Coca Cola 2011 Annual Report Download - page 127

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18 Includes a tax expense of $31 million (or a 0.2 percent impact on our effective tax rate) related to amounts required to be recorded for changes to
our uncertain tax positions, including interest and penalties, and other tax matters in certain domestic jurisdictions.
19 Includes a tax benefit of $16 million (or a reduction of 0.2 percent on our effective tax rate) related to amounts required to be recorded for
changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions.
20 Includes a tax benefit of $17 million (or a 0.1 percent impact on our effective tax rate) related to charges recorded by our equity method investees.
Refer to Note 17.
21 Includes a tax benefit of $16 million (or a 0.6 percent impact on our effective tax rate) related to restructuring charges and asset impairments.
Refer to Note 17.
22 Includes a zero percent effective rate (or a reduction of 0.2 percent on our effective tax rate) related to the sale of all or a portion of certain
investments. Refer to Note 3.
23 Includes a zero percent effective rate (or a 0.1 percent impact on our effective tax rate) related to an other-than-temporary impairment of a cost
method investment. Refer to Note 17.
Our effective tax rate reflects the tax benefits of having significant operations outside the United States, which are generally taxed
at rates lower than the U.S. statutory rate of 35 percent. As a result of employment actions and capital investments made by the
Company, certain tax jurisdictions provide income tax incentive grants, including Brazil, Costa Rica, Singapore and Swaziland. The
terms of these grants range from 2015 to 2020. We expect each of the grants to be renewed indefinitely. Tax incentive grants
favorably impacted our income tax expense by $193 million, $145 million and $191 million for the years ended December 31, 2011,
2010 and 2009, respectively. In addition, our effective tax rate reflects the benefits of having significant earnings generated in
investments accounted for under the equity method of accounting, which are generally taxed at rates lower than the U.S. statutory
rate.
In 2010, the Company recorded a $4,978 million pre-tax remeasurement gain associated with the acquisition of CCE’s North
American business. This remeasurement gain was not recognized for tax purposes and therefore no tax expense was recorded on
this gain. Also, as a result of this acquisition, the Company was required to reverse $34 million of deferred tax liabilities which
were associated with our equity investment in CCE prior to the acquisition. In addition, the Company recognized a $265 million
charge related to the settlement of preexisting relationships with CCE, and we recorded a tax benefit of 37 percent related to this
charge.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign
jurisdictions. U.S. tax authorities have completed their federal income tax examinations for all years prior to 2005. With respect to
state and local jurisdictions and countries outside the United States, with limited exceptions, the Company and its subsidiaries are
no longer subject to income tax audits for years before 2002. For U.S. federal and state tax purposes, the net operating losses and
tax credit carryovers acquired in connection with our acquisition of CCE’s North American business that were generated between
the years of 1990 through 2010 are subject to adjustments, until the year in which they are actually utilized is no longer subject to
examination.
Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, including interest
and penalties, have been provided for any adjustments that are expected to result from those years.
As of December 31, 2011, the gross amount of unrecognized tax benefits was $320 million. If the Company were to prevail on all
uncertain tax positions, the net effect would be a benefit to the Company’s effective tax rate of $149 million, exclusive of any
benefits related to interest and penalties. The remaining $171 million, which was recorded as a deferred tax asset, primarily
represents tax benefits that would be received in different tax jurisdictions in the event the Company did not prevail on all
uncertain tax positions.
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