Coca Cola 2006 Annual Report Download - page 38

behalf of our Company, determining whether the Company provides more than half of the subordinated
financial support to the entity, and determining if we absorb the majority of the entity’s expected losses or
returns.
We use the equity method to account for investments for which we have the ability to exercise significant
influence over operating and financial policies. Our consolidated net income includes our Company’s share of
the net earnings of these companies. Our judgment regarding the level of influence over each equity method
investment includes considering key factors such as our ownership interest, representation on the board of
directors, participation in policy-making decisions and material intercompany transactions.
We use the cost method to account for 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 record dividend income
when applicable dividends are declared.
Our Company eliminates from financial results all significant intercompany transactions, including the
intercompany portion of transactions with equity method investees.
Recoverability of Noncurrent Assets
Management’s assessments of the recoverability of noncurrent assets involve critical accounting estimates.
These assessments reflect management’s best assumptions, which, when appropriate, are consistent with the
assumptions that we believe hypothetical marketplace participants would use. Factors that management must
estimate when performing recoverability and impairment tests include, among others, sales volume, prices,
inflation, cost of capital, marketing spending, foreign currency exchange rates, tax rates and capital spending.
These factors are often interdependent and therefore do not change in isolation. These factors include inherent
uncertainties, and significant management judgment is involved in estimating their impact. However, when
appropriate, the assumptions we use for financial reporting purposes are consistent with those we use in our
internal planning and we believe are consistent with those that a hypothetical marketplace participant would use.
Management periodically evaluates and updates the estimates based on the conditions that influence these
factors. The variability of these factors depends on a number of conditions, including uncertainty about future
events, and thus our accounting estimates may change from period to period. If other assumptions and estimates
had been used in the current period, the balances for noncurrent assets could have been materially impacted.
Furthermore, if management uses different assumptions or if different conditions occur in future periods, future
operating results could be materially impacted.
Our Company faces many uncertainties and risks related to various economic, political and regulatory
environments in the countries in which we operate. Refer to the heading ‘‘Our Business—Challenges and
Risks,’’ above, and ‘‘Item 1A. Risk Factors’’ in Part I of this report. As a result, management must make
numerous assumptions which involve a significant amount of judgment when determining the recoverability of
noncurrent assets in various regions around the world.
For the noncurrent assets listed in the table below, we perform tests of impairment as appropriate. For
applicable assets, we perform these tests when certain conditions exist that indicate the carrying value may not
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