Coca Cola 2014 Annual Report Download - page 43

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funds to meet their benefit obligations when they become due. As a result, the Company periodically revises asset allocations, where
appropriate, to improve returns and manage risk. The weighted-average expected long-term rate of return used to calculate our
pension expense was 8.25 percent in 2014 and 2013.
Effective December 31, 2014, the Company revised our mortality assumptions used to determine the projected benefit obligation of
the U.S. defined benefit pension plans. The revised assumptions were derived from the mortality tables and the mortality improvement
scales published by the Society of Actuaries in October 2014. The change in mortality assumptions for the U.S. plans resulted in an
increase in the projected benefit obligation at December 31, 2014, of approximately $210 million.
In 2014, the Company’s total pension expense related to defined benefit plans was $34 million. In 2015, we expect our total pension
expense to be approximately $134 million. The anticipated increase is primarily due to a decrease in the weighted-average discount
rate used to calculate the Company’s benefit obligation, unfavorable asset performance compared to our expected return during
2014 and the adoption of more conservative mortality assumptions for U.S. plans offset by the impact of approximately $90 million
of contributions the Company expects to make in 2015 to its international plans. The estimated impact of a 50 basis-point decrease in
the discount rate on our 2015 pension expense is an increase to our pension expense of approximately $47 million. Additionally, the
estimated impact of a 50 basis-point decrease in the expected long-term rate of return on plan assets on our 2015 pension expense is an
increase to our pension expense of approximately $31 million.
The sensitivity information provided above is based only on changes to the actuarial assumptions used for our U.S. pension plans.
As of December 31, 2014, the Company’s primary U.S. plan represented 58 percent and 61 percent of the Company’s consolidated
projected pension benefit obligation and pension assets, respectively. Refer to Note 13 of Notes to Consolidated Financial Statements
for additional information about our pension plans and related actuarial assumptions.
Revenue Recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales price is fixed or
determinable and collectibility is reasonably assured. For our Company, this generally means that we recognize revenue when title to
our products is transferred to our bottling partners, resellers or other customers. Title usually transfers upon shipment to or receipt
at our customers’ locations, as determined by the specific sales terms of each transaction. Our sales terms do not allow for a right of
return except for matters related to any manufacturing defects on our part.
Our customers can earn certain incentives which are included in deductions from revenue, a component of net operating revenues
in our consolidated statements of income. These incentives include, but are not limited to, cash discounts, funds for promotional
and marketing activities, volume-based incentive programs and support for infrastructure programs. Refer to Note 1 of Notes to
Consolidated Financial Statements. The aggregate deductions from revenue recorded by the Company in relation to these programs,
including amortization expense on infrastructure programs, were $7.0 billion, $6.9 billion and $6.1 billion in 2014, 2013 and 2012,
respectively. In preparing the financial statements, management must make estimates related to the contractual terms, customer
performance and sales volume to determine the total amounts recorded as deductions from revenue. Management also considers
past results in making such estimates. The actual amounts ultimately paid may be different from our estimates. Such differences are
recorded once they have been determined and have historically not been significant.
Income Taxes
Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various
jurisdictions in which we operate. Significant judgment is required in determining our annual tax expense and in evaluating our tax
positions. We establish reserves to remove some or all of the tax benefit of any of our tax positions at the time we determine that the
positions become uncertain based upon one of the following: (1) the tax position is not “more likely than not” to be sustained, (2) the
tax position is “more likely than not” to be sustained, but for a lesser amount, or (3) the tax position is “more likely than not” to be
sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax
position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all
relevant information, (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative
intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position, and (3) each tax
position is evaluated without considerations of the possibility of offset or aggregation with other tax positions taken. We adjust these
reserves, including any impact on the related interest and penalties, in light of changing facts and circumstances, such as the progress
of a tax audit. Refer to the heading “Operations Review — Income Taxes” below and Note 14 of Notes to Consolidated Financial
Statements.