Coca Cola 2008 Annual Report Download - page 80

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
hold the investment. The Company has currently chosen not to elect the fair value option as permitted by SFAS
No. 159, ‘‘The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of
FASB Statement No. 115,’’ which provides entities the option to measure many financial instruments and certain
other items at fair value. Investments in equity securities that do not qualify for fair value accounting, or for
which the Company has not elected the fair value option, are accounted for under the cost method. In
accordance with the cost method, our initial investment is recorded at cost and we record dividend income when
applicable dividends are declared. Cost method investments are reported as other investments in our
consolidated balance sheets.
We eliminate from our financial results all significant intercompany transactions, including the
intercompany transactions with variable interest entities and the intercompany portion of transactions with
equity method investees.
Certain amounts in the prior years’ consolidated financial statements and notes have been revised to
conform to the current year presentation.
Variable Interest Entities
Financial Accounting Standards Board (‘‘FASB’’) Interpretation No. 46 (revised December 2003),
‘‘Consolidation of Variable Interest Entities’’ (‘‘Interpretation No. 46(R)’’) addresses the consolidation of
business enterprises to which the usual condition (ownership of a majority voting interest) of consolidation does
not apply. Interpretation No. 46(R) focuses on controlling financial interests that may be achieved through
arrangements that do not involve voting interests. It concludes that in the absence of clear control through
voting interests, a company’s exposure (variable interest) to the economic risks and potential rewards from the
variable interest entity’s assets and activities is the best evidence of control. If an enterprise holds a majority of
the variable interests of an entity, it would be considered the primary beneficiary. Upon consolidation, the
primary beneficiary is generally required to include assets, liabilities and noncontrolling interests at fair value
and subsequently account for the variable interest as if it were consolidated based on majority voting interest.
Our consolidated balance sheets include the assets and liabilities of the following:
• all entities in which the Company has ownership of a majority of voting interests; and
• all variable interest entities for which we are the primary beneficiary.
Our Company holds interests in certain entities, primarily bottlers, that are considered variable interest
entities. These variable interests relate to profit guarantees or subordinated financial support for these entities.
Our Company’s investments, plus any loans and guarantees, related to these variable interest entities totaled
approximately $604 million and $647 million at December 31, 2008 and 2007, respectively, representing our
maximum exposures to loss. Any creditors of the variable interest entities do not have recourse against the
general credit of the Company as a result of including these variable interest entities in our consolidated
financial statements. The Company’s investment, plus any loans and guarantees, related to variable interest
entities were not significant to the Company’s consolidated financial statements. In addition, assets and
liabilities of variable interest entities for which we are the primary beneficiary, and thus are included in our
consolidated balance sheets, were not significant to the Company’s consolidated financial statements.
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