Coca Cola 2015 Annual Report Download - page 104

Download and view the complete annual report

Please find page 104 of the 2015 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 220

  • 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
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208
  • 209
  • 210
  • 211
  • 212
  • 213
  • 214
  • 215
  • 216
  • 217
  • 218
  • 219
  • 220

The Company also uses 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 due to changes in foreign currency exchange rates are recognized in earnings. As a result, any difference is reflected in earnings as ineffectiveness. The
total notional values of derivatives that related to our fair value hedges of this type were $2,159 million and $1,358 million as of December 31, 2015 and
2014, respectively.
The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on earnings during the
years ended December 31, 2015, 2014 and 2013 (in millions):
Hedging Instruments and Hedged Items
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in
Income1

Interest rate contracts Interest expense  
Fixed-rate debt Interest expense 
Net impact to interest expense  
Foreign currency contracts Other income (loss) — net  
Available-for-sale securities Other income (loss) — net 
Net impact to other income (loss) — net
 
Net impact of fair value hedging instruments
 
2014
Interest rate contracts Interest expense $ 18
Fixed-rate debt Interest expense 11
Net impact to interest expense $ 29
Foreign currency contracts Other income (loss) — net $ 132
Available-for-sale securities Other income (loss) — net (165)
Net impact to other income (loss) — net
$ (33)
Net impact of fair value hedging instruments
$ (4)
2013
Interest rate contracts Interest expense $ (193)
Fixed-rate debt Interest expense 240
Net impact to interest expense
$ 47
Foreign currency contracts Other income (loss) — net $ 24
Available-for-sale securities Other income (loss) — net (48)
Net impact to other income (loss) — net
$ (24)
Net impact of fair value hedging instruments
$ 23
1 The net impacts represent the ineffective portions of the hedge relationships and the amounts excluded from the assessment of hedge effectiveness.
Hedges of Net Investments in Foreign Operations Strategy
The Company uses forward contracts and non-derivative financial instruments to protect the value of our investments in a number of foreign subsidiaries.
During the year ended December 31, 2015, the Company designated a portion of its euro-denominated debt as a hedge of a net investment in our European
operations. The change in the carrying value of the designated portion of the euro-denominated debt due to changes in foreign currency exchange rates is
recorded in net foreign currency translation adjustment, a component of AOCI. For derivative instruments that are designated and qualify as hedges of net
investments in foreign operations, the changes in fair values of the derivative instruments are recognized in net foreign currency translation adjustment, to
offset the changes in the values of the net investments being hedged. Any ineffective portions of net investment hedges are reclassified from AOCI into
earnings during the period of change.
102