Statement Of Income (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2008	Dec. 31, 2007	Dec. 31, 2006
Net revenues	$ 41,932	$ 35,858	$ 33,018
Cost of sales	28,088	23,656	21,190
Gross profit	13,844	12,202	11,828
Marketing, administration and research costs	8,862	7,587	7,032
Asset impairment and exit costs	1,024	440	999
Gain on redemption of United Biscuits investment	0	0	(251)
Losses / (gains) on divestitures, net	92	(14)	(117)
Amortization of intangibles	23	13	7
Operating income	3,843	4,176	4,158
Interest and other expense, net	1,240	604	510
Earnings from continuing operations before income taxes	2,603	3,572	3,648
Provision for income taxes	755	1,080	816
Earnings from continuing operations	1,848	2,492	2,832
Earnings and gain from discontinued operations, net of income taxes (Note 2)	1,045	232	233
Net earnings	2,893	2,724	3,065
Noncontrolling interest	9	3	5
Net earnings attributable to Kraft Foods	$ 2,884	$ 2,721	$ 3,060
Basic earnings per share attributable to Kraft Foods:
Continuing operations	$ 1.22	$ 1.56	$ 1.70
Discontinued operations	$ 0.70	$ 0.15	$ 0.14
Net earnings attributable to Kraft Foods	$ 1.92	$ 1.71	$ 1.84
Diluted earnings per share attributable to Kraft Foods:
Continuing operations	$ 1.21	$ 1.56	$ 1.70
Discontinued operations	$ 0.69	$ 0.14	$ 0.14
Net earnings attributable to Kraft Foods	$ 1.90	$ 1.70	$ 1.84
Dividends declared	$ 1.12	$ 1.04	$ 0.96

Statement Of Financial Position Classified (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2008	Dec. 31, 2007
ASSETS
Cash and cash equivalents	$ 1,244	$ 567
Receivables (net of allowances of $129 in 2008 and $94 in 2007)	4,704	5,197
Inventories, net	3,881	4,238
Deferred income taxes	804	572
Other current assets	828	302
Total current assets	11,461	10,876
Property, plant and equipment, net	9,917	10,778
Goodwill	27,581	31,193
Intangible assets, net	12,926	12,200
Prepaid pension assets	56	1,648
Other assets	1,232	1,437
TOTAL ASSETS	63,173	68,132
LIABILITIES
Short-term borrowings	897	7,385
Current portion of long-term debt	765	722
Accounts payable	3,373	4,065
Accrued marketing	1,803	1,833
Accrued employment costs	951	913
Other current liabilities	3,255	2,195
Total current liabilities	11,044	17,113
Long-term debt	18,589	12,902
Deferred income taxes	4,064	4,876
Accrued pension costs	2,367	810
Accrued postretirement health care costs	2,678	2,846
Other liabilities	2,075	2,140
TOTAL LIABILITIES	40,817	40,687
Contingencies (Note 13)	-	-
EQUITY
Common Stock, no par value (1,735,000,000 shares issued in 2008 and 2007)	0	0
Additional paid-in capital	23,563	23,445
Retained earnings	13,440	12,321
Accumulated other comprehensive losses	(5,994)	(1,835)
Treasury stock, at cost	(8,714)	(6,524)
Total Kraft Foods Shareholders' Equity	22,295	27,407
Noncontrolling interest	61	38
TOTAL EQUITY	22,356	27,445
TOTAL LIABILITIES AND EQUITY	$ 63,173	$ 68,132

Statement Of Shareholders Equity And Other Comprehensive Income (USD $) In Millions, unless otherwise specified	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive (Losses) / Earnings	Treasury Stock	Noncontrolling Interest
Beginning Balances at Dec. 31, 2005	$ 29,600	$ 0	$ 23,835	$ 9,434	$ (1,663)	$ (2,032)	$ 26
Comprehensive earnings / (losses):
Net earnings	3,065			3,060			5
Other comprehensive earnings / (losses), net of income taxes	647				645		2
Total comprehensive earnings / (losses)	3,712						7
Adoption of new benefit plan guidance	(2,051)				(2,051)
Exercise of stock options and issuance of other stock awards	145		(209)	202		152
Cash dividends declared ($1.12 per share in 2008, $1.04 per share in 2007 and $0.96 per share in 2006)	(1,587)			(1,587)
Dividends paid on noncontrolling interest and other activities	(7)						(7)
Common Stock repurchased	(1,250)					(1,250)
Ending Balances at Dec. 31, 2006	28,562	0	23,626	11,109	(3,069)	(3,130)	26
Comprehensive earnings / (losses):
Net earnings	2,724			2,721			3
Other comprehensive earnings / (losses), net of income taxes	1,236				1,234		2
Total comprehensive earnings / (losses)	3,960						5
Adoption of new income tax guidance	213			213
Exercise of stock options and issuance of other stock awards	247		33	(79)		293
Net settlement of employee stock awards with Altria Group, Inc. (Note 10)	(179)		(179)
Cash dividends declared ($1.12 per share in 2008, $1.04 per share in 2007 and $0.96 per share in 2006)	(1,643)			(1,643)
Acquisitions of noncontrolling interest and other activities	7						7
Common Stock repurchased	(3,687)					(3,687)
Other	(35)		(35)
Ending Balances at Dec. 31, 2007	27,445	0	23,445	12,321	(1,835)	(6,524)	38
Comprehensive earnings / (losses):
Net earnings	2,893			2,884			9
Other comprehensive earnings / (losses), net of income taxes	(4,168)				(4,159)		(9)
Total comprehensive earnings / (losses)	(1,275)
Adoption of new benefit plan guidance	(8)			(8)
Exercise of stock options and issuance of other stock awards	268		118	(81)		231
Cash dividends declared ($1.12 per share in 2008, $1.04 per share in 2007 and $0.96 per share in 2006)	(1,676)			(1,676)
Acquisitions of noncontrolling interest and other activities	23						23
Common Stock repurchased	(777)					(777)
Common Stock tendered (Note 2)	(1,644)					(1,644)
Ending Balances at Dec. 31, 2008	$ 22,356	$ 0	$ 23,563	$ 13,440	$ (5,994)	$ (8,714)	$ 61

Statement Of Cash Flows Indirect (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2008	Dec. 31, 2007	Dec. 31, 2006
CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES
Net earnings	$ 2,893	$ 2,724	$ 3,065
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	986	886	891
Stock-based compensation expense	178	136	142
Deferred income tax benefit	(208)	(389)	(172)
Gain on redemption of United Biscuits investment	0	0	(251)
Losses / (gains) on divestitures, net	92	(14)	(117)
Gain on discontinued operations (Note 2)	(926)	0	0
Asset impairment and exit costs, net of cash paid	731	209	793
Change in assets and liabilities, excluding the effects of acquisitions and divestitures:
Receivables, net	(39)	(268)	(200)
Inventories, net	(151)	(404)	(150)
Accounts payable	29	241	256
Amounts due to Altria Group, Inc. and affiliates	0	(93)	(133)
Other current assets	(535)	(144)	(61)
Other current liabilities	985	186	(236)
Change in pension assets and postretirement liabilities, net	19	81	(128)
Other	87	420	21
Net cash provided by operating activities	4,141	3,571	3,720
CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES
Capital expenditures	(1,367)	(1,241)	(1,169)
Acquisitions, net of cash received	(99)	(7,437)	0
Proceeds from divestitures, net of disbursements	97	216	946
Other	49	46	107
Net cash used in by investing activities	(1,320)	(8,416)	(116)
CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES
Net (repayment) / issuance of short-term borrowings	(5,912)	5,649	343
Long-term debt proceeds	7,018	6,495	69
Long-term debt repaid	(795)	(1,472)	(1,324)
(Decrease) / increase in amounts due to Altria Group, Inc. and affiliates	0	(149)	62
Repurchase of Common Stock	(777)	(3,708)	(1,254)
Dividends paid	(1,663)	(1,638)	(1,562)
Other	72	(56)	(54)
Net cash (used in) / provided by financing activities	(2,057)	5,121	(3,720)
Effect of exchange rate changes on cash and cash equivalents	(87)	52	39
Cash and cash equivalents:
Increase / (decrease)	677	328	(77)
Balance at beginning of period	567	239	316
Balance at end of period	1,244	567	239
Cash paid:
Interest	968	628	628
Income taxes	$ 964	$ 1,366	$ 1,560

Note 1. Summary of Significant Accounting Policies:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 1. Summary of Significant Accounting Policies:

Note 1. Summary of Significant Accounting Policies:

Nature of Operations and Basis of Presentation:

Kraft Foods Inc. was incorporated in 2000 in the Commonwealth of Virginia. Kraft Foods Inc., through its subsidiaries (Kraft Foods Inc. and subsidiaries are hereinafter referred to as “Kraft Foods,” “we,” “us” and “our”), manufactures and markets packaged foods and beverages in approximately 150 countries.

Prior to June 13, 2001, Kraft Foods was a wholly owned subsidiary of Altria Group, Inc. (“Altria”). On June 13, 2001, we completed an initial public offering of 280,000,000 shares of our Class A common stock (“Common Stock”) at a price of $31.00 per share. In the first quarter of 2007, Altria spun off its remaining interest (89.0%) in Kraft Foods on a pro rata basis to Altria stockholders in a tax-free transaction. Effective as of the close of business on March 30, 2007, all Kraft Foods shares owned by Altria were distributed to Altria’s stockholders, and our separation from Altria was completed.

Principles of Consolidation:

The consolidated financial statements include Kraft Foods, as well as our wholly owned and majority owned subsidiaries. Our domestic operating subsidiaries report year-end results as of the Saturday closest to the end of each year, and our international operating subsidiaries generally report year-end results two weeks prior to the Saturday closest to the end of each year.

We account for investments in which we exercise significant influence (20%-50% ownership interest) under the equity method of accounting. We account for investments in which we have an ownership interest of less than 20% and do not exercise significant influence by the cost method of accounting. Noncontrolling interest in subsidiaries consists of the equity interest of noncontrolling investors in consolidated subsidiaries of Kraft Foods. Kraft Foods’ consolidated noncontrolling interest expense, net of taxes, was $9 million in 2008, $3 million in 2007 and $5 million in 2006. All intercompany transactions were eliminated.

Use of Estimates:

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions that affect a number of amounts in our financial statements. Significant accounting policy elections, estimates and assumptions include, among others, pension and benefit plan assumptions, lives and valuation assumptions of goodwill and intangible assets, marketing programs and income taxes. We base our estimates on historical experience and other assumptions that we believe are reasonable. If actual amounts differ from estimates, we include the revisions in our consolidated results of operations in the period the actual amounts become known. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a significant impact on our consolidated financial statements.

Foreign Currencies:

We translate the results of operations of our foreign subsidiaries using average exchange rates during each period, whereas balance sheet accounts are translated using exchange rates at the end of each period. We record currency translation adjustments as a component of equity. Transaction gains and losses are recorded in earnings and were not significant for any of the periods presented.

Cash and Cash Equivalents:

Cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less.

Inventories:

Inventories are stated at the lower of cost or market. We also record inventory allowances for overstocked and obsolete inventories due to ingredient and packaging changes. Effective January 1, 2009, we changed our method of valuing our U.S. inventories to the average cost method. These financial statements were revised to conform to our change in accounting policy. In prior years, principally all U.S. inventories were valued using the last-in, first-out (“LIFO”) method. With this change, we value all of our inventories using the average cost method. We believe that the average cost method of accounting for U.S. inventories is preferable and will improve financial reporting by better matching revenues and expenses to current costs, by better aligning our external reporting with our competitors, and by aligning our external reporting with our tax basis of accounting.

The following line items within the statements of earnings were affected by the change in accounting policy:


	For the Year Ended December 31, 2008
	As Computed under LIFO		As Reported under Average Cost		Favorable / (Unfavorable)
	(in millions, except per share data)

Cost of sales	$	28,105	$	28,088	$	17
Provision for income taxes		728		755		(27	)
Earnings from continuing operations		1,858		1,848		(10	)
Earnings and gain from discontinued operations, net of income taxes		1,052		1,045		(7	)
Net earnings attributable to Kraft Foods		2,901		2,884		(17	)

Basic earnings per share attributable to Kraft Foods:
Continuing operations	$	1.23	$	1.22	$	(0.01	)
Discontinued operations		0.70		0.70		–

Net earnings attributable to Kraft Foods	$	1.93	$	1.92	$	(0.01	)


Diluted earnings per share attributable to Kraft Foods:
Continuing operations	$	1.22	$	1.21	$	(0.01	)
Discontinued operations		0.69		0.69		–

Net earnings attributable to Kraft Foods	$	1.91	$	1.90	$	(0.01	)


	For the Year Ended December 31, 2007
	As Computed under LIFO		As Reported under Average Cost		Favorable / (Unfavorable)
	(in millions, except per share data)

Cost of sales	$	23,864	$	23,656	$	208
Gains on divestitures, net		15		14		(1	)
Provision for income taxes		1,002		1,080		(78	)
Earnings from continuing operations		2,363		2,492		129
Earnings and gain from discontinued operations, net of income taxes		230		232		2
Net earnings attributable to Kraft Foods		2,590		2,721		131

Basic earnings per share attributable to Kraft Foods:
Continuing operations	$	1.48	$	1.56	$	0.08
Discontinued operations		0.15		0.15		–

Net earnings attributable to Kraft Foods	$	1.63	$	1.71	$	0.08


Diluted earnings per share attributable to Kraft Foods:
Continuing operations	$	1.48	$	1.56	$	0.08
Discontinued operations		0.14		0.14		–

Net earnings attributable to Kraft Foods	$	1.62	$	1.70	$	0.08


		For the Year Ended December 31, 2006
		As Computed under LIFO		As Reported under Average Cost		Favorable / (Unfavorable)
		(in millions, except per share data)

	Cost of sales	$	21,189	$	21,190	$	(1	)
	Provision for income taxes		816		816		–
	Earnings from continuing operations		2,833		2,832		(1	)
	Earnings and gain from discontinued operations, net of income taxes		232		233		1
	Net earnings attributable to Kraft Foods		3,060		3,060		–

	Basic earnings per share attributable to Kraft Foods:
	Continuing operations	$	1.70	$	1.70	$	–
	Discontinued operations		0.14		0.14		–

	Net earnings attributable to Kraft Foods	$	1.84	$	1.84	$	–


	Diluted earnings per share attributable to Kraft Foods:
	Continuing operations	$	1.70	$	1.70	$	–
	Discontinued operations		0.14		0.14		–

	Net earnings attributable to Kraft Foods	$	1.84	$	1.84	$	–


The following line items within the balance sheets were affected by the change in accounting policy:

		December 31, 2008
		As Computed under LIFO		As Reported under Average Cost		Favorable / (Unfavorable)
		(in millions)

	Inventories, net	$	3,729	$	3,881	$	(152	)
	Deferred income tax asset		861		804		57
	Retained earnings		13,345		13,440		95

		December 31, 2007
		As Computed under LIFO		As Reported under Average Cost		Favorable / (Unfavorable)
		(in millions)

	Inventories, net	$	4,096	$	4,238	$	(142	)
	Deferred income tax asset		575		572		3
	Other current liabilities		2,168		2,195		27
	Retained earnings		12,209		12,321		112

As a result of the accounting change, retained earnings as of January 1, 2007, increased from $11,128 million, as computed using the LIFO method, to $11,109 million using the average cost method.

There was no impact to net cash provided by operating activities as a result of this change in accounting policy.

Long-Lived Assets:

Property, plant and equipment are stated at historical cost and depreciated by the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from 3 to 20 years and buildings and building improvements over periods up to 40 years.

We review long-lived assets, including amortizable intangible assets, for impairment when conditions exist that indicate the carrying amount of the assets may not be fully recoverable. We perform undiscounted operating cash flow analyses to determine if an impairment exists. When testing assets held for use for impairment, we group assets and liabilities at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, the loss is calculated based on estimated fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Software Costs:

We capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are included in property, plant and equipment and amortized on a straight-line basis over the estimated useful lives of the software, which do not exceed seven years.

Goodwill and Intangible Assets:

We test goodwill and non-amortizable intangible assets at least annually for impairment. We have recognized goodwill in our reporting units, which are generally one level below our operating segments. We use a two step process to test goodwill at the reporting unit level. The first step involves a comparison of the estimated fair value of each reporting unit with its carrying value. Fair value is estimated using discounted cash flows of the reporting unit based on planned growth rates, estimates of discount rates and residual values. If the carrying value exceeds the fair value, the second step of the process is necessary. The second step measures the difference between the carrying value and implied fair value of goodwill. To test non-amortizable intangible assets for impairment, we compare the fair value of the intangible asset with its carrying value. Fair value of non-amortizable intangible assets is determined using our planned revenue growth rates, estimates of discount rates and royalty rates. If the carrying value exceeds fair value, the intangible asset is considered impaired and is reduced to fair value. Definite lived intangible assets are amortized over their estimated useful lives.

Effective October 1, 2007, we adopted a new accounting policy to perform our annual impairment review of goodwill and non-amortizable intangible assets as of October 1 of each year. The change in our testing date was made to align it with the revised timing of our annual strategic planning process implemented in 2007. Prior to that change, we performed our annual impairment reviews as of January 1 of each year.

During the fourth quarter of 2008, we completed the annual review of goodwill and non-amortizable intangible assets and recorded a $44 million charge for the impairment of intangible assets in the Netherlands, France and Puerto Rico. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans, industry and economic conditions. During our 2008 impairment review, it was determined that our Kraft Foods Europe Biscuit reporting unit was the most sensitive to near-term changes in our discounted cash flow assumptions, as it contains a significant portion of the goodwill recorded upon our 2007 acquisition of the global LU biscuit business of Groupe Danone S.A. (“LU Biscuit”). In 2007, due to the change in our testing date, we completed two reviews of goodwill and non-amortizable intangible assets: during the first quarter as of January 1 and during the fourth quarter as of October 1. We found no impairments during these reviews of goodwill and non-amortizable intangible assets. During the first quarter of 2006, we completed our annual review of goodwill and non-amortizable intangible assets and recorded a $24 million charge for the impairment of intangible assets in Egypt and our hot cereal intangible assets in the U.S. These charges were included within asset impairment and exit costs.

Insurance and Self-Insurance:

We use a combination of insurance and self-insurance for a number of risks, including workers’ compensation, general liability, automobile liability, product liability and our obligation for employee healthcare benefits. Liabilities associated with the risks are estimated by considering historical claims experience and other actuarial assumptions.

Revenue Recognition:

We recognize revenues when title and risk of loss pass to customers, which generally occurs upon shipment or delivery of goods. Revenues are recorded net of consumer incentives and trade promotions and include all shipping and handling charges billed to customers. Kraft Foods’ shipping and handling costs are classified as part of cost of sales. A provision for product returns and allowances for bad debts are also recorded as a reduction to revenues within the same period that the revenue is recognized.

Excise Taxes:

Effective January 1, 2009, we changed our classification of certain excise taxes to a net presentation within cost of sales. In prior years, excise taxes were classified gross within net revenues and cost of sales. With this change, we report all of our excise and similar taxes using the net presentation method. We made this change to better align our net revenues between various countries and to provide better clarity to net revenues and margins. These financial statements were revised to conform to this change. As a result, we removed $269 million in 2008, $276 million in 2007 and $238 million in 2006 from net revenues, and netted the amounts within cost of sales. This change did not have a material impact on our net revenues or cost of sales.

Marketing, Administration and Research Costs:

Marketing – We promote our products with advertising, consumer incentives and trade promotions. These programs include, but are not limited to, discounts, coupons, rebates, in-store display incentives and volume-based incentives. We expense advertising costs either in the period the advertising first takes place or as incurred. Consumer incentive and trade promotion activities are recorded as a reduction to revenues based on amounts estimated as being due to customers and consumers at the end of a period. We base these estimates principally on historical utilization and redemption rates. For interim reporting purposes, advertising and consumer incentive expenses are charged to operations as a percentage of volume, based on estimated volume and related expense for the full year. We do not defer costs on our year-end consolidated balance sheet and all marketing costs are recorded as an expense in the year incurred. Advertising expense was $1,639 million in 2008, $1,471 million in 2007 and $1,308 million in 2006.

Research – We expense costs as incurred for product research and development. Research and development expense was $498 million in 2008, $442 million in 2007 and $414 million in 2006.

Environmental Costs:

We are subject to laws and regulations relating to the protection of the environment. We accrue for environmental remediation obligations on an undiscounted basis when amounts are probable and can be reasonably estimated. The accruals are adjusted as new information develops or circumstances change. Recoveries of environmental remediation costs from third parties are recorded as assets when their receipt is deemed probable. As of December 31, 2008, our subsidiaries were involved in 67 active Superfund and other similar actions in the U.S. related to current operations and certain former or divested operations for which we retain liability.

Based on information currently available, we believe that the ultimate resolution of existing environmental remediation actions and our compliance in general with environmental laws and regulations will not have a material effect on our financial results. However, we cannot quantify with certainty the potential impact of future compliance efforts and environmental remediation actions.

Employee Benefit Plans:

In September 2006, new guidance was issued surrounding employers’ accounting for defined benefit pension and other postretirement plans. The new guidance requires us to measure plan assets and benefit obligations as of the balance sheet date beginning in 2008. We previously measured our non-U.S. pension plans (other than certain Canadian and French pension plans) at September 30 of each year. On December 31, 2008, we recorded an after-tax decrease of $8 million to retained earnings using the 15-month approach to proportionally allocate the transition adjustment required upon adoption of the measurement provision of the new guidance. The plan assets and benefit obligations of our pension plans and the benefit obligations of our postretirement plans are now all measured at year-end.

We provide a range of benefits to our employees and retired employees. These include pension plans, postretirement health care benefits and postemployment benefits, consisting primarily of severance. We provide pension coverage for certain employees of our non-U.S. subsidiaries through separate plans. Local statutory requirements govern many of these plans. For certain employees hired in the U.S. after January 1, 2009, we have discontinued benefits under our U.S. pension plans, and we have replaced it with an enhanced company contribution to our employee savings plan. Our U.S. and Canadian subsidiaries provide health care and other benefits to most retired employees. Local government plans generally cover health care benefits for retirees outside the U.S. and Canada. Our postemployment benefit plans cover most salaried and certain hourly employees. The cost of these plans is charged to expense over the working life of the covered employees.

Financial Instruments:

As Kraft Foods operates globally, we use certain financial instruments to manage our foreign currency exchange rate and commodity price risks. We monitor and manage these exposures as part of our overall risk management program. Our risk management program focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on our operating results. We maintain foreign currency and commodity price risk management strategies that seek to reduce significant, unanticipated earnings fluctuations that may arise from volatility in foreign currency exchange rates and commodity prices, principally through the use of derivative instruments.

Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period. We formally document the nature of and relationships between the hedging instruments and hedged items, as well as our risk management objectives, strategies for undertaking the various hedge transactions and method of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, the significant characteristics and expected terms of the forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur. If we deem it probable that the forecasted transaction will not occur, we recognize the gain or loss in earnings currently.

By using derivatives to hedge exposures to changes in exchange rates and commodity prices, Kraft Foods has exposure on these derivatives to credit and market risk. We are exposed to credit risk that the counterparty might fail to fulfill its performance obligations under the terms of the derivative contract. We minimize our credit risk by entering into transactions with high quality counterparties with investment grade credit ratings, limiting the amount of exposure we have with each counterparty and monitoring the financial condition of our counterparties. In October 2008, one of our counterparties, Lehman Brothers Commercial Corporation, filed for bankruptcy. Consequently, we wrote off an insignificant asset related to derivatives held with them. This did not have a significant impact on our foreign currency risk management program. We also maintain a policy of requiring that all significant, non-exchange traded derivative contracts with a duration greater than one year be governed by an International Swaps and Derivatives Association master agreement. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in foreign currency exchange rates, commodity prices or interest rates. We manage market risk by incorporating monitoring parameters within our risk management strategy that limit the types of derivative instruments and derivative strategies we use, and the degree of market risk that may be undertaken by the use of derivative instruments.

We record derivative financial instruments at fair value in our consolidated balance sheets as either current assets or current liabilities. Cash flows from hedging instruments are classified in the same manner as the affected hedged item in the consolidated statements of cash flows.

Commodity cash flow hedges – We are exposed to price risk related to forecasted purchases of certain commodities that we primarily use as raw materials. Accordingly, we use commodity forward contracts as cash flow hedges, primarily for meat, coffee, dairy, sugar, cocoa and wheat. Commodity forward contracts generally qualify for the normal purchase exception under guidance for derivative instruments and hedging activities, and are, therefore, not subject to its provisions. We use commodity futures and options to hedge the price of certain input costs, including dairy, coffee, cocoa, wheat, corn products, soybean oils, meat products, sugar, natural gas and heating oil. Some of these derivative instruments are highly effective and qualify for hedge accounting treatment. We also sell commodity futures to unprice future purchase commitments, and we occasionally use related futures to cross-hedge a commodity exposure. We are not a party to leveraged derivatives and, by policy, do not use financial instruments for speculative purposes.

For those derivative instruments that are highly effective and qualify for hedge accounting treatment, we defer the effective portion of unrealized gains and losses on commodity futures and option contracts as a component of accumulated other comprehensive earnings / (losses). We recognize the deferred portion as a component of cost of sales when the related inventory is sold. Ineffectiveness is directly recorded as a component of cost of sales. For the derivative instruments that we consider economic hedges but do not designate for hedge accounting treatment, we recognize gains and losses directly as a component of cost of sales.

Foreign currency cash flow hedges – We use various financial instruments to mitigate our exposure to changes in exchange rates from third-party and intercompany actual and forecasted transactions. These instruments include forward foreign exchange contracts, foreign currency swaps and foreign currency options. Based on the size and location of our businesses, we use these instruments to hedge our exposure to certain currencies, including the euro, Swiss franc, British pound and Canadian dollar.

For those derivative instruments that are highly effective and qualify for hedge accounting treatment, we defer the effective portion of unrealized gains and losses associated with forward, swap and option contracts as a component of accumulated other comprehensive earnings / (losses) until the underlying hedged transactions are reported in earnings. We recognize the deferred portion as a component of cost of sales when the related inventory is sold or as foreign currency translation gain or loss for our hedges of intercompany loans when the payments are made. For those derivative instruments that we consider economic hedges but do not designate for hedge accounting treatment, we recognize gains and losses directly as a component of cost of sales or foreign currency translation loss, depending on the nature of the underlying transaction.

Hedges of net investments in foreign operations – We have numerous investments in foreign subsidiaries. The net assets of these subsidiaries are exposed to volatility in foreign currency exchange rates. We use foreign-currency-denominated debt to hedge our net investment in foreign operations against adverse movements in exchange rates. We designated our euro denominated borrowings as a net investment hedge of a portion of our overall European operations. The gains and losses in our net investment in these designated European operations are economically offset by losses and gains in our euro denominated borrowings. The change in the debt’s fair value is recorded in the cumulative translation adjustment component of accumulated other comprehensive earnings / (losses).

Guarantees:

Authoritative guidance related to guarantor’s accounting and disclosure requirements for guarantees requires us to disclose certain guarantees and to recognize a liability for the fair value of the obligation of qualifying guarantee activities. See Note 13, Commitments and Contingencies for a further discussion of guarantees.

Income Taxes:

Prior to our spin-off from Altria, we were included in Altria’s consolidated federal income tax return. We generally computed income taxes on a separate company basis; however, some of our foreign tax credits, capital losses and other credits could not be used on a separate company basis. To the extent that Altria used our foreign tax credits and other tax benefits in its consolidated federal income tax return, we recognized the benefit in the calculation of our provision for income taxes. This benefit was approximately $270 million in 2007 (both through the date of our spin-off from Altria as well as post-spin carryback claims to pre-spin periods) and $195 million in 2006. We made payments to, or were reimbursed by, Altria for the tax effects resulting from being included in Altria’s tax return. As of March 31, 2007, we are no longer a member of the Altria consolidated tax return group, and we now file our own federal consolidated income tax returns. Altria also previously carried our federal tax contingencies on its balance sheet and reported them in its financial statements. As a result of the spin-off, Altria transferred our federal tax contingencies of $375 million to our balance sheet and related interest income of $77 million in 2007. Additionally, during 2007, Altria paid us $305 million for the federal tax contingencies held by them, less the impact of federal reserves reversed due to the adoption of new guidance, discussed below, which addressed accounting for the uncertainty in income taxes. This amount is reflected as a component of other within the net cash provided by operating activities section of the consolidated statement of cash flows.

In July 2006, new guidance was issued which addressed accounting for the uncertainty in income taxes. We adopted the guidance effective January 1, 2007. The guidance clarified when tax benefits should be recorded in the financial statements and provided measurement criteria for valuing such benefits. In order for us to recognize benefits, our tax position must be more likely than not to be sustained upon audit. The amount we recognize is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Prior to the implementation of the guidance, we established additional provisions for certain positions that were likely to be challenged even though we believe that those existing tax positions were fully supportable. The adoption of this guidance resulted in an increase to equity as of January 1, 2007 of $213 million and resulted from:

•

a $265 million decrease in the liability for unrecognized tax benefits, comprised of $247 million in tax and $18 million in interest;

•

a reduction in goodwill of $85 million; and

•

an increase to federal and state deferred tax assets of $33 million.

We recognize deferred tax assets for deductible temporary differences, operating loss carryforwards and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

Reclassification:

In 2009, we changed our cost assignment methodology for headquarter functional costs across our operating structure. We conformed these financial statements to this change. As a result, we reclassified $188 million in 2008, $83 million in 2007 and $83 million in 2006 from marketing, administration and research costs to cost of sales. This change did not have an impact on net earnings.

We reclassified dividends payable and income taxes in the consolidated balance sheet at December 31, 2007 from separate line items into other current liabilities to conform with the current year’s presentation. We also reclassified income taxes and other working capital items in the consolidated statements of cash flows for the years ended December 31, 2007 and 2006 from separate line items into other current assets and other current liabilities to conform with the current year’s presentation. In addition, we reclassified stock-based compensation expense in the consolidated statements of cash flows for the years ended December 31, 2007 and 2006 from other operating activities to a separate line item to conform with the current year’s presentation.

New Accounting Pronouncements:

In September 2006, new guidance was issued on fair value measurements. The guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The effective date of the guidance for items recognized or disclosed at fair value on an annual or more frequently recurring basis was January 1, 2008. The effective date of the guidance for all other nonfinancial assets and liabilities is January 1, 2009. As such, we partially adopted the guidance effective January 1, 2008. The partial adoption of this guidance did not have a material impact on our

financial statements. We expect to adopt the remaining provisions beginning in 2009. We expect this adoption to impact the way in which we calculate fair value for our annual impairment review of goodwill and non-amortizable intangible assets, and when conditions exist that require us to calculate the fair value of long-lived assets; however, we do not expect this adoption to have a material impact on our financial statements.

In December 2007, new guidance was issued on business combinations. The provisions, which change the way companies account for business combinations, are effective for Kraft Foods as of January 1, 2009. This guidance requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose all information needed by investors to understand the nature and financial effect of the business combination. We do not expect the adoption of this guidance to have a material impact on our financial statements.

In December 2007, new guidance was also issued on noncontrolling interests in consolidated financial statements, the provisions of which are effective for Kraft Foods as of January 1, 2009. The guidance requires an entity to classify noncontrolling interests in subsidiaries as a separate component of equity. Additionally, transactions between an entity and noncontrolling interests are required to be treated as equity transactions. Therefore, they no longer are removed from net income, but rather are accounted for as equity. These financial statements were revised to conform to the requirements of this guidance. The adoption of this guidance did not have a material impact on our financial statements.

In March 2008, new guidance was issued on required disclosures for derivative instruments and hedging activities. The provisions are effective for Kraft Foods as of January 1, 2009. The guidance requires enhanced disclosures about (i) how and why we use derivative instruments, (ii) how we account for derivative instruments and related hedged items, and (iii) how derivative instruments and related hedged items affect our financial results. We do not expect the adoption of this guidance to have a material impact on our financial statements.

In June 2008, new guidance was issued to assist in determining whether instruments granted in share-based payment transactions are participating securities. The provisions are effective for Kraft Foods as of January 1, 2009. The guidance considers unvested share-based payment awards with the right to receive nonforfeitable dividends or their equivalents participating securities that should be included in the calculation of EPS under the two-class method. These financial statements were revised to conform to the requirements of this guidance. As such, our restricted and deferred stock awards were considered participating units in our calculation of EPS. The adoption of this guidance did not have a material impact on our financial statements.

In December 2008, new guidance was issued on employers’ disclosures for postretirement benefit plan assets, which is effective for fiscal years ending after December 15, 2009. The literature provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. We do not expect the adoption of this guidance to have a material impact on our financial statements.

Note 2. Acquisitions and Divestitures:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 2. Acquisitions and Divestitures:

Note 2. Acquisitions and Divestitures:

LU Biscuit Acquisition:

On November 30, 2007, we acquired LU Biscuit for €5.1 billion (approximately $7.6 billion) in cash. The acquisition included 32 manufacturing facilities and approximately 14,000 employees. We acquired net assets consisting primarily of goodwill of $4,052 million (which will not be deductible for statutory tax purposes), intangible assets of $3,546 million (substantially all of which are indefinite-lived), receivables of $757 million, property, plant and equipment of $1,054 million and inventories of $204 million, and assumed liabilities of $1,063 million consisting primarily of accounts payable and accruals. These purchase price allocations were based upon appraisals that were finalized in the third quarter of 2008. During the second quarter of 2008, we also repaid Groupe Danone S.A. for excess cash received upon the acquisition of LU Biscuit. LU Biscuit contributed net revenues of $3.2 billion during 2008, and $2.8 billion on a proforma basis during 2007. LU Biscuit reported results from operations on a one month lag in 2007; as such, there was no impact on our operating results. On a proforma basis, LU Biscuit’s net earnings for the year ended December 31, 2007 would have been insignificant to Kraft Foods.

United Biscuits Acquisition:

In September 2006, we acquired the Spanish and Portuguese operations of United Biscuits (“UB”) for approximately $1.1 billion. The non-cash acquisition was financed by our assumption of $541 million of debt issued by the acquired business immediately prior to the acquisition, as well as $530 million of value for the redemption of our outstanding investment in UB, primarily deep-discount securities. The redemption of our investment in UB resulted in a $251 million gain.

Post Cereals Split-off:

On August 4, 2008, we completed the split-off of the Post cereals business into Ralcorp Holdings, Inc. (“Ralcorp”), after an exchange with our shareholders. The exchange is expected to be tax-free to participating shareholders for U.S. federal income tax purposes.

In this split-off transaction, approximately 46.1 million shares of Kraft Foods Common Stock were tendered for $1,644 million. Our shareholders had the option to exchange some or all of their shares of Kraft Foods Common Stock and receive shares of common stock of Cable Holdco, Inc. (“Cable Holdco”). Cable Holdco was our wholly owned subsidiary that owned certain assets and liabilities of the Post cereals business. In exchange for the contribution of the Post cereals business, Cable Holdco issued approximately $665 million in debt securities, issued shares of its common stock and assumed a $300 million credit facility. Upon closing, we used the cash equivalent net proceeds, approximately $960 million, to repay debt.

On June 25, 2008, Cable Holdco filed a registration statement on Form S-1/S-4/A with the SEC that announced the start of the exchange offer. Approximately 30.5 million shares of Cable Holdco were offered in exchange for Kraft Foods Common Stock at an exchange ratio of 0.6606. The exchange ratio was calculated using the daily volume-weighted average prices of Kraft Foods Common Stock and Ralcorp common stock on the NYSE on the last three trading days of the offer, which expired on August 4, 2008. The exchange offer was over-subscribed and as a result, the number of shares of Kraft Foods Common Stock accepted for exchange in the offer was prorated. Following the merger of Cable Holdco and a Ralcorp subsidiary, the Cable Holdco common stock was exchanged for shares of Ralcorp common stock on a one-for-one basis.

The Post cereals business included such cereals as Honey Bunches of Oats, Pebbles, Shredded Wheat, Selects, Grape-Nuts and Honeycomb. Under Kraft Foods, the brands in this transaction were distributed primarily in North America. In addition to the Post brands, the transaction included four manufacturing facilities, certain manufacturing equipment and approximately 1,230 employees who joined Ralcorp as part of the transaction.

The results of the Post cereals business were reflected as discontinued operations on the consolidated statement of earnings and prior period results were revised in a consistent manner. Pursuant to the Post cereals business Transition Services Agreement, we agreed to provide certain sales, co-manufacturing, distribution, information technology, and accounting and finance services to Ralcorp for up to 12 months, with Ralcorp’s option to extend it for an additional 6 months.

During the fourth quarter of 2008, we increased our gain on discontinued operations by $77 million to correct for a deferred tax liability that should have been written-off upon the split-off of the Post cereals business. As such, our gain from the split-off of the Post cereals business was $926 million.

Summary results of operations for the Post cereals business through August 4, 2008, were as follows:


		For the Years Ended December 31,
		2008			2007			2006
		(in millions; as revised)

	Net revenues	$	666		$	1,107		$	1,100


	Earnings before income taxes		189			369			369
	Provision for income taxes		(70	)		(137	)		(136	)
	Gain on discontinued operations, net of income taxes		926			–			–

	Earnings and gain from discontinued operations, net of income taxes	$	1,045		$	232		$	233

The following assets of the Post cereals business were included in the Post split-off (in millions; as revised):
	Inventories, net	$	94
	Property, plant and equipment, net		425
	Goodwill		1,234
	Other assets		11
	Other liabilities		(3	)

	Distributed assets of the Post cereals business	$	1,761

Other Divestitures:

In February 2009, we reached an agreement to divest a juice operation in Brazil. The transaction is subject to customary closing conditions, including regulatory approvals, and we expect it to close by mid-2009.

In 2008, we received $153 million in net proceeds, and recorded pre-tax losses of $92 million on divestitures, primarily related to a Nordic and Baltic snacks operation and four operations in Spain. We recorded after-tax losses of $64 million on these divestitures.

Included in those divestitures were the following, which were a condition of the EU Commission’s approval of our LU Biscuit acquisition:

•

We divested an operation in Spain. From this divestiture, we received $86 million in proceeds and recorded pre-tax losses of $74 million.

•

We divested a biscuit operation in Spain and a trademark in Hungary that we had previously acquired as part of the LU Biscuit acquisition. As such, the impacts of these divestitures were reflected as adjustments to the purchase price allocations.

In 2007, we received $216 million in proceeds and recorded pre-tax gains of $14 million on the divestitures of our hot cereal assets and trademarks, our sugar confectionery assets in Romania and related trademarks and our flavored water and juice brand assets and related trademarks, including Veryfine and Fruit2O. We recorded an after-tax loss of $5 million on these divestitures to reflect the differing book and tax bases of our hot cereal assets and trademarks divestiture.

In 2006, we received $946 million in proceeds and recorded pre-tax gains of $117 million on the divestitures of our pet snacks brand and assets, rice brand and assets, certain Canadian assets, our industrial coconut assets, a U.S. biscuit brand and a U.S. coffee plant. We recorded after-tax gains of $31 million on these divestitures, which reflects the tax expense of $57 million related to the differing book and tax bases on our pet snacks brand and assets divestiture.

These gains and losses on divestitures do not reflect the related asset impairment charges discussed in Note 6, Asset Impairment, Exit and Implementation Costs.

The aggregate operating results of the divestitures discussed above, other than the divestiture of the Post cereals business, were not material to our financial statements in any of the periods presented. Refer to Note 17, Segment Reporting, for details of all (losses) / gains on divestitures by segment.

Note 5. Goodwill and Intangible Assets:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 5. Goodwill and Intangible Assets:

Note 5. Goodwill and Intangible Assets:

At December 31, 2008 and 2007, goodwill by reportable segment was:


	2008		2007
	(in millions; as revised)

Kraft Foods North America:
U.S. Beverages	$	1,290	$	1,290
U.S. Cheese		3,000		3,000
U.S. Convenient Meals		1,460		1,460
U.S. Grocery		3,046		3,043
U.S. Snacks ⁽¹⁾		6,965		8,253
Canada & N.A. Foodservice		2,306		2,364
Kraft Foods Europe ⁽²⁾		5,893		7,492
Kraft Foods Developing Markets		3,621		4,291

Total goodwill	$	27,581	$	31,193


(1) This segment was formerly known as U.S. Snacks & Cereals.
(2) This segment was formerly known as European Union.

As discussed in Note 17, Segment Reporting, we implemented changes to our operating structure in 2009. As a result of these changes, we aligned the reporting of our Central Europe operations into our Kraft Foods Developing Markets segment. These financial statements were revised to conform to this change. As a result, we moved $1,534 million of goodwill in 2008 and $1,900 million of goodwill in 2007 from Kraft Foods Europe to Kraft Foods Developing Markets.

Intangible assets at December 31, 2008 and 2007 were:


	2008			2007
	(in millions)

Non-amortizable intangible assets	$	12,758		$	12,065
Amortizable intangible assets		254			197

		13,012			12,262
Accumulated amortization		(86	)		(62	)

Intangible assets, net	$	12,926		$	12,200

Non-amortizable intangible assets consist substantially of brand names purchased through our acquisitions of Nabisco Holdings Corp., LU Biscuit and certain operations of UB (see Note 2, Acquisitions and Divestitures, for further details). Amortizable intangible assets consist primarily of trademark licenses, customer-related intangibles and non-compete agreements.

The movements in goodwill and intangible assets were:


	2008						2007
	Goodwill			Intangible Assets, at cost			Goodwill			Intangible Assets, at cost
	(in millions)

Balance at January 1	$	31,193		$	12,262		$	25,553		$	10,244
Changes due to:
Foreign currency		(1,062	)		(516	)		536			43
Acquisitions		(1,187	)		1,356			5,239			2,196
Divestitures		(1,272	)		(37	)		(45	)		(134	)
Asset impairments		(35	)		(53	)		(3	)		(70	)
Other		(56	)		–			(87	)		(17	)

Balance at December 31	$	27,581		$	13,012		$	31,193		$	12,262

Significant changes to goodwill and intangible assets during 2008 were:

•

Acquisitions – We decreased goodwill by $1,187 million and increased intangible assets by $1,356 million primarily due to refinements of preliminary allocations of purchase price for our acquisition of LU Biscuit. The allocations were based upon appraisals that were finalized in the third quarter of 2008.

•

Divestitures – We reduced goodwill by $1,234 million due to the split-off of our Post cereals business, and we reduced goodwill by $38 million and intangible assets by $37 million due to the divestiture of an operation in Spain.

•

Asset impairments – We recorded asset impairment charges of $34 million to goodwill and $1 million to intangible assets in connection with the divestiture of a Nordic and Baltic snacks operation. We also recorded asset impairment charges of $1 million to goodwill and $8 million to intangible assets in connection with the anticipated divestiture of a juice operation in Brazil. In addition, during the fourth quarter of 2008, we completed our annual review of goodwill and non-amortizable intangible assets, and recorded a $44 million charge for the impairment of intangible assets in the Netherlands, France and Puerto Rico.

•

Other – We reduced goodwill by $56 million primarily related to a reconciliation of our inventory of deferred tax items that also resulted in a write-down of our net deferred tax liabilities.

Significant changes to goodwill and intangible assets during 2007 were:

•

Acquisitions – We increased goodwill by $5,239 million and intangible assets by $2,196 million related to preliminary allocations of purchase price for our acquisition of LU Biscuit. The allocations were later finalized in 2008.

•

Divestitures – We reduced goodwill by $45 million and intangible assets by $134 million primarily due to the divestiture of our hot cereal assets and trademarks.

•

Asset Impairments – We recorded an asset impairment charge of $70 million to intangible assets in conjunction with the divestiture of our flavored water and juice brand assets and related trademarks.

•

Other – We reduced goodwill by $87 million primarily due to the adoption of new guidance which addressed accounting for the uncertainty in income taxes (see Note 1, Summary of Significant Accounting Policies, for further details), and reduced intangible assets by $17 million primarily due to the removal of a fully amortized intangible asset.

Amortization expense for intangible assets was $23 million in 2008, $13 million in 2007 and $7 million in 2006. We currently estimate amortization expense for each of the next five years to be approximately $20 million or less.

- Definition

Discloses the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain or loss on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. This element may be used as a single block of text to include the entire intangible asset disclosure including data and tables.

+ References+ Details

Note 6. Asset Impairment, Exit and Implementation Costs:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 6. Asset Impairment, Exit and Implementation Costs:

Note 6. Asset Impairment, Exit and Implementation Costs:

Restructuring Program

In 2008, we completed our five-year restructuring program (the “Restructuring Program”). The objectives of this program were to leverage our global scale, realign and lower our cost structure, and optimize capacity. As part of the Restructuring Program, we:

•

incurred $3.1 billion in pre-tax charges reflecting asset disposals, severance and implementation costs;

•

announced the closure of 36 facilities and announced the elimination of approximately 19,000 positions; and

•

will use cash to pay for $2.0 billion of the $3.1 billion in charges.

We incurred charges under the Restructuring Program of $989 million in 2008, $459 million in 2007 and $673 million in 2006. Since the inception of the Restructuring Program, we have paid cash for $1.5 billion of the $3.1 billion in charges. At December 31, 2008, we had $489 million accrued in Restructuring Program costs.

In 2008, we implemented a new operating structure built on three core elements: business units; shared services that leverage the scale of our global portfolio; and a streamlined corporate staff. Within the new structure, business units now have full P&L accountability and are staffed accordingly. This also ensures that we are putting our resources closer to where we make decisions that affect our consumers and customers. Our corporate and shared service functions continue to streamline their organizations and focus on core activities that can more efficiently support the goals of the business units. The intent is to simplify, streamline and increase accountability, with the ultimate goal of generating reliable growth for Kraft Foods. In total, we will eliminate approximately 1,500 positions as we streamline our headquarter functions.

We are also in the process of reorganizing our European operations to function on a pan-European centralized category management and value chain model. After the reorganization is complete, the European Principal Company (“EPC”) will manage the European categories centrally and make decisions for all aspects of the value chain, except for sales and distribution. The European subsidiaries will execute sales and distribution locally, and the local production companies will act as toll manufacturers on behalf of the EPC. The EPC legal entity has been incorporated as Kraft Foods Europe GmbH in Zurich, Switzerland. As part of the reorganization, we incurred $16 million of restructuring costs, $39 million of implementation costs and $11 million of non-recurring costs during 2008; $21 million of restructuring costs, $24 million of implementation costs and $10 million of non-recurring costs during 2007; and $7 million of restructuring costs during 2006. Restructuring and implementation costs are included in the total Restructuring Program charges. Other costs relating to our Kraft Foods Europe Reorganization are recorded as marketing, administration and research costs. Management believes the disclosure of implementation and other non-recurring charges provides readers of our financial statements greater transparency to the total costs of our Kraft Foods Europe Reorganization.

During the second quarter of 2006, we entered into a seven-year, $1.7 billion agreement to receive information technology services from Electronic Data Systems (“EDS”). On June 1, 2006, we began using EDS’s data centers, and EDS started providing us with web hosting, telecommunications and IT workplace services. In 2008, we incurred restructuring costs of $2 million and implementation costs of $14 million related to the EDS transition. In 2007, we reversed $6 million in restructuring costs because our severance costs were lower than originally anticipated, and we incurred implementation costs of $47 million. In 2006, we incurred restructuring costs of $51 million and implementation costs of $56 million. These amounts are included in the total Restructuring Program charges.

Restructuring Costs:

Under the Restructuring Program, we recorded asset impairment and exit costs of $884 million during 2008, $332 million during 2007 and $578 million during 2006. We will pay cash for $659 million of the charges that we incurred during 2008. As part of the program, we announced the closure of six plants during 2008.

Restructuring liability activity for the years ended December 31, 2008 and 2007 was:


	Severance			Asset Write-downs			Other			Total
	(in millions)

Liability balance, January 1, 2007	$	165		$	–		$	32		$	197
Charges		156			99			77			332
Cash (spent) / received		(155	)		6			(94	)		(243	)
Charges against assets		(25	)		(109	)		1			(133	)
Currency		13			4			–			17

Liability balance, December 31, 2007		154			–			16			170
Charges		590			195			99			884
Cash (spent) / received		(255	)		33			(71	)		(293	)
Charges against assets		(30	)		(214	)		2			(242	)
Currency		(15	)		(14	)		(1	)		(30	)

Liability balance, December 31, 2008	$	444		$	–		$	45		$	489

Severance charges include the cost of benefits received by terminated employees. As of December 31, 2008, we had eliminated approximately 15,200 positions, and we had announced our intent to eliminate an additional 3,800 positions. Severance charges against assets primarily relate to incremental pension costs, which reduce prepaid pension assets. Asset impairment write-downs were caused by plant closings and related activity. Cash received on asset write-downs reflects the net cash proceeds from the sales of assets previously written-down under the Restructuring Program. We incurred other costs related primarily to the renegotiation of supplier contract costs, workforce reductions associated with facility closings and the termination of leasing agreements.

Implementation Costs:

Implementation costs are directly attributable to exit costs; however, they do not qualify for treatment under guidance related to accounting for costs associated with exit or disposal activities. These costs primarily include the discontinuance of certain product lines, incremental expenses related to the closure of facilities, the EDS transition and the reorganization of our European operations discussed above. Management believes the disclosure of implementation charges provides readers of our financial statements greater transparency to the total costs of our Restructuring Program. Substantially all implementation costs incurred in 2008 will require cash payments.

Implementation costs associated with the Restructuring Program were:


	2008		2007		2006
	(in millions)

Cost of sales		38		67		25
Marketing, administration and research costs		67		60		70

Total implementation costs	$	105	$	127	$	95

Asset Impairment Charges

During our 2008 review of goodwill and non-amortizable intangible assets, we recorded a $44 million charge for the impairment of intangible assets in the Netherlands, France and Puerto Rico. In addition, in December 2008, we reached a preliminary agreement to divest a juice operation in Brazil and reached an agreement to sell a cheese plant in Australia. In anticipation of divesting the juice operation in Brazil, we recorded an asset impairment charge of $13 million in the fourth quarter of 2008. The charge primarily included the write-off of associated intangible assets of $8 million and property, plant and equipment of $4 million. In anticipation of selling the cheese plant in Australia, we recorded an asset impairment charge of $28 million to property, plant and equipment in the fourth quarter of 2008. Additionally, in 2008, we divested a Nordic and Baltic snacks operation and incurred an asset impairment charge of $55 million in connection with the divestiture. This charge primarily included the write-off of associated goodwill of $34 million and property, plant and equipment of $16 million. We recorded the aggregate asset impairment charges within asset impairment and exit costs.

In 2007, we divested our flavored water and juice brand assets and related trademarks. In recognition of the divestiture, we recorded a $120 million asset impairment charge for these assets. The charge primarily included the write-off of associated intangible assets of $70 million and property, plant and equipment of $47 million and was recorded within asset impairment and exit costs.

During our 2006 annual review of goodwill and non-amortizable intangible assets, we recorded a $24 million charge for the impairment of intangible assets in Egypt and our hot cereal intangible assets in the U.S. Additionally, during 2006, we re-evaluated the business model for our Tassimo hot beverage system, the revenues of which lagged our projections. This evaluation resulted in a $245 million asset impairment charge related to lower utilization of existing manufacturing capacity. We also incurred an asset impairment charge of $86 million during 2006 in recognition of our pet snacks brand and assets divestiture. The charge primarily included the write-off of a portion of the associated goodwill of $25 million and intangible assets of $55 million. In addition, in January 2007, we announced the divestiture of our hot cereal assets and trademarks. We recorded an asset impairment charge of $69 million in the fourth quarter of 2006 in connection with the anticipated divestiture. The charge primarily included the write-off of a portion of the associated goodwill of $15 million and intangible assets of $52 million. The transaction closed in 2007 and no further impairment charges were incurred for this divestiture. We recorded the aggregate asset impairment charges within asset impairment and exit costs.

Total – Asset Impairment, Exit and Implementation Costs

We included the asset impairment, exit and implementation costs discussed above, for the years ended December 31, 2008, 2007 and 2006 in segment operating income as follows:


	For the Year Ended December 31, 2008
	Restructuring Costs		Asset Impairment		Total Asset Impairment and Exit Costs		Implementation Costs		Total
	(in millions)

Kraft Foods North America:
U.S. Beverages	$	59	$	–	$	59	$	8	$	67
U.S. Cheese		31		–		31		7		38
U.S. Convenient Meals		31		–		31		7		38
U.S. Grocery		36		–		36		5		41
U.S. Snacks		72		–		72		9		81
Canada & N.A. Foodservice		100		–		100		10		110
Kraft Foods Europe		418		89		507		56		563
Kraft Foods Developing Markets		137		51		188		3		191

Total – continuing operations		884		140		1,024		105		1,129
Discontinued operations		–		–		–		–		–

Total	$	884	$	140	$	1,024	$	105	$	1,129


	For the Year Ended December 31, 2007
	Restructuring Costs		Asset Impairment		Total Asset Impairment and Exit Costs		Implementation Costs		Total
	(in millions)

Kraft Foods North America:
U.S. Beverages	$	12	$	120	$	132	$	7	$	139
U.S. Cheese		50		–		50		25		75
U.S. Convenient Meals		20		–		20		15		35
U.S. Grocery		25		–		25		7		32
U.S. Snacks		17		–		17		15		32
Canada & N.A. Foodservice		50		–		50		2		52
Kraft Foods Europe		108		–		108		44		152
Kraft Foods Developing Markets		38		–		38		12		50

Total – continuing operations		320		120		440		127		567
Discontinued operations		12		–		12		–		12

Total	$	332	$	120	$	452	$	127	$	579


	For the Year Ended December 31, 2006
	Restructuring Costs		Asset Impairment		Total Asset Impairment and Exit Costs		Implementation Costs		Total
	(in millions)

Kraft Foods North America:
U.S. Beverages	$	17	$	75	$	92	$	10	$	102
U.S. Cheese		77		–		77		12		89
U.S. Convenient Meals		81		–		81		8		89
U.S. Grocery		37		–		37		11		48
U.S. Snacks		35		168		203		16		219
Canada & N.A. Foodservice		24		–		24		7		31
Kraft Foods Europe		230		170		400		23		423
Kraft Foods Developing Markets		74		11		85		8		93

Total – continuing operations		575		424		999		95		1,094
Discontinued operations		3		–		3		–		3

Total	$	578	$	424	$	1,002	$	95	$	1,097

Note 7. Debt and Borrowing Arrangements:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 7. Debt and Borrowing Arrangements:

Note 7. Debt and Borrowing Arrangements:

Short-Term Borrowings:

At December 31, 2008 and 2007, our short-term borrowings and related average interest rates consisted of:


	2008			2007
	Amount Outstanding		Average Year-End Rate	Amount Outstanding		Average Year-End Rate
	(in millions)			(in millions)
Commercial paper	$	606	2.6%	$	1,608	5.0%
LU Biscuit bridge facility		–	–		5,527	5.2%
Bank loans		291	13.0%		250	7.2%

Total short-term borrowings	$	897		$	7,385

The fair values of our short-term borrowings at December 31, 2008 and 2007, based upon current market interest rates, approximate the amounts disclosed above.

Borrowing Arrangements:

We maintain a revolving credit facility that we have historically used for general corporate purposes and to support our commercial paper issuances. The $4.5 billion, multi-year revolving credit facility expires in April 2010. No amounts have been drawn on this facility. In October 2008, one of the syndicate banks under our credit facility, Lehman Commercial Paper, Inc., filed for bankruptcy protection. Lehman’s commitment under our credit facility is approximately $136 million. We do not expect to replace them, and our capacity under our credit facility will accordingly be reduced to approximately $4.4 billion.

We must maintain a net worth of at least $20.0 billion under the terms of our revolving credit facility. At December 31, 2008, our net worth was $22.3 billion. We expect to continue to meet this covenant. The revolving credit facility has no other financial covenants, credit rating triggers or provisions that could require us to post collateral as security.

In addition to the above, some of our international subsidiaries maintain primarily uncommitted credit lines to meet short-term working capital needs. Collectively, these credit lines amounted to $1.7 billion at December 31, 2008. Borrowings on these lines amounted to $291 million at December 31, 2008 and $250 million at December 31, 2007.

At December 31, 2007, we had borrowed €3.8 billion (approximately $5.5 billion) under the 364-day bridge facility agreement we used to acquire LU Biscuit (“LU Biscuit Bridge Facility”). Under the terms of the credit agreement, we were required to repay borrowings with the net cash proceeds from debt offerings having a maturity of greater than one year. As such, we repaid the €3.8 billion (approximately $5.9 billion at the time of repayments) with proceeds from our March 20, 2008 and May 22, 2008 debt issuances discussed below. Upon repayment, this facility was terminated.

Long-Term Debt:

On December 19, 2008, we issued $500 million of senior unsecured notes and used the net proceeds ($498 million) for general corporate purposes, including the repayment of outstanding commercial paper. The general terms of the $500 million notes are: $500 million total principal notes due February 19, 2014 at a fixed, annual interest rate of 6.750%. Interest is payable semiannually, and began on February 19, 2009.

On May 22, 2008, we issued $2.0 billion of senior unsecured notes and used the net proceeds ($1,967 million) for general corporate purposes, including the repayment of borrowings under our LU Biscuit Bridge Facility and other short-term borrowings. The general terms of the $2.0 billion notes are:

•

$1,250 million total principal notes due August 23, 2018 at a fixed, annual interest rate of 6.125%. Interest is payable semiannually beginning February 23, 2009.

•

$750 million total principal notes due January 26, 2039 at a fixed, annual interest rate of 6.875%. Interest is payable semiannually, and began on January 26, 2009.

On March 20, 2008, we issued €2.85 billion (approximately $4.5 billion) of senior unsecured notes and used the net proceeds (approximately $4,470 million) to repay a portion of our LU Biscuit Bridge Facility. The general terms of the €2.85 billion notes are:

•

€2.0 billion (approximately $3.2 billion) total principal notes due March 20, 2012 at a fixed, annual interest rate of 5.750%. Interest is payable annually beginning March 20, 2009.

•

€850 million (approximately $1.3 billion) total principal notes due March 20, 2015 at a fixed, annual interest rate of 6.250%. Interest is payable annually beginning March 20, 2009.

On December 12, 2007, we issued $3.0 billion of senior unsecured notes and used the net proceeds ($2,966 million) for general corporate purposes, including the repayment of outstanding commercial paper and a portion of our LU Biscuit Bridge Facility. The general terms of the $3.0 billion notes are:

•

$2.0 billion total principal notes due February 1, 2018 at a fixed, annual interest rate of 6.125%. Interest is payable semiannually, and began on August 1, 2008.

•

$1.0 billion total principal notes due February 1, 2038 at a fixed, annual interest rate of 6.875%. Interest is payable semiannually, and began on August 1, 2008.

On August 13, 2007, we issued $3.5 billion of senior unsecured notes and used the net proceeds ($3,462 million) for general corporate purposes, including the repayment of outstanding commercial paper. The general terms of the $3.5 billion notes are:

•

$250 million total principal notes due August 11, 2010 at a fixed, annual interest rate of 5.625%. Interest is payable semiannually, and began on February 11, 2008.

•

$750 million total principal notes due February 11, 2013 at a fixed, annual interest rate of 6.000%. Interest is payable semiannually, and began on February 11, 2008.

•

$1.5 billion total principal notes due August 11, 2017 at a fixed, annual interest rate of 6.500%. Interest is payable semiannually, and began on February 11, 2008.

•

$750 million total principal notes due August 11, 2037 at a fixed, annual interest rate of 7.000%. Interest is payable semiannually, and began on February 11, 2008.

•

$250 million total principal notes due August 11, 2010 at a floating, annual interest rate of LIBOR plus 50 basis points that resets quarterly. The rate as of December 31, 2008 was 2.735%. Interest on the floating rate notes is payable quarterly, and began on November 13, 2007.

The notes from all issuances discussed above include covenants that restrict our ability to incur debt secured by liens above a certain threshold. We are also required to offer to purchase these notes at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest to the date of repurchase, if we experience both of the following:

(i)

a “change of control” triggering event, and

(ii)

a downgrade of these notes below an investment grade rating by each of Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services and Fitch, Inc. within a specified period.

We expect to continue to comply with our long-term debt covenants.

At December 31, 2008 and 2007, our long-term debt consisted of (interest rates were as of December 31, 2008):


	2008			2007
	(in millions)

Notes, 2.74% to 7.55% (average effective rate 6.17%), due through 2039	$	15,130		$	13,392
Euro notes, 5.75% to 6.25% (average effective rate 5.98%), due through 2015		3,970			–
7% Debenture (effective rate 11.32%), $200 million face amount, due 2011		182			175
Other foreign currency obligations		11			16
Capital leases and other		61			41

Total long-term debt		19,354			13,624
Less current portion of long-term debt		(765	)		(722	)

Long-term debt	$	18,589		$	12,902

Aggregate maturities of long-term debt are (in millions):


	2009							$	765
	2010								508
	2011								2,208
	2012								4,300
	2013								1,555
	Thereafter								10,118
On October 1, 2008, we repaid $700 million in notes. This repayment was primarily financed from commercial paper issuances. Fair Value: The aggregate fair value of our long-term debt, based on quoted prices in active markets for identical liabilities, was $19,629 million at December 31, 2008 and $13,903 million at December 31, 2007. The aggregate fair value of our third-party debt, based on market quotes, at December 31, 2008, was $20,526 million as compared with the carrying value of $20,251 million. The aggregate fair value of our third-party debt at December 31, 2007, was $21,288 million as compared with the carrying value of $21,009 million. Interest and Other Expense: Interest and other (income) / expense was:
		For the Years Ended December 31,
		2008			2007			2006
		(in millions)

	Interest and other expense, net:
	Interest expense, external debt	$	1,272		$	739		$	609
	Interest income, Altria and affiliates		–			(74	)		(47	)
	Other income, net		(32	)		(61	)		(52	)

	Total interest and other expense, net	$	1,240		$	604		$	510

Note 8. Capital Stock:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 8. Capital Stock:

Note 8. Capital Stock: Our articles of incorporation authorize 3.0 billion shares of Class A common stock, 2.0 billion shares of Class B common stock and 500 million shares of preferred stock. Shares of Class A common stock issued, repurchased and outstanding were:
		Shares Issued		Shares Repurchased			Shares Outstanding

	Balance at January 1, 2006		555,000,000		(65,119,245	)	489,880,755
	Repurchase of shares		–		(38,744,248	)	(38,744,248	)
	Exercise of stock options and issuance of other stock awards		–		4,836,138		4,836,138

	Balance at December 31, 2006		555,000,000		(99,027,355	)	455,972,645
	Repurchase of shares		–		(111,516,043	)	(111,516,043	)
	Exercise of stock options and issuance of other stock awards		–		9,321,018		9,321,018
	Conversion of Class B common shares to Class A common shares		1,180,000,000		–		1,180,000,000

	Balance at December 31, 2007		1,735,000,000		(201,222,380	)	1,533,777,620
	Repurchase of shares		–		(25,272,255	)	(25,272,255	)
	Shares tendered (Note 2)		–		(46,119,899	)	(46,119,899	)
	Exercise of stock options and issuance of other stock awards		–		6,915,974		6,915,974

	Balance at December 31, 2008		1,735,000,000		(265,698,560	)	1,469,301,440

Upon the spin-off, Altria converted all of its Class B shares of Kraft Foods common stock into Class A shares of Kraft Foods common stock. Following our spin-off from Altria, we only have Class A common stock outstanding. There were no Class B common stock or preferred shares issued and outstanding at December 31, 2008 and 2007.

On August 4, 2008, we completed the split-off of the Post cereals business. In this transaction, approximately 46.1 million shares of Kraft Foods Common Stock were tendered for $1,644 million.

At December 31, 2008, 139,940,307 shares of Common Stock were reserved for stock options and other stock awards.

Our Board of Directors authorized the following Common Stock repurchase programs. We are not obligated to repurchase any of our Common Stock and may suspend our current program at our discretion. The total repurchases under these programs were 25.3 million shares for $777 million in 2008, 110.1 million shares for $3,640 million in 2007, and 38.7 million shares for $1,250 million in 2006. We made these repurchases of our Common Stock in open market transactions.


Share Repurchase Program Authorized by the Board of Directors	$5.0 billion	$2.0 billion	$1.5 billion

Authorized / completed period for repurchase	April 2007 – March 2009	March 2006 – March 2007	December 2004 – March 2006

Aggregate cost of shares repurchased in 2008 (millions of shares)	$777 million (25.3 shares)

Aggregate cost of shares repurchased in 2007 (millions of shares)	$3.5 billion (105.6 shares)	$140 million (4.5 shares)

Aggregate cost of shares repurchased in 2006 (millions of shares)		$1.0 billion (30.2 shares)	$250 million (8.5 shares)

Aggregate cost of shares repurchased life-to-date under program (millions of shares)	$4.3 billion (130.9 shares)	$1.1 billion (34.7 shares)	$1.5 billion (49.1 shares)

In March 2007, we repurchased 1.4 million additional shares of our Common Stock from Altria at a cost of $46.5 million. We paid $32.085 per share, which was the average of the high and the low price of Kraft Foods Common Stock as reported on the NYSE on March 1, 2007. This repurchase was in accordance with our Altria spin-off agreement.

- Definition

Disclosures related to accounts comprising shareholders' equity, including other comprehensive income. Includes: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables; effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

+ References+ Details

Note 9. Accumulated Other Comprehensive Losses:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 9. Accumulated Other Comprehensive Losses:

Note 9. Accumulated Other Comprehensive Losses:

The components of accumulated other comprehensive losses were:


	Currency Translation Adjustments			Pension and Other Benefits			Derivatives Accounted for as Hedges			Total
	(in millions)

Balances at January 1, 2006	$	(1,290	)	$	(369	)	$	(4	)	$	(1,663	)
Other comprehensive earnings / (losses), net of income taxes:
Currency translation adjustments		567			–			–			567
Additional minimum pension liability		–			78			–			78

Total other comprehensive earnings											645

Adoption of new benefit plan guidance		–			(2,051	)		–			(2,051	)

Balances at December 31, 2006	$	(723	)	$	(2,342	)	$	(4	)	$	(3,069	)
Other comprehensive earnings / (losses), net of income taxes:
Currency translation adjustments		672			(78	)		–			594
Amortization of experience losses and prior service costs		–			154			–			154
Pension settlement		–			45			–			45
Net actuarial gain arising during period		–			410			–			410
Change in fair value of cash flow hedges		–			–			31			31

Total other comprehensive earnings											1,234

Balances at December 31, 2007	$	(51	)	$	(1,811	)	$	27		$	(1,835	)
Other comprehensive earnings / (losses), net of income taxes:
Currency translation adjustments		(2,348	)		114			–			(2,234	)
Amortization of experience losses and prior service costs		–			98			–			98
Pension settlement		–			48			–			48
Net actuarial loss arising during period		–			(2,021	)		–			(2,021	)
Change in fair value of cash flow hedges		–			–			(50	)		(50	)

Total other comprehensive losses											(4,159	)

Balances at December 31, 2008	$	(2,399	)	$	(3,572	)	$	(23	)	$	(5,994	)

- Definition

This label may include the following: 1) the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, 2) the reclassification adjustments for each classification of other comprehensive income and 3) the ending accumulated balances for each component of comprehensive income. Components of comprehensive income include: (1) foreign currency translation adjustments; (2) gains and losses on foreign currency transactions that are designated as, and are effective as, economic hedges of a net investment in a foreign entity; (3) gains and losses on intercompany foreign currency transactions that are of a long-term-investment nature, when the entities to the transaction are consolidated, combined, or accounted for by the equity method in the reporting enterprise's financial statements; (4) change in the market value of a futures contract that qualifies as a hedge of an asset reported at fair value; (5) unrealized holding gains and losses on available-for-sale securities and that resulting from transfers of debt securities from the held-to-maturity category to the available-for-sale category; (6) a net loss recognized as an additional pension liability not yet recognized as net periodic pension cost; and (7) the net gain or loss and net prior service cost or credit for pension plans and other postretirement benefit plans.

+ References+ Details

Note 10. Stock Plans:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 10. Stock Plans:

Note 10. Stock Plans:

Beginning in 2008, we changed our annual and long-term incentive compensation programs to further align them with shareholder returns. Under the annual incentive program, we now grant equity in the form of both restricted or deferred stock and stock options. The restricted or deferred stock will continue to vest 100% after three years, and the stock options will vest one-third each year beginning on the first anniversary of the grant date. Additionally, we changed our long-term incentive plan from a cash-based program to a share-based program. These shares vest based on varying performance, market and service conditions.

Under the Kraft Foods 2005 Performance Incentive Plan (the “2005 Plan”), we may grant to eligible employees awards of stock options, stock appreciation rights, restricted stock, restricted and deferred stock units, and other awards based on our Common Stock, as well as performance-based annual and long-term incentive awards. We are authorized to issue a maximum of 150 million shares of our Common Stock under the 2005 Plan, of which no more than 45 million shares may be awarded as restricted or deferred stock. In addition, under the Kraft Foods 2006 Stock Compensation Plan for Non-Employee Directors (the “2006 Directors Plan”), we may grant up to 500,000 shares of Common Stock to members of the Board of Directors who are not our full-time employees. At December 31, 2008, there were 95,075,163 shares available to be granted under the 2005 Plan and 412,996 shares available to be granted under the 2006 Directors Plan. Restricted or deferred shares available for grant under the 2005 Plan at December 31, 2008, were 27,229,592.

All stock awards are issued to employees from treasury stock. We have no specific policy to repurchase Common Stock to mitigate the dilutive impact of options; however, we have historically made adequate discretionary purchases, based on cash availability, market trends and other factors, to satisfy stock option exercise activity.

On January 1, 2006, we adopted new guidance related to share-based payments under the modified prospective method. The adoption had an insignificant impact on earnings in 2006. The gross cumulative effect was recorded in marketing, administration and research costs.

Stock Option Plan:

Stock options are granted at an exercise price equal to the market value of the underlying stock on the grant date, generally become exercisable one-third each year beginning on the first anniversary of the grant date and have a maximum term of ten years. Prior to 2008, we had not granted stock options through a broad-based program since 2002.

We account for our employee stock options under the fair value method of accounting using a modified Black-Scholes methodology to measure stock option expense at the date of grant. The fair value of the stock options at the date of grant is amortized to expense over the vesting period. We recorded compensation expense related to stock options of $18 million in 2008. The deferred tax benefit recorded related to this compensation expense was $6 million in 2008. The unamortized compensation expense related to our stock options was $40 million at December 31, 2008 and is expected to be recognized over a weighted-average period of two years. Our weighted-average Black-Scholes fair value assumptions were as follows:


		Risk-Free Interest Rate	Expected Life		Expected Volatility		Expected Dividend Yield	Fair Value at Grant Date

	2008	3.08%	6 years			21.04%	3.66%	$	4.49

The risk free interest rate represents the rate on zero-coupon U.S. government issues with a remaining term equal to the expected life of the options. The expected life is the period over which our employees are expected to hold their options. It is based on the simplified method from the SEC safe harbor guidelines. Volatility reflects historical movements in our stock price for a period commensurate with the expected life of the options. Dividend yield is estimated over the expected life of the options based on our stated dividend policy.

Stock option activity for the year ended December 31, 2008 was:

			Shares Subject to Option		Weighted- Average Exercise Price		Average Remaining Contractual Term	Aggregate Intrinsic Value

	Balance at January 1, 2008		31,066,239		$	21.47
	Options granted		13,565,920			29.49
	Options exercised		(4,956,807	)		16.12
	Options cancelled		(1,189,793	)		29.37

	Balance at December 31, 2008		38,485,559			24.74	4 years	$	163 million

	Exercisable at December 31, 2008		25,429,519			22.26	2 years	$	163 million


In February 2008, as part of our annual incentive program, we granted 13.5 million stock options to eligible U.S. and non-U.S. employees at an exercise price of $29.49. We also granted 0.1 million off-cycle stock options during 2008 at an exercise price of $30.78. On May 3, 2007, our Board of Directors approved a stock option grant to our CEO to recognize her election as our Chairman. She received 300,000 stock options under the 2005 Plan, which vest under varying market and service conditions and expire ten years after the grant date. The grant had an insignificant impact on earnings in 2007. Prior to our IPO, certain Kraft Foods employees participated in Altria’s stock compensation plans. After the IPO, Altria did not issue stock awards to our employees, other than reloads of previously issued options and stock awards issued as a result of our spin-off from Altria. No reloads were issued during 2008 and 2007. Compensation expense for Altria stock option awards for reloads totaled $3 million in 2006, and the related tax benefit totaled $1 million. The fair value of the awards was determined using a modified Black-Scholes methodology using the following weighted-average assumptions for Altria common stock.

		Risk-Free Interest Rate	Expected Life		Expected Volatility		Expected Dividend Yield	Fair Value at Grant Date

	2006 Altria	4.87%	4 years			26.73%	4.43%		$ 12.79

The total intrinsic value of options exercised was $76 million in 2008, $90 million in 2007 and $7 million in 2006. Cash received from options exercised was $80 million in 2008, $124 million in 2007 and $55 million in 2006. The actual tax benefit realized for the tax deductions from the option exercises totaled $44 million in 2008, $35 million in 2007 and $3 million in 2006.

Restricted Stock Plans:

We may grant shares of restricted or deferred stock to eligible employees, giving them in most instances all of the rights of shareholders, except that they may not sell, assign, pledge or otherwise encumber the shares. Shares of restricted and deferred stock are subject to forfeiture if certain employment conditions are not met. Restricted and deferred stock generally vests on the third anniversary of the grant date.

Shares granted in connection with our long-term incentive plan vest based on varying performance, market and service conditions. The unvested shares have no voting rights and do not pay dividends.

The fair value of the restricted and deferred shares at the date of grant is amortized to earnings over the restriction period. We recorded compensation expense related to restricted and deferred stock of $160 million in 2008, $136 million in 2007 and $139 million (including a pre-tax cumulative effect gain of $9 million from the adoption of new guidance related to share-based payments) in 2006. The deferred tax benefit recorded related to this compensation expense was $53 million in 2008, $47 million in 2007 and $51 million in 2006. The unamortized compensation expense related to our restricted and deferred stock was $172 million at December 31, 2008 and is expected to be recognized over a weighted-average period of two years.

Our restricted and deferred stock activity for the year ended December 31, 2008 was:


	Number of Shares		Weighted-Average Grant Date Fair Value Per Share

Balance at January 1, 2008	18,660,910		$	32.21
Granted	4,968,452			30.38
Vested	(6,645,606	)		32.66
Forfeited	(1,732,951	)		31.84

Balance at December 31, 2008	15,250,805			31.46

In January 2008, we granted 1.4 million shares of stock in connection with our long-term incentive plan, and the market value per share was $32.26 on the date of grant. In February 2008, as part of our annual incentive program, we issued 3.4 million shares of restricted and deferred stock to eligible U.S. and non-U.S. employees, and the market value per restricted or deferred share was $29.49 on the date of grant. We also issued 0.2 million off-cycle shares of restricted and deferred stock during 2008, and the weighted-average market value per restricted or deferred share was $30.38 on the date of grant.

In January 2007, we issued 5.2 million shares of restricted and deferred stock to eligible U.S. and non-U.S. employees as part of our annual incentive program. The market value per restricted or deferred share was $34.655 on the date of grant. Additionally, we issued 1.0 million off-cycle shares of restricted and deferred stock during 2007. The weighted-average market value per restricted or deferred share was $34.085 on the date of grant. The total number of restricted and deferred shares issued in 2007 was 9.2 million, including those issued as a result of our spin-off from Altria (discussed below).

The weighted-average grant date fair value of restricted and deferred stock granted was $151 million, or $30.38 per restricted or deferred share, in 2008, $310 million, or $33.63 per restricted or deferred share, in 2007 and $200 million, or $29.16 per restricted or deferred share, in 2006. The vesting date fair value of restricted and deferred stock was $196 million in 2008, $153 million in 2007, and $123 million in 2006.

Bifurcation of Stock Awards Upon Spin-Off from Altria:

Upon our spin-off, Altria stock awards were modified through the issuance of Kraft Foods stock awards, and accordingly, the Altria stock awards were split into two instruments. Holders of Altria stock options received: 1) a new Kraft Foods option to acquire shares of Kraft Foods Common Stock; and 2) an adjusted Altria stock option for the same number of shares of Altria common stock previously held, but with a proportionally reduced exercise price. For each employee stock option outstanding, the aggregate intrinsic value immediately after our spin-off from Altria was not greater than the aggregate intrinsic value immediately prior to it. Holders of Altria restricted stock or stock rights awarded before January 31, 2007 retained their existing awards and received restricted stock or stock rights in Kraft Foods Common Stock. Recipients of Altria restricted stock or stock rights awarded on or after January 31, 2007 did not receive Kraft Foods restricted stock or stock rights because Altria had announced the spin-off at that time. We reimbursed Altria $179 million for net settlement of the employee stock awards. We determined the fair value of the stock options using the Black-Scholes option valuation model, and adjusted the fair value of the restricted stock and stock rights by the value of projected forfeitures.

Based upon the number of Altria stock awards outstanding upon our spin-off, we granted stock options for 24.2 million shares of Kraft Foods Common Stock at a weighted-average price of $15.75. The options expire between 2007 and 2012. In addition, we issued 3.0 million shares of restricted stock and stock rights. The market value per restricted share or right was $31.66 on the date of grant. Restrictions on the majority of these restricted stock and stock rights lapse in the first quarter of either 2008 or 2009.

Note 11. Benefit Plans:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 11. Benefit Plans:

Note 11. Benefit Plans:

Pension Plans

Obligations and Funded Status:

The projected benefit obligations, plan assets and funded status of our pension plans at December 31, 2008 and 2007 were:


	U.S. Plans						Non-U.S. Plans
	2008			2007			2008			2007
	(in millions)

Benefit obligation at January 1	$	5,952		$	6,286		$	4,275		$	4,079
Service cost		149			159			107			101
Interest cost		371			365			257			194
Benefits paid		(314	)		(325	)		(269	)		(219	)
Settlements paid		(331	)		(260	)		(16	)		–
Actuarial losses / (gains)		306			(287	)		(542	)		(326	)
Currency		–			–			(710	)		423
Other		–			14			109			23

Benefit obligation at December 31		6,133			5,952			3,211			4,275


Fair value of plan assets at January 1		7,006			7,027			4,041			3,466
Actual return on plan assets		(2,028	)		545			(761	)		166
Contributions		53			19			180			269
Benefits paid		(314	)		(325	)		(269	)		(219	)
Settlements paid		(331	)		(260	)		(16	)		–
Currency		–			–			(615	)		357
Other		–			–			58			2

Fair value of plan assets at December 31		4,386			7,006			2,618			4,041


Net pension (liability) / asset recognized at December 31	$	(1,747	)	$	1,054		$	(593	)	$	(234	)

The accumulated benefit obligation, which represents benefits earned to the measurement date, was $5,464 million at December 31, 2008 and $5,349 million at December 31, 2007 for the U.S. pension plans. The accumulated benefit obligation for the non-U.S. pension plans was $3,024 million at December 31, 2008 and $3,979 million at December 31, 2007.

The combined U.S. and non-U.S. pension plans resulted in a net pension liability of $2,340 million at December 31, 2008 and a net prepaid pension asset of $820 million at December 31, 2007. We recognized these amounts in our consolidated balance sheets at December 31, 2008 and 2007 as follows:


		2008			2007
		(in millions)

	Prepaid pension assets	$	56		$	1,648
	Other accrued liabilities		(29	)		(18	)
	Accrued pension costs		(2,367	)		(810	)

		$	(2,340	)	$	820

Our U.S. and certain of our non-U.S. plans are under funded and have accumulated benefit obligations in excess of plan assets. For these plans, the projected benefit obligations, accumulated benefit obligations and the fair value of plan assets at December 31, 2008 and 2007 were:
		U.S. Plans						Non-U.S. Plans
		2008			2007			2008			2007
		(in millions)

	Projected benefit obligation	$	6,133		$	203		$	1,740		$	1,470
	Accumulated benefit obligation		5,464			180			1,664			1,378
	Fair value of plan assets		4,386			–			1,144			771
We used the following weighted-average assumptions to determine our benefit obligations under the pension plans at December 31:
		U.S. Plans						Non-U.S. Plans
		2008			2007			2008			2007

	Discount rate		6.10%			6.30%			6.41%			5.44%
	Expected rate of return on plan assets		8.00%			8.00%			7.25%			7.43%
	Rate of compensation increase		4.00%			4.00%			3.09%			3.13%
Year-end discount rates for our U.S. and Canadian plans were developed from a model portfolio of high quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit obligations. Year-end discount rates for our non-U.S. plans (other than Canadian pension plans) were developed from local bond indices that match local benefit obligations as closely as possible. Changes in our discount rates were primarily the result of changes in bond yields year-over-year. We determine our expected rate of return on plan assets from the plan assets’ historical long-term investment performance, current asset allocation and estimates of future long-term returns by asset class. Components of Net Pension Cost: Net pension cost consisted of the following for the years ended December 31, 2008, 2007 and 2006:
		U.S. Plans									Non-U.S. Plans
		2008			2007			2006			2008			2007			2006
		(in millions)

	Service cost	$	149		$	159		$	170		$	91		$	101		$	95
	Interest cost		371			365			354			222			194			169
	Expected return on plan assets		(526	)		(523	)		(504	)		(285	)		(251	)		(203	)
	Amortization:
	Net loss from experience differences		85			138			198			31			66			73
	Prior service cost		7			5			5			7			9			8
	Other expense		74			68			66			16			4			13

	Net pension cost	$	160		$	212		$	289		$	82		$	123		$	155

Retired employees elected lump-sum payments, resulting in settlement losses for the U.S. plans of $55 million in 2008, $47 million in 2007 and $49 million in 2006. Additionally, as previously discussed in Note 6, Asset Impairment, Exit and Implementation Costs, we announced several workforce reduction initiatives as part of the Restructuring Program. Employees left Kraft Foods under these initiatives, resulting in settlement losses for the U.S. plans of $19 million in 2008, $21 million in 2007 and $17 million in 2006. Non-U.S. plant closures and early retirement benefits resulted in curtailment and settlement losses of $16 million in 2008, $4 million in 2007 and $13 million in 2006. These costs are included in other expense above.

For the U.S. plans, we determine the expected return on plan assets component of net periodic benefit cost using a calculated market return value that recognizes the cost over a four year period. For our non-U.S. plans, we utilize a similar approach with varying cost recognition periods for some plans, and with others, we determine the expected return on plan assets based on asset fair values as of the measurement date.

For the combined U.S. and non-U.S. pension plans, we expect to amortize from accumulated other comprehensive losses into net periodic pension cost during 2009:

•

an estimated $180 million of net loss from experience differences; and

•

an estimated $11 million of prior service cost.

We used the following weighted-average assumptions to determine our net pension cost for the years ended December 31:


		U.S. Plans			Non-U.S. Plans
		2008	2007	2006	2008	2007	2006

	Discount rate	6.30%	5.90%	5.60%	5.44%	4.67%	4.44%
	Expected rate of return on plan assets	8.00%	8.00%	8.00%	7.43%	7.53%	7.57%
	Rate of compensation increase	4.00%	4.00%	4.00%	3.13%	3.00%	3.11%
Plan Assets: The percentage of fair value of pension plan assets at December 31, 2008 and 2007 was:
		U.S. Plans		Non-U.S. Plans
	Asset Category	2008	2007	2008	2007

	Equity securities	65%	70%	45%	56%
	Debt securities	35%	30%	45%	38%
	Real estate	–	–	4%	3%
	Other	–	–	6%	3%

	Total	100%	100%	100%	100%

Our investment strategy is based on our expectation that equity securities will outperform debt securities over the long term. Accordingly, the composition of our U.S. plan assets is broadly characterized as a 70% / 30% allocation between equity and debt securities. The strategy uses indexed U.S. equity securities, actively managed international equity securities and actively managed investment grade debt securities (which constitute 80% or more of debt securities) with lesser allocations to high yield and international debt securities.

For the plans outside the U.S., the investment strategy is subject to local regulations and the asset / liability profiles of the plans in each individual country. These specific circumstances result in a level of equity exposure that is typically less than the U.S. plans. In aggregate, the asset allocation targets of our non-U.S. plans are broadly characterized as a mix of 50% equity securities, 40% debt securities and 10% real estate / other.

We attempt to maintain our target asset allocation by rebalancing between equity and debt asset classes as we make contributions and monthly benefit payments. We intend to rebalance our plan portfolios by mid-2009 by making contributions and monthly benefit payments.

We make contributions to our U.S. and non-U.S. pension plans, primarily, to the extent that they are tax deductible and do not generate an excise tax liability. Based on current tax law, we plan to make contributions of approximately $220 million to our U.S. plans and approximately $170 million to our non-U.S. plans in 2009. However, our actual contributions may be different due to many factors, including changes in tax and other benefit laws, pension asset performance that differs significantly from the expected performance, or significant changes in interest rates.

Future Benefit Payments:

The estimated future benefit payments from our pension plans at December 31, 2008 were:


		U.S. Plans			Non-U.S. Plans
		(in millions)

	2009	$	579		$	213
	2010		459			220
	2011		453			222
	2012		463			226
	2013		473			230
	2014 – 2018		2,557			1,219

Other Costs:
We sponsor and contribute to employee savings plans. These plans cover eligible salaried, non-union and union employees. Our contributions and costs are determined by the matching of employee contributions, as defined by the plans. Amounts charged to expense for defined contribution plans totaled $93 million in 2008, $83 million in 2007 and $84 million in 2006.

We also made contributions to multiemployer plans totaling $51 million in 2008, $50 million in 2007 and $50 million in 2006.

Postretirement Benefit Plans
Obligations:
Our postretirement health care plans are not funded. The changes in the accumulated benefit obligation and net amount accrued at December 31, 2008 and 2007 were:

		2008			2007
		(in millions)

	Accumulated postretirement benefit obligation at January 1	$	3,063		$	3,230
	Service cost		44			46
	Interest cost		183			177
	Benefits paid		(206	)		(203	)
	Plan amendments		(84	)		(45	)
	Currency		(30	)		21
	Assumption changes		(28	)		14
	Actuarial gains		(43	)		(179	)
	Curtailments / other		–			2

	Accrued postretirement health care costs at December 31	$	2,899		$	3,063


The current portion of our accrued postretirement health care costs of $221 million at December 31, 2008 and $217 million at December 31, 2007 is included in other accrued liabilities.

We used the following weighted-average assumptions to determine our postretirement benefit obligations at December 31:

		U.S. Plans						Canadian Plans
		2008			2007			2008	2007

	Discount rate		6.10%			6.10%		7.60%	5.80%
	Health care cost trend rate assumed for next year		7.00%			7.50%		9.00%	9.00%
	Ultimate trend rate		5.00%			5.00%		6.00%	6.00%
	Year that the rate reaches the ultimate trend rate		2014			2013		2015	2014

Year-end discount rates for our U.S. and Canadian plans were developed from a model portfolio of high quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit obligations. Changes in our Canadian discount rate were primarily the result of changes in bond yields year-over-year. Our expected health care cost trend rate is based on historical costs.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects as of December 31, 2008:


			One-Percentage-Point
			Increase			Decrease

	Effect on total of service and interest cost			13.0%			(10.7%	)
	Effect on postretirement benefit obligation			11.1%			(9.3%	)

Components of Net Postretirement Health Care Costs: Net postretirement health care costs consisted of the following for the years ended December 31, 2008, 2007 and 2006:

			2008			2007			2006
			(in millions)

	Service cost		$	44		$	46		$	50
	Interest cost			183			177			174
	Amortization:
	Net loss from experience differences			55			58			78
	Prior service credit			(28	)		(26	)		(28	)
	Other expense			–			5			(3	)

	Net postretirement health care costs		$	254		$	260		$	271


We expect to amortize from accumulated other comprehensive losses into net postretirement health care costs during 2009:
• an estimated $45 million of net loss from experience differences; and
• an estimated $31 million of prior service credit.
We used the following weighted-average assumptions to determine our net postretirement cost for the years ended December 31:
		U.S. Plans							Canadian Plans
		2008	2007			2006			2008			2007	2006

	Discount rate	6.10%		5.90%			5.60%			5.80%		5.00%	5.00%
	Health care cost trend rate	7.50%		8.00%			8.00%			9.00%		8.50%	9.00%

Future Benefit Payments:
Our estimated future benefit payments for our postretirement health care plans at December 31, 2008 were:

			U.S. Plans			Canadian Plans
			(in millions)

	2009		$	212		$	9
	2010			215			9
	2011			218			9
	2012			218			9
	2013			220			10
	2014 – 2018			1,107			54

Postemployment Benefit Plans

Obligations:

Our postemployment plans are not funded. The changes in the benefit obligations of the plans and net amount accrued at December 31, 2008 and 2007 were:


		2008			2007
		(in millions)

	Accumulated benefit obligation at January 1	$	254		$	238
	Service cost		6			4
	Interest cost		7			6
	Restructuring Program		560			132
	Benefits paid		(280	)		(190	)
	Assumption changes		12			29
	Actuarial (gains) / losses		(2	)		6
	Currency		(15	)		12
	Other		18			17

	Accrued postemployment costs at December 31	$	560		$	254


The accumulated benefit obligation was determined using a weighted-average discount rate of 7.1% in 2008 and 7.0% in 2007, an assumed ultimate annual turnover rate of 0.5% in 2008 and 2007, assumed compensation cost increases of 4.0% in 2008 and 2007, and assumed benefits as defined in the respective plans. Postemployment costs arising from actions that offer employees benefits in excess of those specified in the respective plans are charged to expense when incurred.

Components of Net Postemployment Costs:
Net postemployment costs consisted of the following for the years ended December 31, 2008, 2007 and 2006:

		2008			2007			2006
		(in millions)

	Service cost	$	6		$	4		$	4
	Interest cost		7			6			4
	Amortization of net gains		(2	)		(2	)		(7	)
	Restructuring Program and other		560			132			236

	Net postemployment costs	$	571		$	140		$	237

The postemployment benefit plan cost of workforce reduction initiatives announced under the Restructuring Program was $560 million in 2008, $132 million in 2007 and $247 million in 2006. These costs are included in other expense above.

The estimated net gain for the postemployment benefit plans that will be amortized from accumulated other comprehensive losses into net postemployment costs during 2009 is insignificant.

- Definition

Description containing the entire pension and other postretirement benefits disclosure as a single block of text.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 158

-Paragraph 7, 21, 22

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5, 6, 7, 8

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 8

-Subparagraph m

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 106

-Paragraph 518

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 87

-Paragraph 264

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph b

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph a

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph h

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph q

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name FASB Staff Position (FSP)

-Number FAS106-2

-Paragraph 20, 21, 22

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Emerging Issues Task Force (EITF)

-Number 03-2

-Paragraph 8

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Accounting Principles Board Opinion (APB)

-Number 30

-Paragraph 26

Reference 13: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Implementation Guide (Q and A)

-Number FAS88

-Paragraph 63

+ Details

Note 12. Financial Instruments:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 12. Financial Instruments:

Note 12. Financial Instruments:

Commodity Cash Flow Hedges:

For derivative instruments that are highly effective and qualify for hedge accounting, we expect to transfer unrealized losses of $108 million (net of taxes) to earnings during the next 12 months, and recognized an insignificant amount during the years ended December 31, 2008, 2007 and 2006. We recorded an insignificant amount of ineffectiveness in earnings during the years ended December 31, 2008, 2007 and 2006.

For the derivative instruments that we considered economic hedges but did not designate for hedge accounting treatment, we recognized net gains of $56 million in 2007. The impact to earnings was insignificant in 2008 and 2006.

As of December 31, 2008, we had hedged forecasted commodity transactions for periods not exceeding the next 15 months.

Foreign Currency Cash Flow Hedges:

For derivative instruments that are highly effective and qualify for hedge accounting treatment, we expect to transfer unrealized gains of $77 million (net of taxes) to earnings during the next 12 months, and recognized an insignificant amount during the years ended December 31, 2008, 2007 and 2006. We recorded no ineffectiveness in our foreign currency cash flow hedges in earnings during the years ended December 31, 2008, 2007 and 2006. In October 2008, one of our counterparties, Lehman Brothers Commercial Corporation, filed for bankruptcy. Consequently, we wrote off an insignificant asset related to derivatives held with them. This did not have a significant impact on our foreign currency risk management program.

For the derivative instruments that we consider economic hedges but did not designate for hedge accounting treatment, we recognized net losses in earnings of $50 million in 2008, $231 million in 2007 and $124 million in 2006. The majority of these losses were attributable to hedges of intercompany loans and were economically offset with foreign currency gains from the intercompany receivable.

As of December 31, 2008, we had hedged forecasted foreign currency transactions for periods not exceeding the next 36 months. Excluding intercompany loans, we had hedged forecasted foreign currency transactions for periods not exceeding the next 12 months.

Impact on Other Comprehensive Losses:

Derivatives accounted for as hedges affected accumulated other comprehensive losses, net of taxes, during the years ended December 31, 2008, 2007 and 2006, as follows:


		2008			2007			2006
		(in millions)

	Accumulated gain / (loss) at beginning of period	$	27		$	(4	)	$	(4	)
	Transfer of realized losses / (gains) in fair value to earnings		26			(10	)		32
	Unrealized (loss) / gain in fair value		(76	)		41			(32	)

	Accumulated (loss) / gain at December 31	$	(23	)	$	27		$	(4	)

Fair Value:
The fair value (asset / (liability)) of our derivatives at December 31, 2008 was:
		Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
		(in millions)

	Derivatives	$	(363	)	$	(322	)	$	(41	)	$	–

Hedges of Net Investments in Foreign Operations:

We designated the euro denominated borrowings used to finance the LU Biscuit acquisition as a net investment hedge of a portion of our overall European operations. Our cumulative translation adjustment, which is net of taxes, included gains of $83 million for the year ended December 31, 2008 and $28 million for the year ended December 31, 2007 related to the euro denominated borrowings.

Note 14. Income Taxes:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 14. Income Taxes:

Note 14. Income Taxes:

Earnings from continuing operations before income taxes and provision for income taxes consisted of the following for the years ended December 31, 2008, 2007 and 2006:

		2008			2007			2006
		(in millions; as revised)

	Earnings from continuing operations before income taxes:
	United States	$	1,341		$	2,325		$	2,419
	Outside United States		1,262			1,247			1,229

	Total	$	2,603		$	3,572		$	3,648

	Provision for income taxes:
	United States federal:
	Current	$	392		$	649		$	509
	Deferred		(13	)		(270	)		(118	)

			379			379			391
	State and local:
	Current		62			175			77
	Deferred		(21	)		(69	)		(35	)

			41			106			42

	Total United States		420			485			433

	Outside United States:
	Current		507			649			398
	Deferred		(172	)		(54	)		(15	)

	Total outside United States		335			595			383

	Total provision for income taxes	$	755		$	1,080		$	816

Additionally, the 2008 earnings and gain from discontinued operations from the split-off of the Post cereals business included a net tax benefit of $104 million.

As of January 1, 2008, our unrecognized tax benefits were $850 million. If we had recognized all of these benefits, the net impact on our income tax provision would have been $666 million. Our unrecognized tax benefits were $807 million at December 31, 2008, and if we had recognized all of these benefits, the net impact on our income tax provision would have been $612 million. We expect that our unrecognized tax benefits will decrease approximately $70 million to $75 million during the next 12 months due to various audit resolutions and the expirations of statutes of limitations. We include accrued interest and penalties related to uncertain tax positions in our tax provision. We had accrued interest and penalties of $232 million as of January 1, 2008 and $239 million as of December 31, 2008. Our 2008 provision for income taxes included $17 million for interest and penalties, and we paid $6 million during 2008. Furthermore, in 2008, we decreased our interest and penalties accrual by $4 million due to refinements of preliminary allocations of purchase price for our acquisition of LU Biscuit.

The changes in our unrecognized tax benefits for the years ended December 31, 2008 and 2007 were (in millions):


				2008			2007

	January 1			$	850		$	667
	Increases from positions taken during prior periods				17			131
	Decreases from positions taken during prior periods				(90	)		(23	)
	Increases from positions taken during the current period				98			34
	(Decreases) / increases from acquisition adjustments				(22	)		72
	Decreases relating to settlements with taxing authorities				(8	)		(38	)
	Reductions resulting from the lapse of the applicable statute of limitations				(13	)		(6	)
	Currency / other				(25	)		13

	December 31			$	807		$	850

We are regularly examined by federal and various state and foreign tax authorities. The U.S. federal statute of limitations remains open for the year 2000 and onward, with years 2000 through 2003 currently under examination by the IRS. We are also currently under examination by taxing authorities in various U.S. state and foreign jurisdictions. U.S. state and foreign jurisdictions have statutes of limitations generally ranging from three to five years. Years still open to examination by foreign tax authorities in major jurisdictions include Germany (1999 onward), Brazil (2002 onward), Canada (2003 onward), Spain (2002 onward) and France (2005 onward). At December 31, 2008, applicable U.S. federal income taxes and foreign withholding taxes had not been provided on approximately $4.3 billion of accumulated earnings of foreign subsidiaries that are expected to be permanently reinvested. It is impractical for us to determine the amount of unrecognized deferred tax liabilities on these permanently reinvested earnings. The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2008, 2007 and 2006:
		2008		2007			2006
		(as revised)

	U.S. federal statutory rate	35.0%			35.0%			35.0%
	Increase / (decrease) resulting from:
	State and local income taxes, net of federal tax benefit excluding IRS audit impacts	2.6%			2.8%			1.6%
	Benefit principally related to reversal of federal and state reserves on conclusion of IRS audit	–			–			(10.3%	)
	Reversal of other tax accruals no longer required	(1.7%	)		(1.4%	)		(1.4%	)
	Foreign rate differences, net of repatriation impacts	(5.2%	)		(5.2%	)		(0.3%	)
	Other	(1.7%	)		(1.0%	)		(2.2%	)

	Effective tax rate	29.0%			30.2%			22.4%

Our 2008 effective tax rate included net tax benefits of $222 million from discrete tax events. Of the total net tax benefits, approximately $50 million related to fourth quarter corrections of state, federal and foreign tax liabilities and a third quarter reconciliation of our inventory of deferred tax items that resulted in a write-down of our net deferred tax liabilities. The remaining net tax benefits primarily related to the resolution of various tax audits and the expiration of statutes of limitations in various jurisdictions. Other discrete tax benefits included the impact from divestitures of a Nordic and Baltic snacks operation and several operations in Spain and the tax benefit from impairment charges taken in 2008. In addition, the 2008 tax rate benefited from foreign earnings taxed below the U.S. federal statutory tax rate and from the expected tax benefit on 2008 restructuring expenses. These benefits were only partially offset by state tax expense and certain foreign costs.

Our 2007 effective tax rate included net tax benefits of $184 million, primarily including the effects of dividend repatriation benefits, foreign joint venture earnings, and the effect on foreign deferred taxes from lower foreign tax rates enacted in 2007. The 2007 tax rate also benefited from foreign earnings taxed below the U.S. federal statutory tax rate, an increased domestic manufacturing deduction and the divestiture of our flavored water and juice brand assets and related trademarks. These benefits were partially offset by state tax expense, tax costs associated with the divestiture of our hot cereal assets and trademarks and interest income from Altria related to the transfer of our federal tax contingencies discussed in Note 1, Summary of Significant Accounting Policies.

During 2006, the IRS concluded its examination of Altria’s consolidated tax returns for the years 1996 through 1999. The IRS issued a final Revenue Agents Report on March 15, 2006. Consequently, Altria reimbursed us $337 million for federal tax reserves that were no longer necessary and $46 million for interest ($29 million net of tax). We also recognized net state tax reversals of $39 million, for a total tax provision benefit of $376 million ($337 million federal plus $39 million state). The total benefit to net earnings that we recognized in the first quarter of 2006 due to the IRS settlement was $405 million. The 2006 tax rate also benefited from the resolution of various tax items in our foreign operations, dividend repatriation benefits, joint venture earnings, and lower foreign tax rates enacted in 2006 (primarily Canada). These benefits were partially offset by state tax expense and by the tax costs associated with our 2006 divestitures.

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following at December 31, 2008 and 2007:


	2008			2007
	(in millions; as revised)

Deferred income tax assets:
Accrued postretirement and postemployment benefits	$	1,467		$	1,408
Accrued pension costs		703			–
Other		2,324			1,838

Total deferred income tax assets		4,494			3,246

Valuation allowance		(84	)		(105	)

Net deferred income tax assets	$	4,410		$	3,141

Deferred income tax liabilities:
Trade names	$	(4,431	)	$	(4,359	)
Property, plant and equipment		(1,862	)		(1,398	)
Prepaid pension costs		–			(576	)
Other		(1,239	)		(1,060	)

Total deferred income tax liabilities		(7,532	)		(7,393	)

Net deferred income tax liabilities	$	(3,122	)	$	(4,252	)

Note 17. Segment Reporting:

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 17. Segment Reporting:

Note 17. Segment Reporting:

Kraft Foods manufactures and markets packaged food products, including snacks, beverages, cheese, convenient meals and various packaged grocery products. We manage and report operating results through three commercial units: Kraft Foods North America, Kraft Foods Europe and Kraft Foods Developing Markets. We manage the operations of Kraft Foods North America and Kraft Foods Europe by product category, and we manage the operations of Kraft Foods Developing Markets by geographic location. Our reportable segments are U.S. Beverages, U.S. Cheese, U.S. Convenient Meals, U.S. Grocery, U.S. Snacks (formerly known as U.S. Snacks & Cereals) and Canada & North America Foodservice, Kraft Foods Europe (formerly known as European Union) and Kraft Foods Developing Markets.

Effective January 2009, we began implementing changes to our operating structure based on our Organizing For Growth initiative and Kraft Foods Europe Reorganization. These financial statements were revised to report the results of operations under this new structure. In line with our strategies, we are reorganizing our European operations to function on a pan-European centralized category management and value chain model, and we changed how we work in Europe in two key ways:

•

We transitioned our European Biscuit, Chocolate, Coffee and Cheese categories to fully integrated business units, further strengthening our focus on these core categories. To ensure decisions are made faster and closer to our customers and consumers, each category is fully accountable for its financial results, including marketing, manufacturing and R&D. Category leadership, based in Zurich, Switzerland, reports to the Kraft Foods Europe President. These business units now comprise the Kraft Foods Europe segment.

•

We aligned the reporting of our Central Europe operations into our Kraft Foods Developing Markets segment to help build critical scale in these countries. We operate a country-led model in these markets.

Effective August 4, 2008, we completed the split-off of the Post cereals business. The results of the Post cereals business were reflected as discontinued operations on the consolidated statement of earnings and prior period results were revised in a consistent manner.

In 2008, we implemented a new operating structure. As a result, we began reporting the results of operations under this new structure in the first quarter of 2008 and revised results from prior periods in a consistent manner. The changes were:

•

U.S. Cheese was organized as a standalone operating segment in order to create a more self-contained and integrated business unit in support of faster growth.

•

Our macaroni and cheese category, as well as other dinner products, were moved from our U.S. Convenient Meals segment to our U.S. Grocery segment to take advantage of operating synergies.

•

Canada and North America Foodservice were structured as a standalone reportable segment. This change allows us to deliver on the unique requirements of the Canadian consumer and customer while maintaining strong North American linkages to innovation, new product development and new capabilities to drive our business. Furthermore, it allows us to manage strategic customer decisions and continue to capture cross-border sales and marketing synergies within our Foodservice operations.

Management uses segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. Segment operating income excludes unrealized gains and losses on hedging activities (which is a component of cost of sales), general corporate expenses (which are a component of marketing, administration and research costs) and amortization of intangibles for all periods presented. In the second quarter of 2008, we began excluding unrealized gains and losses on hedging activities from segment operating income in order to provide better transparency of our segment operating results. Once realized, the gains and losses on hedging activities are recorded within segment operating results. Furthermore, we centrally manage interest and other expense and the provision for income taxes. Accordingly, we do not present these items by segment because they are excluded from the segment profitability measure that management reviews. We use the same accounting policies for the segments as those described in Note 1, Summary of Significant Accounting Policies.

Segment data were:


	For the Years Ended December 31,
	2008			2007			2006
	(in millions; as revised)

Net revenues:
Kraft Foods North America:
U.S. Beverages	$	3,001		$	2,990		$	2,886
U.S. Cheese		4,007			3,745			3,544
U.S. Convenient Meals		4,240			3,905			3,697
U.S. Grocery		3,389			3,277			3,225
U.S. Snacks		5,025			4,879			4,834
Canada & N.A. Foodservice		4,294			4,080			3,874
Kraft Foods Europe		9,728			7,007			5,894
Kraft Foods Developing Markets		8,248			5,975			5,064

Net revenues	$	41,932		$	35,858		$	33,018


	For the Years Ended December 31,
	2008			2007			2006
	(in millions; as revised)

Earnings from continuing operations before income taxes:
Operating income:
Kraft Foods North America:
U.S. Beverages	$	381		$	346		$	226
U.S. Cheese		563			487			604
U.S. Convenient Meals		339			319			353
U.S. Grocery		1,009			1,022			1,260
U.S. Snacks		638			716			521
Canada & N.A. Foodservice		448			443			435
Kraft Foods Europe		182			455			462
Kraft Foods Developing Markets		815			588			488
Unrealized (losses) / gains on hedging activities		(205	)		16			–
General corporate expenses		(304	)		(203	)		(184	)
Amortization of intangibles		(23	)		(13	)		(7	)

Operating income		3,843			4,176			4,158
Interest and other expense, net		(1,240	)		(604	)		(510	)

Earnings from continuing operations before income taxes	$	2,603		$	3,572		$	3,648

Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 16% of consolidated net revenues in 2008, 15% in 2007 and 15% in 2006. These net revenues occurred primarily in the Kraft Foods North America segments.

In 2008, unrealized losses on hedging activities increased $221 million, due primarily to energy derivatives, including heating oil (used primarily to hedge transportation costs) and natural gas contracts. In addition, general corporate expenses (which is a component of marketing, administration and research costs) increased $101 million in 2008, primarily due to charges for legal matters related to certain of our U.S. and European operations, including U.S. coffee operations.

We incurred asset impairment, exit and implementation costs of $1,129 million in 2008, $579 million in 2007 and $1,097 million in 2006. Refer to Note 6, Asset Impairment, Exit and Implementation Costs, for a breakout of charges by segment.

As described in Note 2, Acquisitions and Divestitures, in the third quarter of 2006, we acquired the Spanish and Portuguese operations of UB. The redemption of our outstanding investment in UB resulted in a gain on closing of $251 million. This gain is included in segment operating income of Kraft Foods Europe. In addition, we divested several operations, and recorded net (losses) / gains on these divestitures in segment operating income as follows:


		For the Years Ended December 31,
		2008			2007			2006
		(in millions; as revised)

	Kraft Foods North America:
	U.S. Beverages	$	(1	)	$	(6	)	$	(95	)
	U.S. Cheese		–			–			–
	U.S. Convenient Meals		–			–			–
	U.S. Grocery		–			–			226
	U.S. Snacks		–			12			(5	)
	Canada & N.A. Foodservice		–			–			(9	)
	Kraft Foods Europe		(91	)		–			–
	Kraft Foods Developing Markets		–			8			–

	(Losses) / gains on divestitures, net	$	(92	)	$	14		$	117


Total assets, depreciation expense and capital expenditures by segment were:

		2008			2007
		(in millions; as revised)

	Total assets:
	Kraft Foods North America:
	U.S. Beverages	$	2,257		$	2,310
	U.S. Cheese		4,599			4,550
	U.S. Convenient Meals		2,857			2,788
	U.S. Grocery		5,500			5,491
	U.S. Snacks		16,384			18,302
	Canada & N.A. Foodservice		4,888			5,332
	Kraft Foods Europe		13,727			16,382
	Kraft Foods Developing Markets		9,857			9,890
	Unallocated assets ⁽¹⁾		3,104			3,087

	Total assets	$	63,173		$	68,132


	(1) Unallocated assets consist primarily of cash and cash equivalents, deferred income taxes, centrally held property, plant and equipment, prepaid pension assets and derivative financial instrument balances.

		For the Years Ended December 31,
		2008			2007			2006
		(in millions; as revised)

	Depreciation expense:
	Kraft Foods North America:
	U.S. Beverages	$	68		$	57		$	62
	U.S. Cheese		66			62			67
	U.S. Convenient Meals		78			81			77
	U.S. Grocery		78			63			64
	U.S. Snacks		129			140			123
	Canada & N.A. Foodservice		93			96			99
	Kraft Foods Europe		265			215			217
	Kraft Foods Developing Markets		160			115			110

	Total – continuing operations		937			829			819
	Discontinued operations		26			44			65

	Total depreciation expense	$	963		$	873		$	884


		For the Years Ended December 31,
		2008		2007		2006
		(in millions; as revised)

	Capital expenditures:
	Kraft Foods North America:
	U.S. Beverages	$	110	$	90	$	171
	U.S. Cheese		97		115		115
	U.S. Convenient Meals		200		207		148
	U.S. Grocery		87		99		59
	U.S. Snacks		122		136		108
	Canada & N.A. Foodservice		98		83		77
	Kraft Foods Europe		285		207		222
	Kraft Foods Developing Markets		368		274		235

	Total – continuing operations		1,367		1,211		1,135
	Discontinued operations		–		30		34

	Total capital expenditures	$	1,367	$	1,241	$	1,169


Net revenues by consumer sector, which includes Kraft macaroni and cheese dinners in the Convenient Meals sector and the separation of Canada & N.A. Foodservice, and Kraft Foods Europe and Kraft Foods Developing Markets into sector components, were:

		For the Year Ended December 31, 2008
		Kraft Foods North America		Kraft Foods Europe		Kraft Foods Developing Markets		Total
		(in millions; as revised)

	Snacks	$	5,951	$	5,291	$	4,668	$	15,910
	Beverages		3,509		2,625		2,081		8,215
	Cheese		5,525		1,109		828		7,462
	Grocery		3,211		394		567		4,172
	Convenient Meals		5,760		309		104		6,173

	Total net revenues	$	23,956	$	9,728	$	8,248	$	41,932


		For the Year Ended December 31, 2007
		Kraft Foods North America		Kraft Foods Europe		Kraft Foods Developing Markets		Total
		(in millions; as revised)

	Snacks	$	5,704	$	2,833	$	2,824	$	11,361
	Beverages		3,499		2,456		1,830		7,785
	Cheese		5,199		1,019		710		6,928
	Grocery		3,138		363		519		4,020
	Convenient Meals		5,336		336		92		5,764

	Total net revenues	$	22,876	$	7,007	$	5,975	$	35,858


		For the Year Ended December 31, 2006
		Kraft Foods North America		Kraft Foods Europe		Kraft Foods Developing Markets		Total
		(in millions; as revised)

	Snacks	$	5,490	$	2,208	$	2,329	$	10,027
	Beverages		3,351		2,193		1,542		7,086
	Cheese		4,857		916		641		6,414
	Grocery		3,226		287		470		3,983
	Convenient Meals		5,136		290		82		5,508

	Total net revenues	$	22,060	$	5,894	$	5,064	$	33,018

Geographic data for net revenues, long-lived assets (which consist of all non-current assets, other than goodwill, intangible assets, net, and prepaid pension assets) and total assets were:


	For the Years Ended December 31,
	2008		2007		2006
	(in millions; as revised)

Net revenues:
United States	$	21,436	$	20,540	$	19,902
Europe		12,870		9,105		7,578
Other		7,626		6,213		5,538

Total net revenues	$	41,932	$	35,858	$	33,018


	2008		2007
	(in millions; as revised)

Long-lived assets:
United States	$	5,393	$	6,075
Europe		3,301		3,653
Other		2,455		2,487

Total long-lived assets	$	11,149	$	12,215

Total assets:
United States	$	37,535	$	38,435
Europe		18,761		21,039
Other		6,877		8,658

Total assets	$	63,173	$	68,132

Note 18. Quarterly Financial Data (Unaudited):

12 Months Ended

Dec. 31, 2008

Notes to Financial Statements [Abstract]

Note 18. Quarterly Financial Data (Unaudited):

Note 18. Quarterly Financial Data (Unaudited):


		2008 Quarters
		First		Second		Third		Fourth
		(in millions, except per share data; as revised)

	Net revenues	$	10,046	$	10,804	$	10,401	$	10,681

	Gross profit	$	3,301	$	3,868	$	3,305	$	3,370

	Earnings from continuing operations	$	547	$	678	$	520	$	103

	Earnings and gain from discontinued operations, net of income taxes		54		69		845		77

	Net earnings		601		747		1,365		180

	Noncontrolling interest		2		2		3		2

	Net earnings attributable to Kraft Foods	$	599	$	745	$	1,362	$	178


	Weighted average shares for diluted EPS		1,542		1,532		1,503		1,481

	Per share data:
	Basic EPS attributable to Kraft Foods:
	Continuing operations	$	0.35	$	0.44	$	0.34	$	0.07
	Discontinued operations		0.04		0.05		0.57		0.05

	Net earnings attributable to Kraft Foods	$	0.39	$	0.49	$	0.91	$	0.12


	Diluted EPS attributable to Kraft Foods:
	Continuing operations	$	0.35	$	0.44	$	0.34	$	0.07
	Discontinued operations		0.04		0.05		0.57		0.05

	Net earnings attributable to Kraft Foods	$	0.39	$	0.49	$	0.91	$	0.12


	Dividends declared	$	0.27	$	0.27	$	0.29	$	0.29

	Market price – high	$	32.85	$	32.99	$	34.97	$	34.05

	– low	$	28.63	$	28.33	$	28.04	$	24.75

Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not equal the total for the year.

During the fourth quarter of 2008, we increased our gain on discontinued operations by $77 million to correct for a deferred tax liability that should have been written-off upon the split-off of the Post cereals business. As such, our gain from the split-off of the Post cereals business was $926 million.

During 2008, we recorded the following pre-tax charges / (gains) in earnings from continuing operations:

		2008 Quarters
		First		Second		Third		Fourth
		(in millions)

	Asset impairment and exit costs	$	80	$	103	$	123	$	718
	Losses / (gains) on divestitures, net		18		74		1		(1	)

		$	98	$	177	$	124	$	717


		2007 Quarters
		First			Second			Third		Fourth
		(in millions, except per share data; as revised)

	Net revenues	$	8,266		$	8,848		$	8,703	$	10,041

	Gross profit	$	2,935		$	3,131		$	2,928	$	3,208

	Earnings from continuing operations	$	666		$	661		$	549	$	616

	Earnings and gain from discontinued operations, net of income taxes		52			67			61		52

	Net earnings		718			728			610		668

	Noncontrolling interest		1			1			–		1

	Net earnings attributable to Kraft Foods	$	717		$	727		$	610	$	667


	Weighted average shares for diluted EPS		1,644			1,616			1,584		1,559

	Per share data:
	Basic EPS attributable to Kraft Foods:
	Continuing operations	$	0.40		$	0.41		$	0.35	$	0.39
	Discontinued operations		0.04			0.04			0.04		0.04

	Net earnings attributable to Kraft Foods	$	0.44		$	0.45		$	0.39	$	0.43


	Diluted EPS attributable to Kraft Foods:
	Continuing operations	$	0.40		$	0.41		$	0.35	$	0.39
	Discontinued operations		0.04			0.04			0.04		0.04

	Net earnings attributable to Kraft Foods	$	0.44		$	0.45		$	0.39	$	0.43


	Dividends declared	$	0.25		$	0.25		$	0.27	$	0.27

	Market price – high	$	36.26		$	37.20		$	36.85	$	35.29

	– low	$	29.95		$	30.18		$	30.51	$	32.09

Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not equal the total for the year.

During 2007, we recorded the following pre-tax charges / (gains) in earnings from continuing operations:

		2007 Quarters
		First			Second			Third		Fourth

		(in millions; as revised)

	Asset impairment and exit costs	$	67		$	107		$	173	$	93
	(Gains) / losses on divestitures, net		(12	)		(8	)		–		6

		$	55		$	99		$	173	$	99

- Definition

This element can be used to disclose the entire quarterly financial data disclosure in the annual financial statements as a single block of text. The disclosure includes a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income (loss) before extraordinary items and cumulative effect of a change in accounting principle and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished. Alternatively, the details of this disclosure can be reported using the elements in this group, or by using other taxonomy elements and applying the appropriate quarterly date and period contexts when creating an instance document. For example, the element for "Interest and Dividend Income, Operating" may be used by financial institutions from the Statement of Income, applying the appropriate quarterly date and period context when creating an instance document.

+ References+ Details

Note 16. Transactions with Altria Group, Inc.:	12 Months Ended
Note 16. Transactions with Altria Group, Inc.:	Dec. 31, 2008
Notes to Financial Statements [Abstract]
Note 16. Transactions with Altria Group, Inc.:	Note 16. Transactions with Altria Group, Inc.: On March 30, 2007, we entered into a post-spin Transition Services Agreement with Altria’s subsidiary, Altria Corporate Services, Inc. (“ALCS”). Under the agreement, ALCS provided information technology services to Kraft Foods during the EDS transition. Before our spin-off from Altria, ALCS provided pre-spin administrative services to us under a separate Corporate Services agreement that expired on March 30, 2007. These services included planning, legal, treasury, auditing, insurance, human resources, office of the secretary, corporate affairs, information technology, aviation and tax services. Billings for these services were $29 million in 2007 and $178 million in 2006. As of January 1, 2008, ALCS no longer provided services to Kraft Foods. On March 30, 2007, we also entered into Employee Matters and Tax Sharing Agreements with Altria. The Employee Matters Agreement set out each company’s obligations for employee transfers, equity compensation and other employee benefits matters for individuals moving, or who previously moved between companies. The Tax Sharing Agreement identified Altria’s and Kraft Foods’ rights, responsibilities and obligations with respect to our income taxes following our spin-off from Altria. It also placed certain restrictions on us, including a 2-year limit on share repurchases of no more than 20% of our Common Stock outstanding at the time of our spin-off from Altria. Also, see Note 14, Income Taxes, for information on how the closure of an IRS review of Altria’s consolidated federal income tax return in 2006 impacted us.

Document Information	12 Months Ended
Document Information	Dec. 31, 2008
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 03, 2009

Entity Information	12 Months Ended
Entity Information	Dec. 31, 2008
Trading Symbol	KFT
Entity Registrant Name	KRAFT FOODS INC
Entity Central Index Key	0001103982

Statement Of Financial Position Classified (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Dec. 31, 2008	Dec. 31, 2007
Receivables, allowances	$ 129	$ 94
Common Stock, no par value	$ 0	$ 0
Common Stock, shares issued	1,735,000,000	1,735,000,000