Coca Cola 2013 Annual Report Download - page 60

Other Income (Loss) — Net
Other income (loss) — net includes, among other things, the impact of foreign currency exchange gains and losses; dividend
income; rental income; gains and losses related to the disposal of property, plant and equipment; gains and losses related to
business combinations and disposals; realized and unrealized gains and losses on trading securities; realized gains and losses on
available-for-sale securities; other-than-temporary impairments of available-for-sale securities; and the accretion of expense related
to certain acquisitions. The foreign currency exchange gains and losses are primarily the result of the remeasurement of monetary
assets and liabilities from certain currencies into functional currencies. The effects of the remeasurement of these assets and
liabilities are partially offset by the impact of our economic hedging program for certain exposures on our consolidated balance
sheets. Refer to Note 5 of Notes to Consolidated Financial Statements.
In 2013, other income (loss) — net was income of $576 million, primarily related to a gain of $615 million due to the
deconsolidation of our Brazilian bottling operations as a result of their combination with an independent bottling partner; a gain
of $139 million as a result of Coca-Cola FEMSA, an equity method investee, issuing additional shares of its own stock at per
share amounts greater than the carrying value of the Company’s per share investment; and dividend income of $70 million. The
favorable impact of these items was partially offset by a charge of $140 million due to the devaluation of the Venezuelan bolivar,
which resulted in the Company remeasuring the net assets related to its operations in Venezuela, and a net charge of $114 million
related to our investment in four bottling partners that merged during 2013 to form CCEJ through a share exchange. Refer to
Note 2 and Note 17 of Notes to Consolidated Financial Statements.
In 2012, other income (loss) — net was income of $137 million, primarily related to a gain of $185 million due to the merger of
Embotelladora Andina S.A. (‘‘Andina’’) and Embotelladoras Coca-Cola Polar S.A. (‘‘Polar’’); a gain of $92 million the Company
recognized as a result of Coca-Cola FEMSA issuing additional shares of its own stock at per share amounts greater than the
carrying value of the Company’s per share investment; dividend income of $44 million; and net gains of $31 million related to
fluctuations in the fair value of the Company’s trading securities and the sale of available-for-sale securities. The favorable impact
of the previous items was partially offset by a charge of $108 million due to the loss we recognized on the then pending sale of a
majority ownership interest in our consolidated Philippine bottling operations to Coca-Cola FEMSA; a charge of $82 million
related to the premium we paid in excess of the publicly traded market price to acquire an ownership interest in Mikuni
Coca-Cola Bottling Co., Ltd. (‘‘Mikuni’’); and charges of $16 million due to other-than-temporary declines in the fair values of
certain cost method investments. Refer to Note 2 and Note 17 of Notes to Consolidated Financial Statements.
In 2011, other income (loss) — net was income of $529 million, primarily related to a net gain of $417 million the Company
recognized due to the merger of Arca and Contal; a net gain of $122 million the Company recognized due to Coca-Cola FEMSA
issuing additional shares of its own stock at per share amounts greater than the carrying value of the Company’s per share
investment, partially offset by charges associated with certain of the Company’s equity method investments in Japan; and a gain of
$102 million due to the sale of our investment in Coca-Cola Embonor, S.A. (‘‘Embonor’’). Other income (loss) — net also
included $10 million of realized and unrealized gains on trading securities. The net favorable impact of the previous items was
partially offset by foreign currency exchange losses of $73 million; charges of $41 million due to the impairment of an investment
in an entity accounted for under the equity method of accounting; $17 million due to other-than-temporary declines in the fair
value of certain of the Company’s available-for-sale securities; and $5 million due to the finalization of working capital
adjustments associated with the sale of our Norwegian and Swedish bottling operations to New CCE during the fourth quarter of
2010. Refer to Note 17 of Notes to Consolidated Financial Statements.
Income Taxes
Our effective tax rate reflects the tax benefits of having significant operations outside the United States, which are generally taxed
at rates lower than the U.S. statutory rate of 35 percent. As a result of employment actions and capital investments made by the
Company, certain tax jurisdictions provide income tax incentive grants, including Brazil, Costa Rica, Singapore and Swaziland. The
terms of these grants expire from 2015 to 2022. We expect each of these grants to be renewed indefinitely. Tax incentive grants
favorably impacted our income tax expense by $279 million, $280 million and $193 million for the years ended December 31, 2013,
2012 and 2011, respectively. In addition, our effective tax rate reflects the benefits of having significant earnings generated in
investments accounted for under the equity method of accounting, which are generally taxed at rates lower than the U.S. statutory
rate.
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