Coca-Cola Co. (KO)

Coca-Cola classifies intangible assets into three categories: (1) intangible assets with definite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. Coca-Cola determines the useful lives of the identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors Coca-Cola considers when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, Coca-Cola’s long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have definite lives are amortized, primarily on a straight-line basis, over their useful lives, generally ranging from 1 to 20 years.

When facts and circumstances indicate that the carrying value of definite-lived intangible assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of sales volume and the resulting profit and cash flows expected to result from the use of the asset or asset group and its eventual disposition. These estimated future cash flows are consistent with those Coca-Cola uses in the internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, Coca-Cola recognizes an impairment loss. The impairment loss recognized is the amount by which the carrying amount of the asset or asset group exceeds the fair value. Coca-Cola uses a variety of methodologies to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions Coca-Cola believes hypothetical marketplace participants would use.

Coca-Cola tests intangible assets determined to have indefinite useful lives, including trademarks, franchise rights and goodwill, for impairment annually, or more frequently if events or circumstances indicate that assets might be impaired. Coca-Cola performs these annual impairment tests as of the first day of the third fiscal quarter. Coca-Cola uses a variety of methodologies in conducting impairment assessments of indefinite-lived intangible assets, including, but not limited to, discounted cash flow models, which are based on the assumptions Coca-Cola believes hypothetical marketplace participants would use. For indefinite-lived intangible assets, other than goodwill, if the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess. Coca-Cola has the option to perform a qualitative assessment of indefinite-lived intangible assets, other than goodwill, rather than completing the impairment test. Coca-Cola must assesses whether it is more likely than not that the fair value of the intangible asset is less than its carrying amount. If Coca-Cola concludes that this is the case, it must perform the testing described above. Otherwise, Coca-Cola does not need to perform any further assessment.

Coca-Cola performs impairment tests of goodwill at the reporting unit level, which is one level below the operating segments. Coca-Cola’s operating segments are primarily based on geographic responsibility, which is consistent with the way management runs the business. The operating segments are subdivided into smaller geographic regions or territories that Coca-Cola sometimes refers to as "business units." These business units are also Coca-Cola’s reporting units. The Bottling Investments operating segment includes all Company-owned or consolidated bottling operations, regardless of geographic location. Generally, each Company-owned or consolidated bottling operation within Coca-Cola’s 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.

In order to test for goodwill impairment, Coca-Cola compares the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is lower than its carrying amount, goodwill is written down for the amount by which the carrying amount exceeds the fair value. However, the loss recognized cannot exceed the carrying amount of goodwill. Coca-Cola typically uses discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those Coca-Cola believes a hypothetical marketplace participant would use. Coca-Cola has the option to perform a qualitative assessment of goodwill in order 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 Coca-Cola concludes that this is the case, it must perform the testing discussed above. Otherwise, Coca-Cola does not need to perform any further testing.

Impairment charges related to intangible assets, including goodwill, 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 Coca-Cola’s consolidated statements of income.

Source: 10-K (filing date: 2019-02-21).

Coca-Cola Co., Statement of Financial Position, Goodwill and Intangible Assets

US$ in millions

		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Trademarks
	Bottlers’ franchise rights
	Goodwill
	Other
	Indefinite-lived intangible assets
	Customer relationships
	Bottlers’ franchise rights
	Trademarks
	Other
	Definite-lived intangible assets, gross carrying amount
	Accumulated amortization
	Definite-lived intangible assets, net
	Intangible assets

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

Coca-Cola Co., adjustments to financial data

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Equity Attributable To Shareowners Of The Coca-Cola Company
	Equity attributable to shareowners of The Coca-Cola Company (as reported)
	Less: Goodwill
	Equity attributable to shareowners of The Coca-Cola Company (adjusted)
	Adjustment to Net Income Attributable To Shareowners Of The Coca-Cola Company
	Net income attributable to shareowners of The Coca-Cola Company (as reported)
	Add: Goodwill impairment
	Net income attributable to shareowners of The Coca-Cola Company (adjusted)

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

Coca-Cola Co., Financial Data: Reported vs. Adjusted

Coca-Cola Co., adjusted ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

Coca-Cola Co., Ratios: Reported vs. Adjusted

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to shareowners of The Coca-Cola Company
	Net operating revenues
	Ratio
	Net profit margin1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted net income attributable to shareowners of The Coca-Cola Company
	Net operating revenues
	Ratio
	Adjusted net profit margin2

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

2018 Calculations

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net operating revenues
	Total assets
	Ratio
	Total asset turnover1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net operating revenues
	Adjusted total assets
	Ratio
	Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

2018 Calculations

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Equity attributable to shareowners of The Coca-Cola Company
	Ratio
	Financial leverage1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted equity attributable to shareowners of The Coca-Cola Company
	Ratio
	Adjusted financial leverage2

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

2018 Calculations

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to shareowners of The Coca-Cola Company
	Equity attributable to shareowners of The Coca-Cola Company
	Ratio
	ROE1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted net income attributable to shareowners of The Coca-Cola Company
	Adjusted equity attributable to shareowners of The Coca-Cola Company
	Ratio
	Adjusted ROE2

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

2018 Calculations

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to shareowners of The Coca-Cola Company
	Total assets
	Ratio
	ROA1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted net income attributable to shareowners of The Coca-Cola Company
	Adjusted total assets
	Ratio
	Adjusted ROA2

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

2018 Calculations