Coca Cola 2007 Annual Report Download - page 119

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17: INCOME TAXES (Continued)
As of December 31, 2007, we had approximately $2,827 million of loss carryforwards available to reduce future
taxable income. Loss carryforwards of approximately $207 million must be utilized within the next five years,
$67 million must be utilized within the next 10 years, and the remainder can be utilized over a period greater than
10 years.
An analysis of our deferred tax asset valuation allowances is as follows (in millions):
Year Ended December 31, 2007 2006 2005
Balance, beginning of year $ 678 $ 786 $ 854
Additions 201 50 43
Deductions (268) (158) (111)
Balance, end of year $ 611 $ 678 $ 786
The Company’s deferred tax asset valuation allowances are primarily the result of uncertainties regarding the
future realization of recorded tax benefits on tax loss carryforwards from operations in various jurisdictions. In 2007,
the Company recognized a net decrease in its valuation allowances of $67 million. This decrease was primarily related
to the reversal of valuation allowances on deferred tax assets recorded on the basis difference in equity investments.
The Company also recognized a decrease in certain deferred tax assets and corresponding valuation allowances related
to a change in German tax rates. In 2006, the Company recognized a net decrease in its valuation allowances of
$108 million. This decrease was primarily related to the reversal of valuation allowances that covered certain deferred
tax assets recorded on capital loss carryforwards. A portion of the capital loss carryforwards was utilized to offset
taxable gains on the sale of a portion of the investments in Coca-Cola Icecek and Coca-Cola FEMSA. In 2005, the
Company recognized a decrease in its valuation allowances of $68 million. This decrease was primarily related to a
change in tax rates which resulted in a reduction of certain deferred tax assets and corresponding valuation allowances.
NOTE 18: RESTRUCTURING COSTS
During 2007, the Company took steps to streamline and simplify its operations globally. In North America, the
Company reorganized its operations around three main business units: Sparkling Beverages, Still Beverages and
Emerging Brands. In Ireland, the Company announced a plan to close its beverage concentrate manufacturing and
distribution plant in Drogheda in September 2008. The plant closure is expected to improve operating productivity and
enhance capacity utilization. The costs associated with this plant closure are included in the Corporate segment.
Selected other operations also took steps to streamline their operations to improve overall efficiency and effectiveness.
Employees separated or to be separated from the Company as a result of these streamlining initiatives were
offered severance or early retirement packages, as appropriate, that included both financial and nonfinancial
components. The expenses recorded during the year ended December 31, 2007 included costs related to involuntary
terminations and other direct costs associated with implementing these initiatives. Other direct costs included expenses
to relocate employees; contract termination costs; costs associated with the development, communication and
administration of these initiatives; accelerated depreciation; and asset write-offs. During 2007, the Company incurred
total pretax expenses related to these streamlining initiatives of approximately $237 million. These expenses were
primarily recorded in the line item other operating charges in our consolidated statement of income. The Company
currently expects the total cost of these initiatives to be approximately $342 million. The Company expects to expense
the remainder of the costs in 2008. The remaining costs primarily relate to severance pay and benefits and accelerated
depreciation related to the closing of the Drogheda Plant.
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