Coca Cola 2006 Annual Report Download - page 79

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
assumptions that we believe hypothetical marketplace participants would use in estimating future cash flows. In
addition, where applicable, an appropriate discount rate is used, based on the Company’s cost of capital rate or
location-specific economic factors. When the fair value is less than the carrying value of the intangible assets or
the reporting unit, we record an impairment charge to reduce the carrying value of the assets to fair value. These
impairment charges are generally recorded in the line item other operating charges or, to the extent they relate
to equity method investees, as a reduction of equity income—net, in the consolidated statements of income.
Our Company determines the useful lives of our identifiable intangible assets after considering the specific
facts and circumstances related to each intangible asset. Factors we consider when determining useful lives
include the contractual term of any agreement, the history of the asset, the Company’s long-term strategy for the
use of the asset, any laws or other local regulations which could impact the useful life of the asset, and other
economic factors, including competition and specific market conditions. Intangible assets that are deemed to
have definite lives are amortized, generally on a straight-line basis, over their useful lives, ranging from 1 to
45 years. Intangible assets with definite lives have estimated remaining useful lives ranging from 1 to 35 years.
Refer to Note 6.
Derivative Financial Instruments
Our Company accounts for derivative financial instruments in accordance with SFAS No. 133, ‘‘Accounting
for Derivative Instruments and Hedging Activities,’’ as amended by SFAS No. 137, ‘‘Accounting for Derivative
Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133—an
amendment of FASB Statement No. 133,’’ SFAS No. 138, ‘‘Accounting for Certain Derivative Instruments and
Certain Hedging Activities—an amendment of FASB Statement No. 133,’’ and SFAS No. 149, ‘‘Amendment of
Statement 133 on Derivative Instruments and Hedging Activities.’’ We recognize all derivative instruments as
either assets or liabilities at fair value in our consolidated balance sheets, with fair values of foreign currency
derivatives estimated based on quoted market prices or pricing models using current market rates. Refer to
Note 12.
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,’’ and we account for our
nonpension postretirement benefits in accordance with SFAS No. 106, ‘‘Employers’ Accounting for
Postretirement Benefits Other Than Pensions,’’ as amended by SFAS No. 158, ‘‘Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106,
and 132(R).’’ Effective December 31, 2006 for our Company, SFAS No. 158 requires that previously
unrecognized actuarial gains or losses, prior service costs or credits and transition obligations or assets be
recognized generally through adjustments to accumulated other comprehensive income and credits to prepaid
benefit cost or accrued benefit liability. As a result of these adjustments, the current funded status of defined
benefit pension plans and other postretirement benefit plans is reflected in the Company’s consolidated balance
sheet as of December 31, 2006. Refer to Note 16.
Our equity method investees also adopted SFAS No. 158 effective December 31, 2006. Refer to Note 3 for
the impact on our consolidated balance sheet resulting from the adoption of SFAS No. 158 by our equity method
investees.
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