Coca Cola 2010 Annual Report Download - page 141

carryforwards acquired in connection with our acquisition of CCE’s North American business are subject to limitations
under Internal Revenue Code Section 383, the Company expects to utilize these carryforwards in 2011.
An analysis of our deferred tax asset valuation allowances is as follows (in millions):
Year Ended December 31, 2010 2009 2008
Balance, beginning of year $ 681 $ 569 $ 611
Increase due to our acquisition of CCE’s North American business 291 ——
Additions 115 178 99
Deductions (137) (66) (141)
Balance, end of year $ 950 $ 681 $ 569
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. These valuation
allowances were primarily related to deferred tax assets generated from net operating losses. Current evidence does not
suggest we will realize sufficient taxable income of the appropriate character (e.g., capital gain versus ordinary income)
within the carryforward period to allow us to realize these deferred tax benefits. If we were to identify and implement
tax planning strategies to recover these deferred tax assets or generate sufficient income of the appropriate character in
these jurisdictions in the future, it could lead to the reversal of these valuation allowances and a reduction of income
tax expense. The Company believes that it will generate sufficient future taxable income to realize the tax benefits
related to the remaining net deferred tax assets in our consolidated balance sheets.
In 2010, the Company recognized a net increase of $269 million in its valuation allowances. This increase was primarily
related to valuation allowances on various tax loss carryforwards acquired in conjunction with our acquisition of CCE’s
North American business. In addition, the Company also recognized an increase in the valuation allowance due to the
carryforward of expenses disallowed in the current year and changes to deferred tax assets and a related valuation
allowance on certain equity method investments. The Company recognized a reduction in the valuation allowances due
primarily to reversal of a deferred tax asset and related valuation allowance on certain expiring attributes, reversal of a
deferred tax asset and related valuation allowance related to the deconsolidation of certain entities and the impact of
foreign currency fluctuations in 2010.
In 2009, the Company recognized a net increase of $112 million in its valuation allowances. This increase was primarily
related to asset impairments, increases in net operating losses during the normal course of business operations, and the
impact of foreign currency exchange. In addition, the Company also recognized a reduction in the valuation allowances
due to the reversal of a deferred tax asset and related valuation allowance on certain equity investments.
In 2008, the Company recognized a net decrease of $42 million in its valuation allowances, primarily related to the
utilization of capital loss carryforwards used to offset taxable gains on the sale of our investment in Refrigerantes Minas
Gerais Ltda. (‘‘Remil’’), a bottler in Brazil. In addition, the Company also recognized a decrease in the valuation
allowances as a result of asset write-offs, pension adjustments and the impact of foreign currency fluctuations in 2008.
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