Coca Cola 2003 Annual Report Download - page 72

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Coca-Cola Company and Subsidiaries
NOTE 4: GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS (Continued)
The adoption of SFAS No. 142 required the Company to perform an initial impairment assessment of all
goodwill and indefinite-lived intangible assets as of January 1, 2002. The Company compared the fair value of
trademarks and other intangible assets to the current carrying value. Fair values were derived using discounted
cash flow analyses. The assumptions used in these discounted cash flow analyses were consistent with our
internal planning. Valuations were completed for intangible assets for both the Company and our equity method
investees. For the Company’s intangible assets, the cumulative effect of this change in accounting principle in
2002 was an after-tax decrease to net income of approximately $367 million. For the Company’s proportionate
share of its equity method investees, the cumulative effect of this change in accounting principle in 2002 was an
after-tax decrease to net income of approximately $559 million. The deferred income tax benefit related to the
cumulative effect of this change for the Company’s intangible assets in 2002 was approximately $94 million and
for the Company’s proportionate share of its equity method investees was approximately $123 million.
The impairment charges resulting in the after-tax decrease to net income for the cumulative effect of this
change by applicable operating segment as of January 1, 2002 were as follows (in millions):
The Company:
Asia $ 108
Europe, Eurasia & Middle East 33
Latin America 226
Total $ 367
The Company’s proportionate share of its equity method investees:
Africa $63
Europe, Eurasia & Middle East 400
Latin America 96
Total $ 559
Of the $108 million impairment recorded as of January 1, 2002 for the Company in Asia, $99 million related
to bottlers’ franchise rights in our consolidated bottlers in our Southeast and West Asia Division. Difficult
economic conditions impacted our business in Singapore, Sri Lanka, Nepal and Vietnam. As a result, bottlers in
these countries experienced lower than expected volume and operating margins.
Of the Company’s $226 million impairment recorded as of January 1, 2002 for Latin America,
approximately $113 million related to Company-owned Brazilian bottlers’ franchise rights. The Brazilian
macroeconomic conditions, the devaluation of the currency and lower pricing impacted the valuation of these
bottlers’ franchise rights. The remainder of the $226 million primarily related to a $109 million impairment for
certain trademarks in Latin America. In early 1999, our Company formed a strategic partnership to market and
distribute such trademarked brands. The macroeconomic conditions and lower pricing depressed operating
margins for these trademarks.
For Europe, Eurasia and Middle East equity method investees, a $400 million impairment was recorded as
of January 1, 2002 for the Company’s proportionate share related to bottlers’ franchise rights. Of this amount,
approximately $301 million related to CCEAG. This impairment was due to a prolonged difficult economic
environment in Germany, resulting in continuing losses for CCEAG in eastern Germany. At that time, the
market for nonalcoholic beverages was undergoing a transformation. A changing competitive landscape,
continuing price pressure and growing demand for new products and packaging were elements impacting
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