Coca Cola 2011 Annual Report Download - page 38

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rates, tax rates and capital spending. These factors are even more difficult to predict when global financial markets are highly
volatile. The estimates we use when assessing the recoverability of noncurrent assets are consistent with those we use in our
internal planning. When performing impairment tests, we estimate the fair values of the assets using management’s best
assumptions, which we believe would be consistent with what a hypothetical marketplace participant would use. Estimates and
assumptions used in these tests are evaluated and updated as appropriate. The variability of these factors depends on a number of
conditions, including uncertainty about future events, and thus our accounting estimates may change from period to period. If
other assumptions and estimates had been used when these tests were performed, impairment charges could have resulted. As
mentioned above, these factors do not change in isolation and, therefore, we do not believe it is practicable or meaningful to
present the impact of changing a single factor. Furthermore, if management uses different assumptions or if different conditions
occur in future periods, future impairment charges could result. Refer to the heading ‘‘Operations Review’’ below for additional
information related to our present business environment. Certain factors discussed above are impacted by our current business
environment and are discussed throughout this report, as appropriate.
Our Company faces many uncertainties and risks related to various economic, political and regulatory environments in the
countries in which we operate, particularly in developing or emerging markets. Refer to the heading ‘‘Our Business — Challenges
and Risks’’ above and ‘‘Item 1A. Risk Factors’’ in Part I of this report. As a result, management must make numerous
assumptions which involve a significant amount of judgment when completing recoverability and impairment tests of noncurrent
assets in various regions around the world.
Investments in Equity and Debt Securities
The carrying values of our investments in equity securities are determined using the equity method, the cost method or the fair
value method. We account for investments in companies that we do not control or account for under the equity method either at
fair value or under the cost method, as applicable. Investments in equity securities are carried at fair value, if the fair value of the
security is readily determinable. Equity investments carried at fair value are classified as either trading or available-for-sale
securities. Realized and unrealized gains and losses on trading securities and realized gains and losses on available-for-sale
securities are included in net income. Unrealized gains and losses, net of deferred taxes, on available-for-sale securities are
included in our consolidated balance sheets as a component of accumulated other comprehensive income (loss) (‘‘AOCI’’). Trading
securities are reported as either marketable securities or other assets in our consolidated balance sheets. Securities classified as
available-for-sale are reported as either marketable securities or other investments in our consolidated balance sheets, depending
on the length of time we intend to hold the investment. Investments in equity securities that do not qualify for fair value
accounting are accounted for under the cost method. In accordance with the cost method, our initial investment is recorded at
cost and we record dividend income when applicable dividends are declared. Cost method investments are reported as other
investments in our consolidated balance sheets.
Our investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the
Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity.
Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or
available-for-sale.
The following table presents the carrying values of our investments in equity and debt securities (in millions):
Percentage
Carrying of Total
December 31, 2011 Value Assets
Equity method investments $ 7,233 9%
Securities classified as available-for-sale 1,401 2
Securities classified as trading 211 *
Cost method investments 155 *
Securities classified as held-to-maturity 113 *
Total $ 9,113 11%
* Accounts for less than 1 percent of the Company’s total assets.
36