Coca Cola 2006 Annual Report Download - page 73

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. We primarily sell concentrates and syrups, as well as some
finished beverages, to bottling and canning operations, distributors, fountain wholesalers and fountain retailers.
Our Company owns or licenses more than 400 brands, including Coca-Cola, Diet Coke, Fanta and Sprite, and a
variety of diet and light beverages, waters, juice and juice drinks, teas, coffees, and energy and sports drinks.
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 and notes have been reclassified to
conform to the current year presentation.
Variable Interest Entities
Financial Accounting Standards Board (‘‘FASB’’) Interpretation No. 46 (revised December 2003),
‘‘Consolidation of Variable Interest Entities’’ (‘‘Interpretation No. 46(R)’’) addresses the consolidation of
business enterprises to which the usual condition (ownership of a majority voting interest) of consolidation does
not apply. Interpretation No. 46(R) 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 evidence of control. If an enterprise holds a majority of
the variable interests of an entity, it would be considered the primary beneficiary. Upon consolidation, the
primary beneficiary is generally required to include assets, liabilities and noncontrolling interests at fair value
and subsequently account for the variable interest as if it were consolidated based on majority voting interest.
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