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 losses of $128 ($80 after tax, or $.26 per share) in the first quarter of 2016 as certain U.S. plans were remeasured. The remeasurement was 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 first quarter of 2015.

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



	Three months ended November 1, 2015							Three months ended November 2, 2014
Consolidated Statements of Earnings	Prior Accounting Principles		Effect of Accounting Change			As Reported		Previously Reported		Effect of Accounting Change			Recast
Cost of products sold	$	1,412	$	36		$	1,448	$	1,472	$	(12	)	$	1,460
Marketing and selling expenses	216		10			226		247		(4		)	243
Administrative expenses	149		7			156		135		(4		)	131
Research and development expenses	29		3			32		29		(1		)	28
Earnings before interest and taxes	371		(56		)	315		368		21			389
Earnings before taxes	343		(56		)	287		343		21			364
Taxes on earnings	110		(17		)	93		109		7			116
Net earnings	233		(39		)	194		234		14			248
Net earnings attributable to Campbell Soup Company	$	233	$	(39	)	$	194	$	234	$	14		$	248
Earnings per share — Basic ⁽¹⁾	$	.75	$	(.13	)	$	.63	$	.75	$	.04		$	.79
Earnings per share — Diluted	$	.75	$	(.13	)	$	.62	$	.74	$	.04		$	.78

^{________________________________________________________}

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



	Three months ended November 1, 2015									Three months ended November 2, 2014
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	$	(26	)	$	—		$	(26	)	$	(83	)	$	2		$	(81	)
Pension and other postretirement benefits
Net actuarial gain (loss) arising during the period	(136		)	136			—			4			(4		)	—
Reclassification of net actuarial loss included in net earnings	77			(77		)	—			24			(24		)	—
Tax benefit / (expense)	$	22		$	(22	)	$	—		$	(10	)	$	10		$	—



	November 1, 2015									August 2, 2015
Consolidated Balance Sheets	Prior Accounting Principles			Effect of Accounting Change			As Reported			Previously Reported			Effect of Accounting Change			Recast
Inventories	$	1,044		$	5		$	1,049		$	993		$	2		$	995
Other current assets	198			(2		)	196			199			(1		)	198
Accrued income taxes	119			4			123			29			—			29
Earnings retained in the business	2,629			(779		)	1,850			2,494			(740		)	1,754
Accumulated other comprehensive (loss) income	$	(978	)	778			$	(200	)	$	(909	)	741			$	(168	)



	Three months ended November 1, 2015									Three months ended November 2, 2014
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	$	233		$	(39	)	$	194		$	234		$	14		$	248
Pension and postretirement benefit expense / (income)	—			133			133			—			(6		)	(6		)
Deferred income taxes	(14		)	(21		)	(35		)	2			7			9
Other, net	73			(74		)	(1		)	19			(18		)	1
Inventories	(53		)	(3		)	(56		)	(98		)	3			(95		)
Accounts payable and accrued liabilities	$	68		$	4		$	72		$	132		—			$	132
Net cash provided by operating activities	$	218		$	—		$	218		$	188		$	—		$	188