Coca Cola 2011 Annual Report Download - page 92

In early June 2010, the Venezuelan government introduced a newly regulated foreign currency exchange system known as the
Transaction System for Foreign Currency Denominated Securities (‘‘SITME’’). This new system, which is subject to annual limits,
replaced the parallel market whereby entities domiciled in Venezuela are able to exchange their bolivars to U.S. dollars through
authorized financial institutions (commercial banks, savings and lending institutions, etc.).
In December 2010, the Venezuelan government announced that it was eliminating the official rate of 2.6 bolivars per U.S. dollar
for essential goods. As a result, there are only two exchange rates available for remeasuring bolivar-denominated transactions as
of December 31, 2011, the official rate of 4.3 bolivars per U.S. dollar for nonessential goods and the SITME rate. As discussed
above, the Company has remeasured the net assets of our Venezuelan subsidiary using the official rate for nonessential goods of
4.3 bolivars per U.S. dollar since January 1, 2010. Therefore, the elimination of the official rate for essential goods had no impact
on the remeasurement of the net assets of our Venezuelan subsidiary. We continue to use the official exchange rate for
nonessential goods to remeasure the financial statements of our Venezuelan subsidiary. If the official exchange rate devalues
further, it would result in our Company recognizing additional foreign currency exchange losses in our consolidated financial
statements. As of December 31, 2011, our Venezuelan subsidiary held monetary assets of $300 million, including cash, which
accounted for approximately 2 percent of our consolidated cash and cash equivalents balance.
In addition to the foreign currency exchange exposure related to our Venezuelan subsidiary’s net assets, we also sell concentrate
to our bottling partner in Venezuela from outside the country. These sales are denominated in U.S. dollars. Some of our
concentrate sales were approved by the government-operated Foreign Exchange Administration Board (‘‘CADIVI’’) to receive the
official rate for essential goods of 2.6 bolivars per U.S. dollar prior to the elimination of the official rate for essential goods in
December 2010. Prior to the elimination of the official rate for essential goods, our bottling partner in Venezuela was able to
convert bolivars to U.S. dollars to settle our receivables related to sales approved by the CADIVI. Therefore, as of December 31,
2011, our receivable balance related to concentrate sales that had been approved by the CADIVI was not significant. If we are
unable to utilize a government-approved exchange rate mechanism for future concentrate sales to our bottling partner in
Venezuela, the amount of receivables related to these sales will increase. In addition, we have certain intangible assets associated
with products sold in Venezuela. If we are unable to utilize a government-approved exchange rate mechanism for concentrate
sales, or if the bolivar further devalues, it could result in the impairment of these intangible assets. As of December 31, 2011, the
carrying value of our accounts receivable from our bottling partner in Venezuela and intangible assets associated with products
sold in Venezuela was $147 million. The revenues and cash flows associated with concentrate sales to our bottling partner in
Venezuela in 2012 are not anticipated to be significant to the Company’s consolidated financial statements.
Recently Issued Accounting Guidance
In June 2011, the FASB issued an amendment to an existing accounting standard which requires companies to present net income
and other comprehensive income in one continuous statement or in two separate, but consecutive, statements. In addition, in
December 2011, the FASB issued an amendment to an existing accounting standard which defers the requirement to present
components of reclassifications of other comprehensive income on the face of the income statement. This new accounting
pronouncement is effective for our first quarter of 2012 and we do not expect any material impact on our financial statements
from its adoption.
As previously discussed, in June 2009, the FASB amended its guidance on accounting for VIEs. Please refer to the heading
‘‘Principles of Consolidation’’ above.
NOTE 2: ACQUISITIONS AND DIVESTITURES
Acquisitions
During 2011, cash payments related to the Company’s acquisition and investment activities totaled $977 million. These payments
were primarily related to the acquisitions of Great Plains Coca-Cola Bottling Company (‘‘Great Plains’’) and Honest Tea, Inc.
(‘‘Honest Tea’’), and an additional investment in Coca-Cola Central Japan Company (‘‘Central Japan’’). In addition, the
Company’s acquisition and investment activities during 2011 included immaterial cash payments for the finalization of working
capital adjustments related to our acquisition of CCE’s North American business. Refer to our discussion of this transaction
below.
The Company acquired Great Plains on December 30, 2011. The total purchase price for the Great Plains acquisition was
approximately $360 million, of which $321 million was paid at closing. The purchase price was primarily allocated to property,
plant and equipment, identifiable intangible assets and goodwill. The Company anticipates finalizing our purchase accounting for
the Great Plains acquisition no later than the end of 2012, upon the finalization of appraisals primarily related to fixed assets and
intangible assets.
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