Coca Cola 2006 Annual Report Download - page 101

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: COMMITMENTS AND CONTINGENCIES (Continued)
The Company is involved in various tax matters. We establish reserves at the time that we determine it is
probable we will be liable to pay additional taxes related to certain matters and the amounts of such possible
additional taxes are reasonably estimable. We adjust these reserves, including any impact on the related interest
and penalties, in light of changing facts and circumstances, such as the progress of a tax audit. A number of years
may elapse before a particular matter, for which we may have established a reserve, is audited and finally
resolved or when a tax assessment is raised. The number of years with open tax audits varies depending on the
tax jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any
particular tax matter, we record a reserve when we determine the likelihood of loss is probable and the amount
of loss is reasonably estimable. Such liabilities are recorded in the line item accrued income taxes in the
Company’s consolidated balance sheets. Favorable resolution of tax matters that had been previously reserved
would be recognized as a reduction to our income tax expense, when known.
The Company is also involved in various tax matters where we have determined that the probability of an
unfavorable outcome is reasonably possible. Management believes that any liability to the Company that may
arise as a result of currently pending tax matters will not have a material adverse effect on the financial condition
of the Company taken as a whole.
NOTE 14: NET CHANGE IN OPERATING ASSETS AND LIABILITIES
Net cash provided by (used in) operating activities attributable to the net change in operating assets and
liabilities is composed of the following (in millions):
Year Ended December 31, 2006 2005 2004
(Increase) in trade accounts receivable $ (214) $ (79) $ (5)
(Increase) in inventories (150) (79) (57)
(Increase) decrease in prepaid expenses and other assets (152) 244 (397)
Increase in accounts payable and accrued expenses 173 280 45
(Decrease) increase in accrued taxes (68) 145 (194)
(Decrease) in other liabilities (204) (81) (9)
$ (615) $ 430 $ (617)
NOTE 15: STOCK COMPENSATION PLANS
Effective January 1, 2006, the Company adopted SFAS No. 123(R). Our Company adopted SFAS
No. 123(R), using the modified prospective method. Based on the terms of our plans, our Company did not have
a cumulative effect related to its plans. The adoption of SFAS No. 123(R) did not have a material impact on our
stock-based compensation expense for the year ended December 31, 2006. Further, we believe the adoption of
SFAS No. 123(R) will not have a material impact on our Company’s future stock-based compensation expense.
Prior to 2006, our Company accounted for stock option plans and restricted stock plans under the preferable fair
value recognition provisions of SFAS No. 123.
Our total stock-based compensation expense was approximately $324 million, $324 million and $345 million
in 2006, 2005 and 2004, respectively. These amounts were recorded in selling, general and administrative
expenses in 2006, 2005 and 2004, respectively. The total income tax benefit recognized in the income statement
for share-based compensation arrangements was approximately $93 million, $90 million and $92 million for
2006, 2005 and 2004, respectively. As of December 31, 2006, we had approximately $376 million of total
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