Coca Cola 2011 Annual Report Download - page 36

Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United
States, which require management to make estimates, judgments and assumptions that affect the amounts reported in our
consolidated financial statements and accompanying notes. We believe our most critical accounting policies and estimates relate to
the following:
• Principles of Consolidation
• Purchase Accounting for Acquisitions
• Recoverability of Noncurrent Assets
• Pension Plan Valuations
• Revenue Recognition
• Income Taxes
Management has discussed the development, selection and disclosure of critical accounting policies and estimates with the Audit
Committee of the Company’s Board of Directors. While our estimates and assumptions 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. For
a discussion of the Company’s significant accounting policies, refer to Note 1 of Notes to Consolidated Financial Statements.
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 of Notes to Consolidated Financial Statements. 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 $1,183 million and $1,274 million as of December 31, 2011 and 2010,
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.
In addition, our Company holds interests in certain VIEs, primarily bottling and container manufacturing operations, for which we
were determined to be the primary beneficiary. As a result, we have consolidated these entities. Our Company’s investments, plus
any loans and guarantees, related to these VIEs totaled $199 million and $191 million as of December 31, 2011 and 2010,
respectively, representing our maximum exposures to loss. The assets and liabilities of VIEs for which we are the primary
beneficiary were not significant to the Company’s consolidated financial statements.
Creditors of our VIEs do not have recourse against the general credit of the Company, regardless of whether they are accounted
for as consolidated entities.
The information presented above reflects the impact of the Company’s adoption of accounting guidance issued by the FASB
related to VIEs in June 2009. This accounting guidance resulted in a change in our accounting policy effective January 1, 2010.
Among other things, the guidance requires more qualitative than quantitative analyses to determine the primary beneficiary of a
VIE, requires continuous assessments of whether an enterprise is the primary beneficiary of a VIE, enhances disclosures about an
enterprise’s involvement with a VIE, and amends certain guidance for determining whether an entity is a VIE.
Beginning January 1, 2010, we deconsolidated certain entities as a result of this change in accounting policy. These entities are
primarily bottling operations and had previously been consolidated due to certain loan guarantees and/or other financial support
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