Coca Cola 2004 Annual Report Download - page 82

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Coca-Cola Company and Subsidiaries
NOTE 4: GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS (Continued)
equity method investees, the cumulative effect of this change in accounting principle in 2002 was an after-tax
decrease to net income of $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 and Middle East 33
Latin America 226
$ 367
The Company’s proportionate share of its equity method investees:
Africa $63
Europe, Eurasia and Middle East 400
Latin America 96
$ 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 products. 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 CCEAG. The
$400 million impairment also included a $50 million charge for Middle East bottlers’ franchise rights.
In our Africa operating segment, a $63 million charge was recorded for the Company’s proportionate share
of impairments related to equity method investee bottlers’ franchise rights. These Middle East and Africa
bottlers had challenges as a result of political instability and the resulting economic instability in their respective
regions, which adversely impacted financial performance.
A $96 million impairment was recorded as of January 1, 2002 for the Company’s proportionate share
related to bottlers’ franchise rights of Latin America equity method investees. In southern Latin America, the
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