Coca Cola 2013 Annual Report Download - page 38

Recoverability of Noncurrent Assets
We perform recoverability and impairment tests of noncurrent assets in accordance with accounting principles generally accepted
in the United States. For certain assets, recoverability and/or impairment tests are required only when conditions exist that
indicate the carrying value may not be recoverable. For other assets, impairment tests are required at least annually, or more
frequently, if events or circumstances indicate that an asset may be impaired.
Our equity method investees also perform such recoverability and/or impairment tests. If an impairment charge is recorded by one
of our equity method investees, the Company records its proportionate share of such charge as a reduction of equity income
(loss) — net in our consolidated statements of income. However, the actual amount we record with respect to our proportionate
share of such charges may be impacted by items such as basis differences, deferred taxes and deferred gains.
Management’s assessments of the recoverability and impairment tests of noncurrent assets involve critical accounting estimates.
These estimates require significant management judgment, include inherent uncertainties and are often interdependent; therefore,
they do not change in isolation. Factors that management must estimate include, among others, the economic life of the asset,
sales volume, pricing, cost of raw materials, delivery costs, inflation, cost of capital, marketing spending, foreign currency exchange
rates, tax rates, capital spending and proceeds from the sale of assets. 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, other than investments accounted for under
the equity method, 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 or equity method 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.
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