Coca Cola 2010 Annual Report Download - page 44

Management’s assessments of the recoverability and impairment tests of noncurrent assets involve critical accounting
estimates. These estimates require significant management judgment, include inherent uncertainties and are often
interdependent; therefore, they do not change in isolation. Factors that management must estimate include, among
others, the economic life of the asset, sales volume, prices, inflation, cost of capital, marketing spending, foreign
currency exchange rates, tax rates and capital spending. These factors are even more difficult to predict when global
financial markets are highly volatile. The estimates we use when assessing the recoverability of noncurrent assets are
consistent with those we use in our internal planning. When performing impairment tests, we estimate the fair values of
the assets using management’s best assumptions, which we believe would be consistent with what a hypothetical
marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as
appropriate. The variability of these factors depends on a number of conditions, including uncertainty about future
events, and thus our accounting estimates may change from period to period. If other assumptions and estimates had
been used when these tests were performed, impairment charges could have resulted. As mentioned above, these factors
do not change in isolation; and therefore, we do not believe it is practicable to present the impact of changing a single
factor. Furthermore, if management uses different assumptions or if different conditions occur in future periods, future
impairment charges could result.
Our Company faces many uncertainties and risks related to various economic, political and regulatory environments in
the countries in which we operate, particularly in developing or emerging markets. Refer to the heading ‘‘Our
Business — Challenges and Risks,’’ above, and ‘‘Item 1A. Risk Factors’’ in Part I of this report. As a result,
management must make numerous assumptions which involve a significant amount of judgment when completing
recoverability and impairment tests of noncurrent assets in various regions around the world.
Investments in Equity and Debt Securities
The carrying values of our investments in equity securities are determined using the equity method, the cost method or
the fair value method. Refer to the heading ‘‘Basis of Presentation,’’ above, for information related to how the carrying
values of our equity method investments are determined. We account for investments in companies that we do not
control or account for under the equity method either at fair value or under the cost method, as applicable. Investments
in equity securities are carried at fair value, if the fair value of the security is readily determinable. Equity investments
carried at fair value are classified as either trading or available-for-sale securities. Realized and unrealized gains and
losses on trading securities and realized gains and losses on available-for-sale securities are included in net income.
Unrealized gains and losses, net of deferred taxes, on available-for-sale securities are included in our consolidated
balance sheets as a component of accumulated other comprehensive income (loss) (‘‘AOCI’’). Trading securities are
reported as either marketable securities or other assets in our consolidated balance sheets. Securities classified as
available-for-sale are reported as either marketable securities or other investments in our consolidated balance sheets,
depending on the length of time we intend to hold the investment. Investments in equity securities that do not qualify
for fair value accounting 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.
Our investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that
the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as
held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and
classified as either trading or available-for-sale.
The following table presents the carrying values of our investments in equity and debt securities (in millions):
Percentage
Carrying of Total
December 31, 2010 Value Assets
Equity method investments $ 6,954 10%
Securities classified as available-for-sale 485 *
Securities classified as trading 209 *
Cost method investments 159 *
Securities classified as held-to-maturity 111 *
Total $ 7,918 11%
* Accounts for less than 1 percent of the Company’s total assets.
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