Coca Cola 2007 Annual Report Download - page 75

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
basis of existing assets and liabilities. The tax rate used to determine the deferred tax assets and liabilities is the enacted
tax rate for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce
deferred tax assets to the amount that will more likely than not be realized. On January 1, 2007, the Company adopted
FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“Interpretation No. 48”) to account for
uncertainty in income taxes recognized in the Company’s financial statements in accordance with SFAS No. 109,
“Accounting for Income Taxes.” Refer to Note 17.
Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number of common
shares outstanding during the reporting period. Diluted net income per share is computed similarly to basic net income
per share, except that it includes the potential dilution that could occur if dilutive securities were exercised.
Approximately 71 million, 175 million and 180 million stock option awards were excluded from the computations of
diluted net income per share in 2007, 2006 and 2005, respectively, because the awards would have been antidilutive for
the periods presented.
Cash Equivalents
We classify marketable securities that are highly liquid and have maturities of three months or less at the date of
purchase as cash equivalents. We manage our exposure to counterparty credit risk through specific minimum credit
standards, diversification of counterparties and procedures to monitor our credit risk concentrations.
Trade Accounts Receivable
We record trade accounts receivable at net realizable value. This value includes an appropriate allowance for
estimated uncollectible accounts to reflect any loss anticipated on the trade accounts receivable balances and charged to
the provision for doubtful accounts. We calculate this allowance based on our history of write-offs, level of past-due
accounts based on the contractual terms of the receivables, and our relationships with and the economic status of our
bottling partners and customers.
Activity in the allowance for doubtful accounts was as follows (in millions):
Year Ended December 31, 2007 2006 2005
Balance, beginning of year $63 $72 $69
Net charges to costs and expenses 17 217
Write-offs (32) (12) (12)
Other181 (2)
Balance, end of year $56 $63 $72
1Other includes acquisitions, divestitures and currency translation.
A significant portion of our net operating revenues is derived from sales of our products in international markets.
Refer to Note 21. We also generate a significant portion of our net operating revenues by selling concentrates and
syrups to bottlers in which we have a noncontrolling interest, including Coca-Cola Enterprises Inc. (“CCE”),
Coca-Cola Hellenic Bottling Company S.A. (“Coca-Cola Hellenic”), Coca-Cola FEMSA, S.A.B. de C.V. (“Coca-Cola
FEMSA”) and Coca-Cola Amatil Limited (“Coca-Cola Amatil”). Refer to Note 3.
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