Coca Cola 2014 Annual Report Download - page 38

36
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”), except for the change in fair value attributable to the currency risk being hedged, if applicable, which is included in net
income. 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.