Coca Cola 2010 Annual Report Download - page 50

Pension Plan Valuations
Our Company sponsors and/or contributes to pension and postretirement health care and life insurance benefit plans
covering substantially all U.S. employees. We also sponsor nonqualified, unfunded defined benefit pension plans for
certain associates and participate in multi-employer pension plans in the United States. In addition, our Company and
its subsidiaries have various pension plans and other forms of postretirement arrangements outside the United States.
Management is required to make certain critical estimates related to actuarial assumptions used to determine our
pension expense and related obligation. We believe the most critical assumptions are related to (1) the discount rate
used to determine the present value of the liabilities and (2) the expected long-term rate of return on plan assets. All of
our actuarial assumptions are reviewed annually. Changes in these assumptions could have a material impact on the
measurement of our pension expense and related obligation.
At each measurement date, we determine the discount rate by reference to rates of high quality, long-term corporate
bonds that mature in a pattern similar to the future payments we anticipate making under the plans. As of
December 31, 2010 and 2009, the weighted-average discount rate used to compute our benefit obligation was
5.5 percent and 5.75 percent, respectively.
The expected long-term rate of return on plan assets is based upon the long-term outlook of our investment strategy as
well as our historical returns and volatilities for each asset class. We also review current levels of interest rates and
inflation to assess the reasonableness of our long-term rates. Our pension plan investment objective is to ensure all our
plans have sufficient funds to meet their benefit obligations when they become due. As a result, the Company
periodically revises asset allocations, where appropriate, to improve returns and manage risk. The weighted-average
expected long-term rate of return used to calculate our net periodic benefit cost was 8.0 percent in both 2010 and 2009.
In 2010, the Company’s total pension expense was $176 million. In 2011, we expect our total pension expense to be
approximately $240 million. The expected increase is primarily due to the impact of our acquisition of CCE’s North
American business. The estimated impact of an additional 50-basis-point decrease in the discount rate on our 2011
pension expense is an increase to our pension expense of approximately $21 million. Additionally, the estimated impact
of a 50-basis-point decrease in the expected long-term rate of return on plan assets on our 2011 pension expense is an
increase to our pension expense of approximately $20 million.
The sensitivity information provided above is based only on changes to the actuarial assumptions used for our U.S.
pension plans. Refer to Note 13 of Notes to Consolidated Financial Statements for additional information about our
pension plans and related actuarial assumptions.
Revenue Recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales
price is fixed or determinable, and collectibility is reasonably assured. For our Company, this generally means that we
recognize revenue when title to our products is transferred to our bottling partners, resellers or other customers. Title
usually transfers upon shipment to or receipt at our customers’ locations, as determined by the specific sales terms of
each transaction. Our sales terms do not allow for a right of return except for matters related to any manufacturing
defects on our part.
Our customers can earn certain incentives, which are included in deductions from revenue, a component of net
operating revenues in the consolidated statements of income. These incentives include, but are not limited to, cash
discounts, funds for promotional and marketing activities, volume-based incentive programs and support for
infrastructure programs. Refer to Note 1 of Notes to Consolidated Financial Statements. The aggregate deductions
from revenue recorded by the Company in relation to these programs, including amortization expense on infrastructure
programs, were approximately $5.0 billion, $4.5 billion and $4.4 billion in 2010, 2009 and 2008, respectively. In
preparing the financial statements, management must make estimates related to the contractual terms, customer
performance and sales volume to determine the total amounts recorded as deductions from revenue. Management also
considers past results in making such estimates. The actual amounts ultimately paid may be different from our
estimates. Such differences are recorded once they have been determined, and have historically not been significant.
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