Coca Cola 2013 Annual Report Download - page 41

The following table presents the carrying values of intangible assets included in our consolidated balance sheet (in millions):
Percentage
Carrying of Total
December 31, 2013 Value Assets1
Goodwill $ 12,312 14%
Bottlers’ franchise rights with indefinite lives 7,415 8
Trademarks with indefinite lives 6,744 7
Definite-lived intangible assets, net 969 1
Other intangible assets not subject to amortization 171 *
Total $ 27,611 31%
* Accounts for less than 1 percent of the Company’s total assets.
1The total percentage does not add due to rounding.
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 of the asset (or asset
group), 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 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.
The Company has the option to perform a qualitative assessment of indefinite-lived intangible assets, other than goodwill, prior to
completing the impairment test described above. The Company must assess whether it is more likely than not that the fair value
of the intangible asset is less than its carrying amount. If the Company concludes that this is the case, it must perform the testing
described above. Otherwise, the Company does not need to perform any further assessment. During 2013, the Company
performed qualitative assessments on less than 10 percent of our indefinite-lived intangible assets balance.
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.
The Company has the option to perform a qualitative assessment of goodwill prior to completing the two-step process
described above to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount, including goodwill and other intangible assets. If the Company concludes that this is the case, it must perform the
two-step process. Otherwise, the Company will forego the two-step process and does not need to perform any further testing.
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