The accompanying consolidated financial statements have been prepared in accordance with GAAP and include the consolidated accounts of PepsiCo, Inc. and the affiliates that we control. In addition, we include our share of the results of certain other affiliates using the equity method based on our economic ownership interest, our ability to exercise significant influence over the operating or financial decisions of these affiliates or our ability to direct their economic resources. We do not control these other affiliates, as our ownership in these other affiliates is generally 50% or less. Intercompany balances and transactions are eliminated. As a result of exchange restrictions and other operating restrictions, we do not have control over our Venezuelan subsidiaries. As such, our Venezuelan subsidiaries are not included within our consolidated financial results for any period presented.

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, including merchandising activities, are included in selling, general and administrative expenses.

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities. Estimates are used in determining, among other items, sales incentives accruals, tax reserves, share-based compensation, pension and retiree medical accruals, amounts and useful lives for intangible assets and future cash flows associated with impairment testing for indefinite-lived intangible assets, goodwill and other long-lived assets. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. Additionally, the business and economic uncertainty resulting from the ongoing conflicts in Ukraine and the Middle East and the high interest rate and inflationary cost environment has made such estimates and assumptions more difficult to calculate. As future events and their effect cannot be determined with precision, actual results could differ significantly from those estimates.

Our fiscal year ends on the last Saturday of each December, resulting in a 53rd reporting week every five or six years, including in our 2022 financial results. While our North America financial results are reported on a weekly calendar basis, substantially all of our international operations reported on a monthly calendar basis prior to the fourth quarter of 2021. Beginning in the fourth quarter of 2021, all of our international operations reported on a monthly calendar basis. This change did not have a material impact on our consolidated financial statements. The following chart details our quarterly reporting schedule:

Quarter

United States and Canada

International

First Quarter

12 weeks

January and February

Second Quarter

12 weeks

March, April and May

Third Quarter

12 weeks

June, July and August

Fourth Quarter

16 weeks (17 weeks for 2022)

September, October, November and December

Unless otherwise noted, 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. Certain reclassifications were made to the prior year’s consolidated financial statements to conform to the current year presentation.

Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of beverages and convenient foods, serving customers and consumers in more than 200 countries and territories with our largest operations in the United States, Mexico, Canada, Russia, China, the United Kingdom, Brazil and South Africa.

The expense allocated to our divisions excludes any impact of changes in our assumptions during the year which reflect market conditions over which division management has no control. Therefore, any variances between allocated expense and our actual expense are recognized in corporate unallocated expenses.

Pension and retiree medical service costs measured at fixed discount rates are reflected in division results. The variance between the fixed discount rate used to determine the service cost reflected in division results and the discount rate as disclosed in Note 7 is reflected in corporate unallocated expenses.

We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore, the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses. These derivatives hedge underlying commodity price risk and were not entered into for trading or speculative purposes.


	Net Revenue						Operating Profit/(Loss)
	2023		2022		2021		2023(a)		2022(a)		2021
FLNA	$	24,914	$	23,291	$	19,608	$	6,755	$	6,135	$	5,633
QFNA (b)	3,101		3,160		2,751		492		604		578
PBNA (c)	27,626		26,213		25,276		2,584		5,426		2,442
LatAm	11,654		9,779		8,108		2,252		1,627		1,369
Europe (c)	13,234		12,724		13,038		767		(1,380)		1,292
AMESA	6,139		6,438		6,078		807		666		858
APAC	4,803		4,787		4,615		713		537		673
Total division	91,471		86,392		79,474		14,370		13,615		12,845
Corporate unallocated expenses	—		—		—		(2,384)		(2,103)		(1,683)
Total	$	91,471	$	86,392	$	79,474	$	11,986	$	11,512	$	11,162

(b)In 2023, operating profit included a pre-tax charge of $136 million ($104 million after-tax or $0.07 per share) in cost of sales for product returns, inventory write-offs and customer and consumer-related costs associated with the Quaker Recall.

(c)In 2022, we recorded a gain of $3,029 million and $292 million in our PBNA and Europe divisions, respectively, associated with the Juice Transaction. The total after-tax amount was $2,888 million or $2.08 per share. See Note 13 for further information.

Our primary performance obligation is the distribution and sales of beverage and convenient food products to our customers. The following table reflects the percentage of net revenue generated between our beverage business and our convenient food business for each of our international divisions, as well as our consolidated net revenue:


	2023				2022				2021
	Beverages(a)		Convenient Foods		Beverages(a)		Convenient Foods		Beverages(a)		Convenient Foods
LatAm	9	%	91	%	9	%	91	%	10	%	90	%
Europe	48	%	52	%	50	%	50	%	54	%	46	%
AMESA	29	%	71	%	30	%	70	%	31	%	69	%
APAC	23	%	77	%	23	%	77	%	22	%	78	%
PepsiCo	41	%	59	%	42	%	58	%	45	%	55	%

(a)Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe divisions, is 35%, 37% and 40% of our consolidated net revenue in 2023, 2022 and 2021, respectively. Generally, our finished goods beverage operations produce higher net revenue, but lower operating margins as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages.




	Cost of sales		Selling, general and administrative expenses		Impairment of intangible assets(a)		Total
Impairment charges related to intangible assets	$	—	$	—	$	1,198	$	1,198
Impairment charges related to property, plant and equipment	103		22		—		125
Allowance for expected credit losses	—		12		—		12
Allowance for inventory write downs	28		1		—		29
Other	9		42		—		51
Total	$	140	$	77	$	1,198	$	1,415
After-tax amount							$	1,124
Impact on net income attributable to PepsiCo per common share							$	(0.81)

In 2023, a pre-tax credit of $7 million ($7 million after-tax or $0.01 per share) was recorded in our Europe division, primarily in selling, general and administrative expenses, representing adjustments for changes in estimates of previously recorded amounts. In addition, a tax benefit of $68 million ($0.05 per share) was recorded in our Europe division related to the impairment of certain consolidated investments.




	Cost of sales		Selling, general and administrative expenses		Impairment of intangible assets(a)		Total
PBNA	$	26	$	8	$	126	$	160	Impairment and other charges associated with distribution rights and inventory due to the termination of Bang energy drinks distribution agreement
LatAm	—		35		36		71		Loss on sale and impairment of intangible assets related to the sale of certain non-strategic brands



Europe	1		10		242		253		Primarily impairment of intangible assets related to the discontinuation or repositioning of certain juice and dairy brands in Russia
AMESA	29		121		9		159		Primarily impairment of investment, property, plant and equipment and intangible assets related to the sale or discontinuation of non-strategic investment and brands
APAC	5		—		—		5		Impairment of property, plant and equipment related to the discontinuation of a non-strategic brand in China

Total	$	61	$	174	$	413	$	648
After-tax amount							$	522
Impact on net income attributable to PepsiCo per common share							$	(0.38)

In 2023, a pre-tax credit of $13 million ($13 million after-tax or $0.01 per share) was recorded in our AMESA division, with $9 million in selling, general and administrative expenses and $4 million in cost of sales. In addition, a pre-tax charge of $2 million ($1 million after-tax with a nominal amount per share) was recorded in our LatAm division in selling, general and administrative expenses. Both of these amounts represent adjustments for changes in estimates of previously recorded amounts.


	Other impairment charges
	2023						2022
	Selling, general and administrative expenses		Impairment of intangible assets(a)		Total		Impairment of intangible assets(a)
FLNA	$	—	$	—	$	—	$	88	Related to a baked fruit convenient food brand
PBNA	321		—		321		—		Includes our proportionate share of TBG’s indefinite-lived intangible assets impairment and other-than-temporary impairment of our investment in TBG
Europe	—		862		862		1,264		Related to the SodaStream brand and goodwill
AMESA	—		6		6		31		Related to brands from the Pioneer Foods acquisition
APAC	—		59		59		172		Related to the Be & Cheery brand
Total	$	321	$	927	$	1,248	$	1,555
After-tax amount					$	1,033	$	1,301
Impact on net income attributable to PepsiCo per common share					$	(0.75)	$	(0.94)

Operating profit includes certain pre-tax charges taken as a result of the COVID-19 pandemic related to incremental employee compensation costs, such as certain leave benefits and labor costs, employee protection costs, allowances for expected credit losses and upfront payments to customers and their related adjustments for changes in estimates as conditions improve. These pre-tax charges were not significant in 2023. In 2022 and 2021, these pre-tax charges by division were as follows:

Corporate unallocated expenses include costs of our corporate headquarters, centrally managed initiatives such as commodity derivative gains and losses, foreign exchange transaction gains and losses, our ongoing business transformation initiatives, unallocated research and development costs, unallocated insurance and benefit programs, tax-related contingent consideration, certain acquisition and divestiture-related charges, certain gains and losses on equity investments, as well as certain other items.


	Total Assets				Capital Spending
	2023		2022		2023		2022		2021
FLNA	$	12,176	$	11,042	$	1,341	$	1,464	$	1,411
QFNA	1,199		1,245		103		93		92
PBNA	41,355		40,286		1,723		1,714		1,275
LatAm	9,281		7,886		841		581		461
Europe	15,615		16,230		551		668		752
AMESA	6,389		6,143		391		307		325
APAC	5,630		5,452		284		241		203
Total division	91,645		88,284		5,234		5,068		4,519
Corporate (a)	8,850		3,903		284		139		106
Total	$	100,495	$	92,187	$	5,518	$	5,207	$	4,625

(a)Corporate assets consist principally of certain cash and cash equivalents, restricted cash, short-term investments, derivative instruments, property, plant and equipment, pension plan assets and tax assets. In 2023, the change in assets was primarily due to an increase in cash and cash equivalents.


	Amortization of Intangible Assets						Depreciation and Other Amortization
	2023		2022		2021		2023		2022		2021
FLNA	$	11	$	11	$	11	$	736	$	653	$	594
QFNA	—		—		—		51		47		46
PBNA	22		22		25		1,003		930		926
LatAm	2		3		4		372		306		283
Europe	29		30		37		347		357		364
AMESA	3		4		5		167		179		181
APAC	8		8		9		99		92		102
Total division	75		78		91		2,775		2,564		2,496
Corporate	—		—		—		98		121		123
Total	$	75	$	78	$	91	$	2,873	$	2,685	$	2,619


	Net Revenue						Long-Lived Assets(a)
	2023		2022		2021		2023		2022
United States	$	52,165	$	49,390	$	44,545	$	41,234	$	38,240
Mexico	7,011		5,472		4,580		2,509		1,933
Canada	3,722		3,536		3,405		2,815		2,678
Russia	3,566		4,118		3,426		1,986		2,538
China	2,703		2,752		2,679		1,510		1,517
United Kingdom	1,946		1,844		2,102		868		847
Brazil	1,779		1,617		1,252		573		446
South Africa	1,707		1,837		2,008		1,305		1,327
All other countries	16,872		15,826		15,477		11,226		12,439
Total	$	91,471	$	86,392	$	79,474	$	64,026	$	61,965

(a)Long-lived assets represent property, plant and equipment, indefinite-lived intangible assets, amortizable intangible assets, investments in noncontrolled affiliates and other investments included in other assets. See Notes 2 and 15 for further information on property, plant and equipment. See Notes 2 and 4 for further information on goodwill and other intangible assets. See Notes 9 and 15 for further information on other assets. These assets are reported in the country where they are primarily used.