Coca Cola 2013 Annual Report Download - page 85

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.
Each reporting period we review all of our investments in equity and debt securities, except for those classified as trading, to
determine whether a significant event or change in circumstances has occurred that may have an adverse effect on the fair value
of each investment. When such events or changes occur, we evaluate the fair value compared to our cost basis in the investment.
We also perform this evaluation every reporting period for each investment for which our cost basis exceeded the fair value in the
prior period. The fair values of most of our investments in publicly traded companies are often readily available based on quoted
market prices. For investments in nonpublicly traded companies, management’s assessment of fair value is based on valuation
methodologies including discounted cash flows, estimates of sales proceeds and appraisals, as appropriate. We consider the
assumptions that we believe hypothetical marketplace participants would use in evaluating estimated future cash flows when
employing the discounted cash flow or estimates of sales proceeds valuation methodologies.
In the event the fair value of an investment declines below our cost basis, management determines if the decline in fair value is
other than temporary. If management determines the decline is other than temporary, an impairment charge is recorded.
Management’s assessment as to the nature of a decline in fair value is based on, among other things, the length of time and the
extent to which the market value has been less than our cost basis, the financial condition and near-term prospects of the issuer,
and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market
value.
Trade Accounts Receivable
We record trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated
uncollectible accounts to reflect any loss anticipated on the trade accounts receivable balances and charged to the provision for
doubtful accounts. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the
contractual terms of the receivables, and our relationships with, and the economic status of, our bottling partners and customers.
We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations.
Activity in the allowance for doubtful accounts was as follows (in millions):
Year Ended December 31, 2013 2012 2011
Balance at beginning of year $53 $83 $48
Net charges to costs and expenses 30 556
Write-offs (14) (19) (12)
Other1(8) (16) (9)
Balance at end of year $61 $53 $83
1Other includes foreign currency translation and the impact of transferring the assets of our consolidated Philippine and Brazilian bottling operations
to assets held for sale. See Note 2.
A significant portion of our net operating revenues and corresponding accounts receivable is derived from sales of our products in
international markets. Refer to Note 19. We also generate a significant portion of our net operating revenues by selling
concentrates and syrups to bottlers in which we have a noncontrolling interest, including Coca-Cola FEMSA, S.A.B. de C.V.
(‘‘Coca-Cola FEMSA’’), Coca-Cola HBC AG (‘‘Coca-Cola Hellenic’’), and Coca-Cola Amatil Limited (‘‘Coca-Cola Amatil’’). Refer
to Note 6.
Inventories
Inventories consist primarily of raw materials and packaging (which includes ingredients and supplies) and finished goods (which
include concentrates and syrups in our concentrate operations and finished beverages in our finished product operations).
Inventories are valued at the lower of cost or market. We determine cost on the basis of the average cost or first-in, first-out
methods. Refer to Note 4.
Derivative Instruments
Our Company, when deemed appropriate, uses derivatives as a risk management tool to mitigate the potential impact of certain
market risks. The primary market risks managed by the Company through the use of derivative instruments are foreign currency
exchange rate risk, commodity price risk and interest rate risk. All derivatives are carried at fair value in our consolidated balance
sheets in the line items prepaid expenses and other assets; other assets; or accounts payable and accrued expenses; and other
liabilities, as applicable. The cash flow impact of the Company’s derivative instruments is primarily included in our consolidated
statements of cash flows in net cash provided by operating activities. Refer to Note 5.
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