Coca Cola 2013 Annual Report Download - page 96

Download and view the complete annual report

Please find page 96 of the 2013 Coca Cola annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 160

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160

The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on
AOCI and earnings during the years ended December 31, 2013, 2012 and 2011 (in millions):
Gain (Loss) Gain (Loss)
Recognized Gain (Loss) Recognized in Income
in Other Reclassified from (Ineffective Portion and
Comprehensive Location of Gain (Loss) AOCI into Income Amount Excluded from
Income (‘‘OCI’’) Recognized in Income1(Effective Portion) Effectiveness Testing)
2013
Foreign currency contracts $ 218 Net operating revenues $ 149 $ 1
Foreign currency contracts 52 Cost of goods sold 32 —2
Interest rate contracts 169 Interest expense (12) (3)
Commodity contracts 2Cost of goods sold (2) —
Total $ 441 $ 167 $ (2)
2012
Foreign currency contracts $ 59 Net operating revenues $ (46) $ 2
Foreign currency contracts 34 Cost of goods sold (23) —
Interest rate contracts 1 Interest expense (12) —2
Commodity contracts (4) Cost of goods sold (1) —
Total $ 90 $ (82) $ 2
2011
Foreign currency contracts $ 3 Net operating revenues $ (231) $ —2
Interest rate contracts (11) Interest expense (12) (1)
Commodity contracts (1) Cost of goods sold — —
Total $ (9) $ (243) $ (1)
1The Company records gains and losses reclassified from AOCI in income for the effective portion and ineffective portion, if any, to the same line
items in our consolidated statements of income.
2Includes a de minimis amount of ineffectiveness in the hedging relationship.
As of December 31, 2013, the Company estimates that it will reclassify into earnings during the next 12 months gains of
approximately $119 million from the pretax amount recorded in AOCI as the anticipated cash flows occur.
Fair Value Hedging Strategy
The Company uses interest rate swap agreements designated as fair value hedges to minimize exposure to changes in the fair
value of fixed-rate debt that results from fluctuations in benchmark interest rates. The changes in fair values of derivatives
designated as fair value hedges and the offsetting changes in fair values of the hedged items are recognized in earnings. The
ineffective portions of these hedges are immediately recognized in earnings. As of December 31, 2013, such adjustments increased
the carrying value of our long-term debt by $52 million. Refer to Note 10. When a derivative is no longer designated as a fair
value hedge for any reason, including termination and maturity, the remaining unamortized difference between the carrying value
of the hedged item at that time and the par value of the hedged item is amortized to earnings over the remaining life of the
hedged item, or immediately if the hedged item has matured. The changes in fair values of hedges that are determined to be
ineffective are immediately recognized into earnings. The total notional values of derivatives that related to our fair value hedges
of this type were $5,600 million and $6,700 million as of December 31, 2013 and 2012, respectively.
During the first quarter of 2012, the Company began using fair value hedges to minimize exposure to changes in the fair value of
certain available-for-sale securities from fluctuations in foreign currency exchange rates. The changes in fair values of derivatives
designated as fair value hedges and the offsetting changes in fair values of the hedged items are recognized in earnings. The
changes in fair values of hedges that are determined to be ineffective are immediately recognized into earnings. The total notional
values of derivatives that related to our fair value hedges of this type were $996 million and $850 million as of December 31, 2013
and 2012, respectively.
94