Coca Cola 2010 Annual Report Download - page 45

Investments classified as trading securities are not assessed for impairment, since they are carried at fair value with the
change in fair value included in net income. We review our investments in equity and debt securities that are accounted
for using the equity method or cost method or that are classified as available-for-sale or held-to-maturity each reporting
period to determine whether a significant event or change in circumstances has occurred that may have an adverse
effect on the fair value of each investment. When such events or changes occur, we evaluate the fair value compared to
our cost basis in the investment. We also perform this evaluation every reporting period for each investment for which
our cost basis has exceeded the fair value in the prior period. The fair values of most of our Company’s investments in
publicly traded companies are often readily available based on quoted market prices. For investments in nonpublicly
traded companies, management’s assessment of fair value is based on valuation methodologies including discounted
cash flows, estimates of sales proceeds and appraisals, as appropriate. We consider the assumptions that we believe
hypothetical marketplace participants would use in evaluating estimated future cash flows when employing the
discounted cash flow or estimates of sales proceeds valuation methodologies. The ability to accurately predict future
cash flows, especially in developing and emerging markets, may impact the determination of fair value.
In the event the fair value of an investment declines below our cost basis, management is required to determine if the
decline in fair value is other than temporary. If management determines the decline is other than temporary, an
impairment charge is recorded. Management’s assessment as to the nature of a decline in fair value is based on, among
other things, the length of time and the extent to which the market value has been less than our cost basis, the financial
condition and near-term prospects of the issuer, and our intent and ability to retain the investment in the issuer for a
period of time sufficient to allow for any anticipated recovery in market value.
As of December 31, 2010, unrealized gains and losses on available-for-sale securities were approximately $267 million
and $5 million, respectively. Management assessed each individual investment with unrealized losses to determine if the
decline in fair value was other than temporary. Based on these assessments, management determined that the decline in
fair value of each of these investments was temporary in nature. We will continue to monitor these investments in
future periods. Refer to Note 3 of Notes to Consolidated Financial Statements.
In 2010, the Company recognized other-than-temporary impairments of $41 million related to certain available-for-sale
securities and an equity method investment. These impairment charges were recorded in other income (loss) — net and
impacted the Bottling Investments and Corporate operating segments. Refer to Note 16 and Note 17 of Notes to
Consolidated Financial Statements.
In 2009, the Company recorded a charge of approximately $27 million in other income (loss) — net as a result of an
other-than-temporary decline in the fair value of a cost method investment. As of December 31, 2008, the estimated
fair value of this investment approximated the Company’s carrying value in the investment. However, in 2009, the
Company was informed by the investee of its intent to reorganize its capital structure in 2009, which resulted in the
Company’s shares in the investee being canceled. As a result, the Company determined that the decline in fair value of
this cost method investment was other than temporary. This impairment charge impacted the Corporate operating
segment. Refer to Note 16 and Note 17 of Notes to Consolidated Financial Statements.
As of December 31, 2008, the Company had several investments classified as available-for-sale securities in which our
cost basis exceeded the fair value of the investment, each of which initially occurred between the end of the second
quarter and the beginning of the third quarter of 2008. Management determined that the decline in fair value of each
investment was other than temporary, and the Company recognized impairment charges of approximately $81 million
during the fourth quarter of 2008. These impairment charges were recorded to other income (loss) — net in the
consolidated statement of income. Refer to Note 17 of Notes to Consolidated Financial Statements.
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