Coca Cola 2015 Annual Report Download - page 63

As of December 31, 2015, the gross amount of unrecognized tax benefits was $168 million. If the Company were to prevail on all uncertain tax positions, the
net effect would be a benefit to the Company's effective tax rate of $148 million, exclusive of any benefits related to interest and penalties. The remaining
$20 million, which was recorded as a deferred tax asset, primarily represents tax benefits that would be received in different tax jurisdictions in the event the
Company did not prevail on all uncertain tax positions.
A reconciliation of the changes in the gross amount of unrecognized tax benefits is as follows (in millions):
Year Ended December 31, 
2014
2013
Beginning balance of unrecognized tax benefits  
$ 230
$ 302
Increase related to prior period tax positions 
13
1
Decrease related to prior period tax positions 
(2)
(7)
Increase related to current period tax positions 
11
8
Decrease related to settlements with taxing authorities 
(5)
(4)
Decrease due to lapse of the applicable statute of limitations 
(32)
(59)
Increase (decrease) due to effect of foreign currency exchange rate changes 
(4)
(11)
Ending balance of unrecognized tax benefits  
$ 211
$ 230
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company had $111 million, $113
million and $105 million in interest and penalties related to unrecognized tax benefits accrued as of December 31, 2015, 2014 and 2013, respectively. Of
these amounts, $8 million of expense and $8 million of benefit were recognized through income tax expense in 2014 and 2013, respectively. For the year
ended December 31, 2015, an insignificant amount of interest and penalties were recognized through income tax expense. If the Company were to prevail on
all uncertain tax positions, the reversal of this accrual would also be a benefit to the Company's effective tax rate.
Based on current tax laws, the Company's effective tax rate in 2016 is expected to be 22.5 percent before considering the effect of any unusual or special
items that may affect our tax rate.

We believe our ability to generate cash flows from operating activities is one of our fundamental financial strengths. Refer to the heading "Cash Flows from
Operating Activities" below. The near-term outlook for our business remains strong, and we expect to generate substantial cash flows from operations in
2016. As a result of our expected cash flows from operations, we have significant flexibility to meet our financial commitments. The Company does not
typically raise capital through the issuance of stock. Instead, we use debt financing to lower our overall cost of capital and increase our return on shareowners'
equity. Refer to the heading "Cash Flows from Financing Activities" below. We have a history of borrowing funds domestically and continue to have the
ability to borrow funds domestically at reasonable interest rates. In addition, our domestic entities have recently borrowed and continue to have the ability to
borrow funds in international markets at reasonable interest rates. Our debt financing includes the use of an extensive commercial paper program as part of
our overall cash management strategy. The Company reviews its optimal mix of short-term and long-term debt regularly and may replace certain amounts of
commercial paper, short-term debt and current maturities of long-term debt with new issuances of long-term debt in the future. In addition to the Company's
cash balances, commercial paper program, and our ability to issue long-term debt, we also had $8,340 million in lines of credit for general corporate purposes
as of December 31, 2015. These backup lines of credit expire at various times from 2016 through 2019.
We have significant operations outside the United States. Unit case volume outside the United States represented 81 percent of the Company's worldwide
unit case volume in 2015. We earn a substantial amount of our consolidated operating income and income before income taxes in foreign subsidiaries that
either sell concentrate to our local bottling partners or, in certain instances, sell finished products directly to our customers to fulfill the demand for Company
beverage products outside the United States. A significant portion of these foreign earnings is considered to be indefinitely reinvested in foreign jurisdictions
where the Company has made, and will continue to make, substantial investments to support the ongoing development and growth of our international
operations. Accordingly, no U.S. federal and state income taxes have been provided on the portion of our foreign earnings that is considered to be
indefinitely reinvested in foreign jurisdictions. The Company's cash, cash equivalents, short-term investments and marketable securities held by our foreign
subsidiaries totaled $17.9 billion as of December 31, 2015. With the exception of an insignificant amount, for which U.S. federal and state income taxes have
already been provided, we do not intend, nor do we foresee a need, to repatriate these funds.
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