Coca Cola 2005 Annual Report Download - page 70

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The Coca-Cola Company is predominantly a manufacturer, distributor and marketer of nonalcoholic
beverage concentrates and syrups. We also manufacture, distribute and market some finished beverages. In
these notes, the terms ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ or ‘‘our’’ mean The Coca-Cola Company and all subsidiaries
included in the consolidated financial statements. Operating in more than 200 countries worldwide, we primarily
sell our concentrates and syrups, as well as some finished beverages, to bottling and canning operations,
distributors, fountain wholesalers and fountain retailers. We also market and distribute juice and juice drinks,
sports drinks, water products, teas, coffees and other beverage products. Additionally, we have ownership
interests in numerous bottling and canning operations. Significant markets for our products exist in all the
world’s geographic regions.
Basis of Presentation and Consolidation
Our consolidated financial statements are prepared in accordance with accounting principles generally
accepted in the United States. Our Company consolidates all entities that we control by ownership of a majority
voting interest as well as variable interest entities for which our Company is the primary beneficiary. Refer to the
heading ‘‘Variable Interest Entities,’’ below, for a discussion of variable interest entities.
We use the equity method to account for our investments for which we have the ability to exercise
significant influence over operating and financial policies. Consolidated net income includes our Company’s
share of the net income of these companies.
We use the cost method to account for our investments in companies that we do not control and for which
we do not have the ability to exercise significant influence over operating and financial policies. In accordance
with the cost method, these investments are recorded at cost or fair value, as appropriate.
We eliminate from our financial results all significant intercompany transactions, including the
intercompany transactions with variable interest entities and the intercompany portion of transactions with
equity method investees.
Certain amounts in the prior years’ consolidated financial statements have been reclassified to conform to
the current-year presentation.
Variable Interest Entities
In December 2003, the Financial Accounting Standards Board (‘‘FASB’’) issued FASB Interpretation
No. 46 (revised December 2003), ‘‘Consolidation of Variable Interest Entities’’ (‘‘Interpretation 46(R)’’).
Application of this interpretation was required in our consolidated financial statements for the year ended
December 31, 2003, for interests in variable interest entities that were considered to be special-purpose entities.
Our Company determined that we did not have any arrangements or relationships with special-purpose entities.
Application of Interpretation 46(R) for all other types of variable interest entities was required for our Company
effective April 2, 2004.
Interpretation 46(R) addresses the consolidation of business enterprises to which the usual condition
(ownership of a majority voting interest) of consolidation does not apply. This interpretation focuses on
controlling financial interests that may be achieved through arrangements that do not involve voting interests. It
concludes that in the absence of clear control through voting interests, a company’s exposure (variable interest)
to the economic risks and potential rewards from the variable interest entity’s assets and activities is the best
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