Coca Cola 2006 Annual Report Download - page 119

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17: INCOME TAXES (Continued)
As of December 31, 2006, we had approximately $2,324 million of loss carryforwards available to reduce
future taxable income. Loss carryforwards of approximately $373 million must be utilized within the next five
years; $91 million must be utilized within the next 10 years; and the remainder can be utilized over a period
greater than 10 years.
An analysis of our deferred tax asset valuation allowances is as follows (in millions):
Year Ended December 31, 2006 2005 2004
Balance, beginning of year $ 786 $ 854 $ 630
Additions 50 43 291
Deductions (158) (111) (67)
Balance, end of year $ 678 $ 786 $ 854
The Company’s deferred tax asset valuation allowances are primarily the result of uncertainties regarding
the future realization of recorded tax benefits on tax loss carryforwards from operations in various jurisdictions.
In 2006, the Company recognized a net decrease in its valuation allowances of $108 million. This decrease was
primarily related to the reversal of valuation allowances that covered certain deferred tax assets recorded on
capital loss carryforwards. A portion of the capital loss carryforwards was utilized to offset taxable gains on the
sale of a portion of the investments in Coca-Cola Icecek and Coca-Cola FEMSA. In 2005, the Company
recognized a decrease in its valuation allowances of $68 million. This decrease was primarily related to a change
in tax rates which resulted in a reduction of certain deferred tax assets and corresponding valuation allowances.
In 2004, the Company recognized an increase in its valuation allowances of $224 million. This increase was
primarily related to the recording of a valuation allowance on Germany’s net operating losses, the recording of a
valuation allowance on a deferred tax asset recorded on the basis difference in an equity investment and a
change in the valuation allowance in India.
NOTE 18: SIGNIFICANT OPERATING AND NONOPERATING ITEMS
In 2006, our Company recorded charges of approximately $606 million related to our proportionate share
of charges recorded by our equity method investees. Of this amount, approximately $602 million related to our
proportionate share of an impairment charge recorded by CCE for its North American franchise rights. Our
proportionate share of CCE’s charges also included approximately $18 million due to restructuring charges
recorded by CCE. These charges were partially offset by approximately $33 million related to our proportionate
share of changes in certain of CCE’s state and Canadian federal and provincial tax rates. The charges were
recorded in the line item equity income—net in the consolidated statement of income. All of these charges and
changes impacted our Bottling Investments operating segment. Refer to Note 3.
During 2006, our Company also recorded charges of approximately $112 million, primarily related to the
impairment of assets and investments in our bottling operations, approximately $53 million for contract
termination costs related to production capacity efficiencies and approximately $24 million related to other
restructuring costs. These charges impacted the Africa, the East, South Asia and Pacific Rim, the European
Union, the North Asia, Eurasia and Middle East, the Bottling Investments and the Corporate operating
segments. None of these charges was individually significant. Approximately $4 million of these charges were
recorded in the line item cost of goods sold and approximately $185 million of these charges were recorded in
the line item other operating charges in the consolidated statement of income. Refer to Note 20.
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