Coca Cola 2015 Annual Report Download - page 75
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Commodity Prices
The Company is subject to market risk with respect to commodity price fluctuations, principally related to our purchases of sweeteners, metals, juices, PET
and fuels. We manage our exposure to commodity risks primarily through the use of supplier pricing agreements that enable us to establish the purchase
prices for certain inputs that are used in our manufacturing and distribution business. We also use derivative financial instruments to manage our exposure to
commodity risks at times. Certain of these derivatives do not qualify for hedge accounting, but they are effective economic hedges that help the Company
mitigate the price risk associated with the purchases of materials used in our manufacturing processes and the fuel used to operate our extensive vehicle fleet.
Open commodity derivatives that qualify for hedge accounting had notional values of $8 million and $9 million as of December 31, 2015 and 2014,
respectively. The fair value of the contracts that qualify for hedge accounting resulted in a net unrealized gain of $1 million. The potential change in fair
value of these commodity derivative instruments, assuming a 10 percent decrease in underlying commodity prices, would have resulted in a net unrealized
loss of $1 million.
Open commodity derivatives that do not qualify for hedge accounting had notional values of $893 million and $816 million as of December 31, 2015 and
2014, respectively. The fair value of the contracts that do not qualify for hedge accounting resulted in a net unrealized loss of $170 million. The potential
change in fair value of these commodity derivative instruments, assuming a 10 percent decrease in underlying commodity prices, would have increased the
net unrealized loss to $226 million.
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