Coca Cola 2006 Annual Report Download - page 80

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Contingencies
Our Company is involved in various legal proceedings and tax matters. Due to their nature, such legal
proceedings and tax matters involve inherent uncertainties including, but not limited to, court rulings,
negotiations between affected parties and governmental actions. Management assesses the probability of loss for
such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate. Refer to
Note 13.
Business Combinations
In accordance with SFAS No. 141, ‘‘Business Combinations,’’ we account for all business combinations by
the purchase method. Furthermore, we recognize intangible assets apart from goodwill if they arise from
contractual or legal rights or if they are separable from goodwill.
Recent Accounting Standards and Pronouncements
In February 2007, the FASB issued SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and
Financial Liabilities—Including an amendment of FASB Statement No. 115.’’ SFAS No. 159 permits entities to
choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses
on items for which the fair value option has been elected will be recognized in earnings at each subsequent
reporting date. SFAS No. 159 is effective for our Company January 1, 2008. The Company is evaluating the
impact that the adoption of SFAS No. 159 will have on our consolidated financial statements.
In September 2006, the Securities and Exchange Commission staff published Staff Accounting Bulletin
(‘‘SAB’’) No. 108, ‘‘Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements.’’ SAB No. 108 addresses quantifying the financial statement effects of
misstatements, specifically, how the effects of prior year uncorrected errors must be considered in quantifying
misstatements in the current year financial statements. SAB No. 108 is effective for fiscal years ending after
November 15, 2006. The adoption of SAB No. 108 by our Company in the fourth quarter of 2006 did not have a
material impact on our consolidated financial statements.
As previously discussed, our Company adopted SFAS No. 158 related to defined benefit pension and other
postretirement plans. Refer to Note 16.
In September 2006, the FASB issued SFAS No. 157, ‘‘Fair Value Measurements.’’ SFAS No. 157 defines fair
value, establishes a framework for measuring fair value and expands disclosure requirements about fair value
measurements. SFAS No. 157 is effective for our Company January 1, 2008. We believe that the adoption of
SFAS No. 157 will not have a material impact on our consolidated financial statements.
In July 2006, the FASB issued FASB Interpretation No. 48, ‘‘Accounting for Uncertainty in Income Taxes’’
(‘‘Interpretation No. 48’’). Interpretation No. 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with SFAS No. 109, ‘‘Accounting for Income
Taxes.’’ Interpretation No. 48 prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Interpretation No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition. For our Company, Interpretation No. 48 was effective beginning
January 1, 2007, and the cumulative effect adjustment will be recorded in the first quarter of 2007. We believe
that the adoption of Interpretation No. 48 will not have a material impact on our consolidated financial
statements.
In May 2005, the FASB issued SFAS No. 154, ‘‘Accounting Changes and Error Corrections, a replacement
of Accounting Principles Board (‘‘APB’’) Opinion No. 20 and FASB Statement No. 3.’’ SFAS No. 154 requires
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