Coca Cola 2011 Annual Report Download - page 90

plant and equipment, including appraisals and discounted cash flow models, which are consistent with the assumptions we believe
hypothetical marketplace participants would use. Refer to Note 7.
Goodwill, Trademarks and Other Intangible Assets
We classify intangible assets into three categories: (1) intangible assets with definite lives subject to amortization, (2) intangible
assets with indefinite lives not subject to amortization and (3) goodwill. We determine the useful lives of our identifiable
intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when
determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the
asset, the Company’s long-term strategy for using the asset, any laws or other local regulations which could impact the useful life
of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed
to have definite lives are amortized, primarily on a straight-line basis, over their useful lives, generally ranging from 1 to 20 years.
Refer to Note 8.
When facts and circumstances indicate that the carrying value of definite-lived intangible assets may not be recoverable,
management assesses the recoverability of the carrying value by preparing estimates of sales volume and the resulting gross profit
and cash flows. 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 of the asset (or asset group)
exceeds the fair value. We use a variety of methodologies to determine the fair value of these assets, including discounted cash
flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use.
We test intangible assets determined to have indefinite useful lives, including trademarks, franchise rights and goodwill, for
impairment annually, or more frequently if events or circumstances indicate that assets might be impaired. Our Company
performs these annual impairment reviews as of the first day of our third fiscal quarter. We use a variety of methodologies in
conducting impairment assessments of indefinite-lived intangible assets, including, but not limited to, discounted cash flow models,
which are based on the assumptions we believe hypothetical marketplace participants would use. For indefinite-lived intangible
assets, other than goodwill, if the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal
to that excess.
We perform impairment tests of goodwill at our reporting unit level, which is one level below our operating segments. Our
operating segments are primarily based on geographic responsibility, which is consistent with the way management runs our
business. Our operating segments are subdivided into smaller geographic regions or territories that we sometimes refer to as
‘‘business units.’’ These business units are also our reporting units. The Bottling Investments operating segment includes all
Company-owned or consolidated bottling operations, regardless of geographic location, except for bottling operations managed by
CCR, which are included in our North America operating segment. Generally, each Company-owned or consolidated bottling
operation within our Bottling Investments operating segment is its own reporting unit. Goodwill is assigned to the reporting unit
or units that benefit from the synergies arising from each business combination.
The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting
unit to its carrying value, including goodwill. We typically use discounted cash flow models to determine the fair value of a
reporting unit. The assumptions used in these models are consistent with those we believe hypothetical marketplace participants
would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be
performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of the
reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds
its implied fair value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed
the carrying amount of goodwill.
Impairment charges related to intangible assets are generally recorded in the line item other operating charges or, to the extent
they relate to equity method investees, in the line item equity income (loss) — net in our consolidated statements of income.
Contingencies
Our Company is involved in various legal proceedings and tax matters. Due to their nature, such legal proceedings and tax
matters involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and
governmental actions. Management assesses the probability of loss for such contingencies and accrues a liability and/or discloses
the relevant circumstances, as appropriate. Refer to Note 11.
Stock-Based Compensation
Our Company currently sponsors stock option plans and restricted stock award plans. The fair values of the stock awards are
determined using an estimated expected life. The Company recognizes compensation expense on a straight-line basis over the
period the award is earned by the employee. Refer to Note 12.
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