Coca Cola 2010 Annual Report Download - page 95

partners who distribute them to retailers. In addition, in the United States, we manufacture fountain syrups and sell
them to fountain retailers such as restaurants and convenience stores who use the fountain syrups to produce beverages
for immediate consumption or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to
fountain retailers. In the United States, we authorize wholesalers to resell our fountain syrups through nonexclusive
appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict
the territories in which the wholesalers may resell in the United States.
Summary of Significant Accounting Policies
Basis of Presentation
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the
United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities in our consolidated financial statements and accompanying notes. Although these estimates are based on our
knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these
estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses
different assumptions or if different conditions occur, impairment charges may result.
We use the equity method to account for investments in companies, if our investment provides us with the ability to
exercise significant influence over operating and financial policies of the investee. Our consolidated net income includes
our Company’s proportionate share of the net income or loss of these companies. Our judgment regarding the level of
influence over each equity method investment includes considering key factors such as our ownership interest,
representation on the board of directors, participation in policy-making decisions and material intercompany
transactions.
We eliminate from our financial results all significant intercompany transactions, including the intercompany
transactions with consolidated variable interest entities (‘‘VIEs’’) and the intercompany portion of transactions with
equity method investees.
Certain amounts in the prior years’ consolidated financial statements and notes have been revised to conform to the
current year presentation.
Principles of Consolidation
Our Company consolidates all entities that we control by ownership of a majority voting interest as well as VIEs for
which our Company is the primary beneficiary. Generally, we consolidate only business enterprises that we control by
ownership of a majority voting interest. However, there are situations in which consolidation is required even though
the usual condition of consolidation (ownership of a majority voting interest) does not apply. Generally, this occurs
when an entity holds an interest in another business enterprise that was achieved through arrangements that do not
involve voting interests, which results in a disproportionate relationship between such entity’s voting interests in, and its
exposure to the economic risks and potential rewards of, the other business enterprise. This disproportionate
relationship results in what is known as a variable interest, and the entity in which we have the variable interest is
referred to as a VIE. An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the
VIE. The primary beneficiary has both (a) the power to direct the activities of the VIE that most significantly impact
the entity’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits from the VIE
that could potentially be significant to the VIE.
Our Company holds interests in certain VIEs, primarily bottling and container manufacturing operations, for which we
were not determined to be the primary beneficiary. Our variable interests in these VIEs primarily relate to profit
guarantees or subordinated financial support. Refer to Note 11. Although these financial arrangements resulted in us
holding variable interests in these entities, the majority of these arrangements did not empower us to direct the
activities of the VIEs that most significantly impact the VIEs’ economic performance. Our Company’s investments, plus
any loans and guarantees, related to these VIEs totaled approximately $1,274 million and $624 million as of
December 31, 2010, and 2009, respectively, representing our maximum exposures to loss. The Company’s investments,
plus any loans and guarantees, related to these VIEs were not significant to the Company’s consolidated financial
statements.
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