Coca Cola 2015 Annual Report Download - page 39

Management has discussed the development, selection and disclosure of critical accounting policies and estimates with the Audit Committee of the
Company's Board of Directors. While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the
future, actual results may ultimately differ from these estimates and assumptions. For a discussion of the Company's significant accounting policies, refer to
Note 1 of Notes to Consolidated Financial Statements.
Principles of Consolidation
Our Company consolidates all entities that we control by ownership of a majority voting interest as well as variable interest entities for which our Company
is the primary beneficiary. Generally, we consolidate only business enterprises that we control by ownership of a majority voting interest. However, there are
situations in which consolidation is required even though the usual condition of consolidation (ownership of a majority voting interest) does not apply.
Generally, this occurs when an entity holds an interest in another business enterprise that was achieved through arrangements that do not involve voting
interests, which results in a disproportionate relationship between such entity's voting interests in, and its exposure to the economic risks and potential
rewards of, the other business enterprise. This disproportionate relationship results in what is known as a variable interest, and the entity in which we have the
variable interest is referred to as a "VIE." An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary
beneficiary has both (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (2) the obligation
to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
Our Company holds interests in certain VIEs, primarily bottling and container manufacturing operations, for which we were not determined to be the primary
beneficiary. Our variable interests in these VIEs primarily relate to profit guarantees or subordinated financial support. Refer to Note 11 of Notes to
Consolidated Financial Statements. Although these financial arrangements resulted in our holding variable interests in these entities, they did not empower
us to direct the activities of the VIEs that most significantly impact the VIEs' economic performance. Our Company's investments, plus any loans and
guarantees, related to these VIEs totaled $2,687 million and $2,274 million as of December 31, 2015 and 2014, respectively, representing our maximum
exposures to loss. The Company's investments, plus any loans and guarantees, related to these VIEs were not significant to the Company's consolidated
financial statements.
In addition, our Company holds interests in certain VIEs, primarily bottling and container manufacturing operations, for which we were determined to be the
primary beneficiary. As a result, we have consolidated these entities. Our Company's investments, plus any loans and guarantees, related to these VIEs totaled
$221 million and $266 million as of December 31, 2015 and 2014, respectively, representing our maximum exposures to loss. The assets and liabilities of
VIEs for which we are the primary beneficiary were not significant to the Company's consolidated financial statements.
Creditors of our VIEs do not have recourse against the general credit of the Company, regardless of whether they are accounted for as consolidated entities.
Recoverability of Current and Noncurrent Assets
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 current and noncurrent assets in various regions around the world.
We perform recoverability and impairment tests of current and 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.
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