Coca Cola 2014 Annual Report Download - page 59

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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 2014, other income (loss) — net was a loss of $1,263 million, primarily due to charges of $799 million related to the refranchising
of certain territories in North America and foreign exchange losses of $569 million, including a charge of $372 million due to the
remeasurement of the net monetary assets of our Venezuelan subsidiary using the SICAD 2 exchange rate. These charges were
partially offset by dividend income of $51 million and net gains of $45 million related to fluctuations in the carrying value of the
Company’s trading securities and sales of available-for-sale securities. Refer to Note 1, Note 2 and Note 17 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.
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 2016 to 2023. We anticipate that we will be able to extend or renew the grants in these locations.
Tax incentive grants favorably impacted our income tax expense by $265 million, $279 million and $280 million for the years ended
December 31, 2014, 2013 and 2012, 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.