Coca Cola 2010 Annual Report Download - page 43

in accordance with accounting principles generally accepted in the United States as of December 31, 2009. Although
these financial arrangements resulted in us holding a majority of the variable interests in these VIEs, the majority of
these arrangements did not empower us to direct the activities of the VIEs that most significantly impact the VIEs’
economic performance. Consequently, subsequent to the change in accounting policy, the Company deconsolidated the
majority of these VIEs.
The entities that have been deconsolidated accounted for less than 1 percent of net income attributable to shareowners
of The Coca-Cola Company in 2009, and we have accounted for these entities under the equity method of accounting
since January 1, 2010. Although the deconsolidation of these entities impacted individual line items in our consolidated
financial statements, the impact on net income attributable to shareowners of The Coca-Cola Company in future
periods will be nominal. The equity method of accounting is intended to be a single line consolidation and, therefore,
generally should result in the same net income attributable to the investor as would be the case if the investee had been
consolidated. The main impact on our consolidated financial statements in 2010 was that, instead of these entities’
results of operations and balance sheets affecting our consolidated line items, our proportionate share of net income or
loss from these entities was reported in equity income (loss) — net, in our consolidated income statements, and our
investment in these entities was reported as equity method investments in our consolidated balance sheets. Refer to the
heading ‘‘Structural Changes and New License Agreements’’ for additional information.
Purchase Accounting for Acquisitions
The Company adopted new guidance issued by the FASB on January 1, 2009, which changed the application of the
acquisition method of accounting in a business combination and also modified the way assets acquired and liabilities
assumed are recognized on a prospective basis. In general, the acquisition method of accounting requires companies to
record assets acquired and liabilities assumed at their respective fair market values at the date of acquisition. We
estimate fair value using the exit price approach which is defined as the price that would be received if we sold an asset
or paid to transfer a liability in an orderly market. The value of an exit price is determined from the viewpoint of all
market participants as a whole and may result in the Company valuing assets at a fair value that is not reflective of our
intended use of the assets. Any amount of the purchase price paid that is in excess of the estimated fair values of net
assets acquired is recorded in the line item goodwill on our consolidated balance sheets. Management’s judgment is
used to determine the estimated fair values assigned to assets acquired and liabilities assumed, as well as asset lives for
property, plant and equipment and amortization periods for intangible assets, and can materially affect the Company’s
results of operations.
Transaction costs, as well as costs to reorganize acquired companies, are expensed as incurred in the Company’s
consolidated statements of income.
In 2010, we acquired CCE’s North American business and recorded total assets of approximately $22.2 billion as of the
acquisition date. The assets we acquired included a material amount of intangible assets that are subject to the
significant estimates described above. Our acquisition accounting is not complete and adjustments may be recorded in
future periods as appraisals for intangible assets and certain fixed assets are completed. Refer to the heading
‘‘Recoverability of Noncurrent Assets,’’ below, and Note 2 of Notes to Consolidated Financial Statements for further
information related to this acquisition.
Recoverability of Noncurrent Assets
We perform recoverability and impairment tests of noncurrent assets in accordance with accounting principles generally
accepted in the United States. For certain assets, recoverability and/or impairment tests are required only when
conditions exist that indicate the carrying value may not be recoverable. For other assets, impairment tests are required
at least annually, or more frequently, if events or circumstances indicate that an asset may be impaired.
Our equity method investees also perform such recoverability and/or impairment tests. If an impairment charge was
recorded by one of our equity method investees, the Company would record its proportionate share of such charge as a
reduction of equity income (loss) — net in our consolidated income statements. However, the actual amount we record
with respect to our proportionate share of such charges may be impacted by items such as basis differences, deferred
taxes and deferred gains.
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