Coca Cola 2011 Annual Report Download - page 66

Income Taxes
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.
A reconciliation of the statutory U.S. federal tax rate and our effective tax rate is as follows:
Year Ended December 31, 2011 2010 2009
Statutory U.S. federal tax rate 35.0% 35.0% 35.0%
State and local income taxes — net of federal benefit 0.9 0.6 0.7
Earnings in jurisdictions taxed at rates different from the statutory U.S. federal rate (9.5)1,2,3 (5.6)11 (11.6)19
Equity income or loss (1.4)4(1.9)12 (2.3)20
CCE transaction —(12.5)13,14 —
Sale of Norwegian and Swedish bottling operations —50.415 —
Other operating charges 0.360.416 0.621
Other — net (0.8)7,8,9,10 0.317,18 0.422,23
Effective tax rate 24.5% 16.7% 22.8%
1Includes a tax benefit of $6 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and
penalties, in various international jurisdictions.
2Includes a zero percent effective tax rate on charges due to the impairment of available-for-sale securities. Refer to Note 3 and Note 17 of Notes
to Consolidated Financial Statements.
3Includes a tax expense of $299 million (or a 0.7 percent impact on our effective tax rate) related to the net gain recognized as a result of the
merger of Arca and Contal, the gain recognized on the sale of our investment in Embonor and gains the Company recognized as a result of an
equity method investee issuing additional shares of its own stock during the year at per share amounts greater than the carrying value of the
Company’s per share investment. These gains were partially offset by charges associated with certain of the Company’s equity method investments
in Japan. Refer to Note 17 of Notes to Consolidated Financial Statements.
4Includes a tax benefit of $7 million (or a 0.1 percent impact on our effective tax rate) related to our proportionate share of asset impairments and
restructuring charges recorded by certain of our equity method investees. Refer to Note 17 of Notes to Consolidated Financial Statements.
5Includes a tax benefit of $2 million related to the finalization of working capital adjustments on the sale of our Norwegian and Swedish bottling
operations. Refer to Note 2 and Note 17 of Notes to Consolidated Financial Statements.
6Includes a tax benefit of $224 million (or a 0.3 percent impact on our effective tax rate) primarily related to the Company’s productivity, integration
and restructuring initiatives, transaction costs incurred in connection with the merger of Arca and Contal, costs associated with the earthquake and
tsunami that devastated northern and eastern Japan and costs associated with the flooding in Thailand. Refer to Note 17 of Notes to Consolidated
Financial Statements.
7Includes a tax benefit of $8 million related to the amortization of favorable supply contracts acquired in connection with our acquisition of CCE’s
North American business.
8Includes a tax benefit of $3 million related to net charges we recognized on the repurchase and/or exchange of certain long-term debt assumed in
connection with our acquisition of CCE’s North American business as well as the early extinguishment of certain other long-term debt. Refer to
Note 10 of Notes to Consolidated Financial Statements.
9Includes a tax benefit of $14 million on charges due to the impairment of an investment in an entity accounted for under the equity method of
accounting. Refer to Note 17 of Notes to Consolidated Financial Statements.
10 Includes a tax benefit of $2 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and
penalties, in certain domestic jurisdictions.
11 Includes tax expense of $265 million (or a 1.9 percent impact on our effective tax rate), primarily related to deferred tax expense on certain current
year undistributed foreign earnings that are not considered indefinitely reinvested and amounts required to be recorded for changes to our
uncertain tax positions, including interest and penalties.
12 Includes a tax benefit of $9 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 of Notes to Consolidated Financial Statements.
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