Coca Cola 2015 Annual Report Download - page 92

The Monster Transaction consisted of multiple elements including the purchase of common stock, the acquisition and divestiture of businesses and the
expansion of distribution territories. When consideration transferred is not solely in the form of cash, measurement is based on either the cost to the acquiring
entity (the fair value of the assets given) or the fair value of the assets acquired, whichever is more clearly evident and, thus, more reliably measurable. As the
majority of the consideration transferred was cash, we believe the fair value of the consideration transferred is more reliably measurable. The consideration
transferred consists of $2,150 million of cash (including $125 million in escrow) and the fair value of our global energy business of $2,046 million, which we
determined using discounted cash flow analyses, resulting in total consideration transferred of $4,196 million. As such, we have allocated the total
consideration transferred to the individual assets and business acquired based on a relative fair value basis, using the closing date fair values of each element,
as follows (in millions):
June 12, 2015
Equity investment in Monster $ 3,066
Expansion of distribution territories 1,035
Monster non-energy drink business 95
Total assets and business acquired $ 4,196
In addition to our ownership interest in Monster's outstanding common stock, the Company is represented by two directors on Monster's 10 member Board of
Directors. Based on our equity ownership percentage, the significance that our expanded distribution and coordination agreements have on Monster's
operations, and our representation on Monster's Board of Directors, the Company is accounting for its interest in Monster as an equity method investment.
As a result of the Monster Transaction, the North America Coca-Cola system obtained the right to distribute Monster products in territories for which it was
not previously the authorized distributor ("expanded territories"). These distribution rights are governed by an agreement with an initial term of 20 years,
after which it will continue to remain in effect unless otherwise terminated by either party and there are no future costs of renewal. As such, these rights were
determined to be indefinite-lived intangible assets and are classified in the line item bottlers' franchise rights with indefinite lives in our consolidated balance
sheet. CCR is the distributor in the majority of the expanded territories. The remainder of the territories are serviced by independent bottling partners. Of the
$1,035 million allocated to the expanded distribution rights, the Company derecognized $341 million related to the expanded territories serviced by the
independent bottling partners upon the close of the transaction. As consideration for these rights, the Company received an up-front payment of $28 million
related to these territories, and we will receive a payment per case on all future sales made by these independent bottlers for the duration of the distribution
agreements. As these payments are dependent on future sales, they are a form of contingent consideration. We elected to account for this consideration in the
same manner as the contingent consideration to be received in the North America refranchising, discussed below. This resulted in a net loss of $313 million
recorded in the line item other income (loss) — net in our consolidated statement of income during the year ended December 31, 2015.
During the year ended December 31, 2015, the Company recognized a gain of $1,715 million on the sale of our global energy drink business, primarily due
to the difference in the recorded carrying value of the assets transferred, including an allocated portion of goodwill, compared to the value of the total assets
and business acquired. After considering the loss resulting from the derecognition of the expanded territory rights serviced by the independent bottling
partners, the net gain recognized on the Monster Transaction was $1,403 million, which was recorded in the line item other income (loss) — net in our
consolidated statement of income. Additionally, under the terms of the Monster Transaction, we were required to discontinue selling energy products under
certain trademarks, including one trademark in the glacéau portfolio. The Company recognized an impairment charge of $380 million upon closing,
primarily related to the discontinuation of the energy products in the glacéau portfolio, which was recorded in the line item other operating charges in our
consolidated statement of income.
During the year ended December 31, 2015, based on the relative fair values of the total assets and business acquired, $1,620 million of the $2,150 million
cash payment made was classified in the line item acquisitions of businesses, equity method investments and nonmarketable securities in our consolidated
statement of cash flows. The remaining $530 million was classified in the line item other investing activities in our consolidated statement of cash flows.
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