Coca Cola 2008 Annual Report Download - page 83

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
basic net income per share, except that it includes the potential dilution that could occur if dilutive securities
were exercised. Approximately 59 million, 71 million and 175 million stock option awards were excluded from
the computations of diluted net income per share in 2008, 2007 and 2006, 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. We have established strict counterparty credit guidelines and enter into transactions only with
financial institutions of investment grade or better. We monitor counterparty exposures daily and review any
downgrade in credit rating immediately.
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,
the 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, 2008 2007 2006
Balance, beginning of year $56 $63 $72
Net charges to costs and expenses 17 17 2
Write-offs (28) (32) (12)
Other1681
Balance, end of year $51 $56 $63
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.
Inventories
Inventories consist primarily of raw materials and packaging (which includes ingredients and supplies) and
finished goods (which include concentrates and syrups in our concentrate and foodservice operations, and
finished beverages in our bottling and canning operations). Inventories are valued at the lower of cost or market.
We determine cost on the basis of the average cost or first-in, first-out methods. Refer to Note 2.
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