Coca Cola 2015 Annual Report Download - page 88

We perform impairment tests of goodwill at our reporting unit level, which is one level below our operating segments. Our operating segments are primarily
based on geographic responsibility, which is consistent with the way management runs our business. Our operating segments are subdivided into smaller
geographic regions or territories that we sometimes refer to as "business units." These business units are also our reporting units. The Bottling Investments
operating segment includes all Company-owned or consolidated bottling operations, regardless of geographic location, except for bottling operations
managed by CCR, which are included in our North America operating segment. Generally, each Company-owned or consolidated bottling operation within
our Bottling Investments operating segment is its own reporting unit. Goodwill is assigned to the reporting unit or units that benefit from the synergies
arising from each business combination.
The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value,
including goodwill. We typically use discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are
consistent with those we believe hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the
second step of the impairment test must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair
value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds its implied
fair value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill.
The Company has the option to perform a qualitative assessment of goodwill prior to completing the two-step process described above to determine whether
it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. If the Company
concludes that this is the case, it must perform the two-step process. Otherwise, the Company will forego the two-step process and does not need to perform
any further testing. During 2015, the Company performed qualitative assessments on 10 percent of our consolidated goodwill balance.
Impairment charges related to intangible assets are generally recorded in the line item other operating charges or, to the extent they relate to equity method
investees, in the line item equity income (loss) — net in our consolidated statements of income.
Contingencies
Our Company is involved in various legal proceedings and tax matters. Due to their nature, such legal proceedings and tax matters involve inherent
uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management assesses the
probability of loss for such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate. Refer to Note 11.
Stock-Based Compensation
Our Company sponsors equity plans that provide for the grant of awards including stock options, restricted stock units, restricted stock and performance share
units. The fair value of our stock option grants is estimated on the grant date using a Black-Scholes-Merton option-pricing model. The Company recognizes
compensation expense on a straight-line basis over the period the grant is earned by the employee, generally four years.
The fair value of our restricted stock units, restricted stock and certain performance share units is the quoted market value of the Company's stock on the grant
date less the present value of the expected dividends not received during the relevant holding period. For certain performance share units granted beginning
in 2014, the Company includes a relative total shareowner return ("TSR") modifier to determine the number of shares earned at the end of the performance
period. For these awards, the number of shares earned based on the certified achievement of the predefined performance criteria will be reduced or increased if
total shareowner return over the performance period relative to a predefined compensation comparator group of companies falls outside of a defined range.
The fair value of performance share units that include the TSR modifier is determined using a Monte Carlo valuation model.
In the period it becomes probable that the minimum performance criteria specified in the performance share award plan will be achieved, we recognize
expense for the proportionate share of the total fair value of the award related to the vesting period that has already lapsed. The remaining fair value of the
award is expensed on a straight-line basis over the balance of the vesting period. In the event the Company determines it is no longer probable that we will
achieve the minimum performance criteria specified in the plan, we reverse all of the previously recognized compensation expense in the period such a
determination is made. Refer to Note 12.
Pension and Other Postretirement Benefit Plans
Our Company sponsors and/or contributes to pension and postretirement health care and life insurance benefit plans covering substantially all U.S.
employees. We also sponsor nonqualified, unfunded defined benefit pension plans for certain associates and participate in multi-employer pension plans in
the United States. In addition, our Company and its subsidiaries have various pension plans and other forms of postretirement arrangements outside the
United States. Refer to Note 13.
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