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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)
retrospective application to prior periods’ financial statements of a voluntary change in accounting principle
unless it is impracticable. APB Opinion No. 20, ‘‘Accounting Changes,’’ previously required that most voluntary
changes in accounting principle be recognized by including in net income of the period of the change the
cumulative effect of changing to the new accounting principle. SFAS No. 154 became effective for our Company
on January 1, 2006. The adoption of SFAS No. 154 did not have a material impact on our consolidated financial
statements.
In December 2004, the FASB issued SFAS No. 153, ‘‘Exchanges of Nonmonetary Assets, an amendment of
APB Opinion No. 29.’’ SFAS No. 153 is based on the principle that exchanges of nonmonetary assets should be
measured based on the fair value of the assets exchanged. APB Opinion No. 29, ‘‘Accounting for Nonmonetary
Transactions,’’ provided an exception to its basic measurement principle (fair value) for exchanges of similar
productive assets. Under APB Opinion No. 29, an exchange of a productive asset for a similar productive asset
was based on the recorded amount of the asset relinquished. SFAS No. 153 eliminates this exception and
replaces it with an exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS
No. 153 became effective for our Company as of July 2, 2005, and did not have a material impact on our
consolidated financial statements.
As previously discussed, our Company adopted SFAS No. 123(R) related to share based payments. Refer to
Note 15.
During 2004, the FASB issued FASB Staff Position 106-2, ‘‘Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003’’ (‘‘FSP 106-2’’). FSP
106-2 relates to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the ‘‘Act’’). The
Act introduced a prescription drug benefit under Medicare known as Medicare Part D. The Act also established
a federal subsidy to sponsors of retiree health care plans that provide a benefit that is at least actuarially
equivalent to Medicare Part D. During the second quarter of 2004, our Company adopted the provisions of FSP
106-2 retroactive to January 1, 2004. The adoption of FSP 106-2 did not have a material impact on our
consolidated financial statements. Refer to Note 16.
In November 2004, the FASB issued SFAS No. 151, ‘‘Inventory Costs, an amendment of Accounting
Research Bulletin No. 43, Chapter 4.’’ SFAS No. 151 requires that abnormal amounts of idle facility expense,
freight, handling costs and wasted materials (spoilage) be recorded as current period charges and that the
allocation of fixed production overheads to inventory be based on the normal capacity of the production
facilities. The Company adopted SFAS No. 151 on January 1, 2006. The adoption of SFAS No. 151 did not have
a material impact on our consolidated financial statements.
In October 2004, the American Jobs Creation Act of 2004 (the ‘‘Jobs Creation Act’’) was signed into law.
The Jobs Creation Act includes a temporary incentive for U.S. multinationals to repatriate foreign earnings at
an approximate 5.25 percent effective tax rate. Issued in December 2004, FASB Staff Position 109-2,
‘‘Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American
Jobs Creation Act of 2004’’ (‘‘FSP 109-2’’), indicated that the lack of clarification of certain provisions within the
Jobs Creation Act and the timing of the enactment necessitated a practical exception to the SFAS No. 109,
‘‘Accounting for Income Taxes,’’ requirement to reflect in the period of enactment the effect of a new tax law.
Accordingly, enterprises were allowed time beyond 2004 to evaluate the effect of the Jobs Creation Act on their
plans for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109. Accordingly,
in 2005, the Company repatriated $6.1 billion of its previously unremitted earnings and recorded an associated
tax expense of approximately $315 million. Refer to Note 17.
In 2004, our Company recorded an income tax benefit of approximately $50 million as a result of the
realization of certain tax credits related to certain provisions of the Jobs Creation Act not related to repatriation
provisions. Refer to Note 17.
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