ANYTIMEkANYPLACEkANYWHERE - Heinz

Revenue Recognition: The company generally recognizes revenue upon shipment of goods
to customers or upon performance of services. However, in certain overseas countries,
revenue is recognized upon receipt of the product by the customer.
Advertising Expenses: Advertising costs are generally expensed in the year in which the
advertising first takes place.
Income Taxes: Deferred income taxes result primarily from temporary differences between
financial and tax reporting. If it is more likely than not that some portion or all of a deferred tax
asset will not be realized, a valuation allowance is recognized.
The company has not provided for possible U.S. taxes on the undistributed earnings of
foreign subsidiaries that are considered to be reinvested indefinitely. Calculation of the
unrecognized deferred tax liability for temporary differences related to these earnings is not
practicable. Where it is contemplated that earnings will be remitted, credit for foreign taxes
already paid generally will offset applicable U.S. income taxes. In cases where they will not
offset U.S. income taxes, appropriate provisions are included in the Consolidated Statements
of Income.
Stock-Based Employee Compensation Plans: Stock-based compensation is accounted for by
using the intrinsic value-based method in accordance with Accounting Principles Board
Opinion No. 25, ‘‘Accounting for Stock Issued to Employees.’’
Financial Instruments: The company uses derivative financial instruments for the purpose of
hedging currency, price and interest rate exposures which exist as part of ongoing business
operations. As a policy, the company does not engage in speculative or leveraged transactions,
nor does the company hold or issue financial instruments for trading purposes.
Interest Rate Swap Agreements: The company may utilize interest rate swap agreements
to lower funding costs or to alter interest rate exposure. Amounts paid or received on interest
rate swap agreements are deferred and recognized as adjustments to interest expense. Gains
and losses realized upon the settlement of such contracts are deferred and amortized to interest
expense over the remaining term of the debt instrument or are recognized immediately if the
underlying instrument is settled.
Foreign Currency Contracts: The company enters into forward, purchased option and swap
contracts to hedge transactions denominated in foreign currencies in order to reduce the
currency risk associated with fluctuating exchange rates. Such contracts are used primarily
to hedge certain intercompany cash flows, purchases and sales of certain raw materials
and finished goods and for payments arising from certain foreign currency denominated
obligations. Realized and unrealized gains and losses from instruments qualifying as hedges
are deferred as part of the cost basis of the underlying transaction. Realized and unrealized
gains and losses from foreign currency contracts used as economic hedges but not qualifying
for hedge accounting are recognized currently in miscellaneous income and expense.
Commodity Contracts: In connection with purchasing certain commodities for future
manufacturing requirements, the company enters into commodities futures and option
contracts, as deemed appropriate, to reduce the effect of price fluctuations. Such contracts
are accounted for as hedges, with gains and losses recognized as part of cost of products
sold, and generally have a term of less than one year.
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