campbell Soup Company and its consolidated subsidiaries.

The financial statements reflect all adjustments which are, in our opinion, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods. The accounting policies we used in preparing these financial statements are substantially consistent with those we applied in our Annual Report on Form 10-K for the year ended August 2, 2015, with the exception of the changes in accounting policy related to our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets as described below. As of the beginning of 2016, we are managing our operations under a new structure and have modified our segment reporting accordingly. Certain amounts in prior-year financial statements were reclassified to conform to the current-year presentation. The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year. Our fiscal year ends on the Sunday nearest July 31.

In 2016, we elected to change our method of accounting for the recognition of actuarial gains and losses for defined benefit pension and postretirement plans and the calculation of expected return on pension plan assets. Historically, actuarial gains and losses associated with benefit obligations were recognized in Accumulated other comprehensive loss in the Consolidated Balance Sheets and were amortized into earnings over the remaining service life of participants to the extent that the amounts were in excess of a corridor. Under the new policy, actuarial gains and losses will be recognized immediately in our Consolidated Statements of Earnings as of the measurement date, which is our fiscal year end, or more frequently if an interim remeasurement is required. In addition, we will no longer use a market-related value of plan assets, which is an average value, to determine the expected return on assets but rather will use the fair value of plan assets. We believe the new policies will provide greater transparency to ongoing operating results and better reflect the impact of current market conditions on the obligations and assets.

The changes in policy were applied retrospectively to all periods presented. As of August 4, 2014, the cumulative effect of these changes on the opening balance sheet was a $715 decrease to Earnings retained in the business, a decrease of $2 to Inventories, a $714 reduction to Accumulated other comprehensive loss, and an increase of $1 to Other current assets.

We recognized mark-to-market gains of $7 ($4 after tax, or $.01 per share) in the second quarter of 2016 and year-to-date mark-to-market losses of $121 ($76 after tax, or $.24 per share) in 2016 as certain U.S. plans were remeasured. The remeasurements were required due to a high level of lump sum payments to certain vested plan participants arising primarily out of a limited-time offer to accept a single lump sum in lieu of future annuity payments. No remeasurement was required in the prior year.

The impacts of the changes in policy to the consolidated financial statements are summarized below:



	Three months ended January 31, 2016							Three months ended February 1, 2015
Consolidated Statements of Earnings	Prior Accounting Principles		Effect of Accounting Change			As Reported		Previously Reported		Effect of Accounting Change			Recast
Cost of products sold	$	1,404	$	(22	)	$	1,382	$	1,506	$	(15	)	$	1,491
Marketing and selling expenses	233		(10		)	223		242		(3		)	239
Administrative expenses	154		(8		)	146		140		(5		)	135
Research and development expenses	26		(3		)	23		27		(2		)	25
Earnings before interest and taxes	371		43			414		312		25			337
Earnings before taxes	344		43			387		287		25			312
Taxes on earnings	108		14			122		80		10			90
Net earnings	236		29			265		207		15			222
Net earnings attributable to Campbell Soup Company	$	236	$	29		$	265	$	207	$	15		$	222
Earnings per share — Basic	$	.76	$	.09		$	.85	$	.66	$	.05		$	.71
Earnings per share — Diluted	$	.76	$	.09		$	.85	$	.66	$	.05		$	.71



	Six months ended January 31, 2016							Six months ended February 1, 2015
Consolidated Statements of Earnings	Prior Accounting Principles		Effect of Accounting Change			As Reported		Previously Reported		Effect of Accounting Change			Recast
Cost of products sold	$	2,816	$	14		$	2,830	$	2,978	$	(27	)	$	2,951
Marketing and selling expenses	449		—			449		489		(7		)	482
Administrative expenses	303		(1		)	302		275		(9		)	266
Research and development expenses	55		—			55		56		(3		)	53
Earnings before interest and taxes	742		(13		)	729		680		46			726
Earnings before taxes	687		(13		)	674		630		46			676
Taxes on earnings	218		(3		)	215		189		17			206
Net earnings	469		(10		)	459		441		29			470
Net earnings attributable to Campbell Soup Company	$	469	$	(10	)	$	459	$	441	$	29		$	470
Earnings per share - Basic	$	1.51	$	(.03	)	$	1.48	$	1.41	$	.09		$	1.50
Earnings per share - Diluted ⁽¹⁾	$	1.50	$	(.03	)	$	1.47	$	1.40	$	.09		$	1.50

^{________________________________________________________}

⁽¹⁾ The sum of the individual per share amounts may not add due to rounding.



	Three months ended January 31, 2016									Three months ended February 1, 2015
Consolidated Statements of Comprehensive Income	Prior Accounting Principles			Effect of Accounting Change			As Reported			Previously Reported			Effect of Accounting Change			Recast
Foreign currency translation:
Foreign currency translation adjustments	$	(17	)	$	—		$	(17	)	$	(167	)	$	10		$	(157	)
Pension and other postretirement benefits:
Net actuarial gain (loss) arising during the period	23			(23		)	—			13			(13		)	—
Reclassification of net actuarial loss included in net earnings	32			(32		)	—			24			(24		)	—
Tax benefit / (expense)	$	(20	)	$	20		$	—		$	(12	)	$	12		$	—



	Six months ended January 31, 2016									Six months ended February 1, 2015
Consolidated Statements of Comprehensive Income	Prior Accounting Principles			Effect of Accounting Change			As Reported			Previously Reported			Effect of Accounting Change			Recast
Foreign currency translation:
Foreign currency translation adjustments	$	(43	)	$	—		$	(43	)	$	(250	)	$	12		$	(238	)
Pension and other postretirement benefits:
Net actuarial gain (loss) arising during the period	(113		)	113			—			17			(17		)	—
Reclassification of net actuarial loss included in net earnings	109			(109		)	—			48			(48		)	—
Tax benefit / (expense)	$	2		$	(2	)	$	—		$	(22	)	$	22		$	—



	January 31, 2016									August 2, 2015
Consolidated Balance Sheets	Prior Accounting Principles			Effect of Accounting Change			As Reported			Previously Reported			Effect of Accounting Change			Recast
Inventories	$	862		$	(7	)	$	855		$	993		$	2		$	995
Other current assets	199			2			201			199			(1		)	198
Accrued income taxes	73			2			75			29			—			29
Earnings retained in the business	2,767			(750		)	2,017			2,494			(740		)	1,754
Accumulated other comprehensive (loss) income	$	(966	)	$	743		$	(223	)	$	(909	)	$	741		$	(168	)



	Six months ended January 31, 2016									Six months ended February 1, 2015
Consolidated Statements of Cash Flows	Prior Accounting Principles			Effect of Accounting Change			As Reported			Previously Reported			Effect of Accounting Change			Recast
Cash flow from operating activities:
Net earnings	$	469		$	(10	)	$	459		$	441		$	29		$	470
Pension and postretirement benefit expense / (income)	—			109			109			—			(12		)	(12		)
Deferred income taxes	(9		)	(5		)	(14		)	1			17			18
Other, net	109			(105		)	4			46			(36		)	10
Inventories	124			9			133			71			2			73
Accounts payable and accrued liabilities	(32		)	2			(30		)	(16		)	—			(16		)
Net cash provided by operating activities	$	727		$	—		$	727		$	584		$	—		$	584