Coca Cola 2005 Annual Report Download - page 76

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Retirement-Related Benefits
Using appropriate actuarial methods and assumptions, our Company accounts for defined benefit pension
plans in accordance with SFAS No. 87, ‘‘Employers’ Accounting for Pensions.’’ We account for our nonpension
postretirement benefits in accordance with SFAS No. 106, ‘‘Employers’ Accounting for Postretirement Benefits
Other Than Pensions.’’ In 2003, we adopted SFAS No. 132 (revised 2003), ‘‘Employers’ Disclosures about
Pensions and Other Postretirement Benefits,’’ (‘‘SFAS No. 132(R)’’) for all U.S. plans. As permitted by this
standard, in 2004, we adopted the disclosure provisions for all foreign plans. SFAS No. 132(R) requires
additional disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. This statement did not change the measurement
or recognition of those plans required by SFAS No. 87, SFAS No. 88, ‘‘Employers’ Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,’’ or SFAS No. 106. Refer to
Note 15 for a description of how we determine our principal assumptions for pension and postretirement benefit
accounting.
Contingencies
Our Company is involved in various legal proceedings and tax matters. Due to their nature, such legal
proceedings and tax matters involve inherent uncertainties including, but not limited to, court rulings,
negotiations between affected parties and governmental actions. Management assesses the probability of loss for
such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate. Refer to
Note 12.
Business Combinations
In accordance with SFAS No. 141, ‘‘Business Combinations,’’ we account for all business combinations by
the purchase method. Furthermore, we recognize intangible assets apart from goodwill if they arise from
contractual or legal rights or if they are separable from goodwill.
Recent Accounting Standards and Pronouncements
In May 2005, the FASB issued SFAS No. 154, ‘‘Accounting Changes and Error Corrections, a replacement
of Accounting Principles Board (‘‘APB’’) Opinion No. 20 and FASB Statement No. 3.’’ SFAS No. 154 requires
retrospective application to prior periods’ financial statements of a voluntary change in accounting principle
unless it is impracticable. APB Opinion No. 20, ‘‘Accounting Changes,’’ previously required that most voluntary
changes in accounting principle be recognized by including in net income of the period of the change the
cumulative effect of changing to the new accounting principle. SFAS No. 154 became effective for our Company
on January 1, 2006. We believe that the adoption of SFAS No. 154 will not have a material impact on our
consolidated financial statements.
In December 2004, the FASB issued SFAS No. 153, ‘‘Exchanges of Nonmonetary Assets, an amendment of
APB Opinion No. 29.’’ SFAS No. 153 is based on the principle that exchanges of nonmonetary assets should be
measured based on the fair value of the assets exchanged. APB Opinion No. 29, ‘‘Accounting for Nonmonetary
Transactions,’’ provided an exception to its basic measurement principle (fair value) for exchanges of similar
productive assets. Under APB Opinion No. 29, an exchange of a productive asset for a similar productive asset
was based on the recorded amount of the asset relinquished. SFAS No. 153 eliminates this exception and
replaces it with an exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS
No. 153 became effective for our Company as of July 2, 2005, and did not have a material impact on our
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