Coca Cola 2011 Annual Report Download - page 89

Trade Accounts Receivable
We record trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated
uncollectible accounts to reflect any loss anticipated on the trade accounts receivable balances and charged to the provision for
doubtful accounts. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the
contractual terms of the receivables, and our relationships with, and the economic status of, our bottling partners and customers.
We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations.
Activity in the allowance for doubtful accounts was as follows (in millions):
Year Ended December 31, 2011 2010 2009
Balance at beginning of year $48 $55 $51
Net charges to costs and expenses 56 21 24
Write-offs (12) (18) (22)
Other1(9) (10) 2
Balance at end of year $83 $48 $55
1Other includes acquisitions, divestitures and currency translation.
A significant portion of our net operating revenues and corresponding accounts receivable is derived from sales of our products in
international markets. Refer to Note 19. We also generate a significant portion of our net operating revenues by selling
concentrates and syrups to bottlers in which we have a noncontrolling interest, including Coca-Cola Hellenic Bottling
Company S.A. (‘‘Coca-Cola Hellenic’’), Coca-Cola FEMSA, S.A.B. de C.V. (‘‘Coca-Cola FEMSA’’) and Coca-Cola Amatil Limited
(‘‘Coca-Cola Amatil’’). Refer to Note 6.
Inventories
Inventories consist primarily of raw materials and packaging (which includes ingredients and supplies) and finished goods (which
include concentrates and syrups in our concentrate operations, and finished beverages in our finished products operations).
Inventories are valued at the lower of cost or market. We determine cost on the basis of the average cost or first-in, first-out
methods. Refer to Note 4.
Derivative Instruments
Our Company, when deemed appropriate, uses derivatives as a risk management tool to mitigate the potential impact of certain
market risks. The primary market risks managed by the Company through the use of derivative instruments are foreign currency
exchange rate risk, commodity price risk and interest rate risk. All derivatives are carried at fair value in our consolidated balance
sheets in the line items prepaid expenses and other assets or accounts payable and accrued expenses, as applicable. Refer to
Note 5.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Repair and maintenance costs that do not improve service potential or extend
economic life are expensed as incurred. Depreciation is recorded principally by the straight-line method over the estimated useful
lives of our assets, which are reviewed periodically and generally have the following ranges: buildings and improvements: 40 years
or less; machinery, equipment and vehicle fleet: 20 years or less; cold-drink equipment: 13 years or less; and containers: 12 years
or less. Land is not depreciated, and construction in progress is not depreciated until ready for service. Leasehold improvements
are amortized using the straight-line method over the shorter of the remaining lease term, including renewals that are deemed to
be reasonably assured, or the estimated useful life of the improvement. Depreciation expense, including the depreciation expense
of assets under capital lease, totaled $1,654 million, $1,188 million and $1,005 million in 2011, 2010 and 2009, respectively.
Amortization expense for leasehold improvements totaled $18 million, $16 million and $18 million in 2011, 2010 and 2009,
respectively.
Certain events or changes in circumstances may indicate that the recoverability of the carrying amount of property, plant
and equipment should be assessed, including, among others, a significant decrease in market value, a significant change in the
business climate in a particular market, or a current period operating or cash flow loss combined with historical losses or
projected future losses. When such events or changes in circumstances are present, we estimate the future cash flows expected to
result from the use of the asset (or asset group) and its eventual disposition. These estimated future cash flows are consistent
with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized is the amount by
which the carrying amount exceeds the fair value. We use a variety of methodologies to determine the fair value of property,
87