The Coca-Cola Company Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INVESTMENTS

INVESTMENTS

12 Months Ended

Dec. 31, 2011

Investments in debt and marketable securities, other than investments accounted for under the equity method, are classified as trading, available-for-sale or held-to-maturity. Our marketable equity investments are classified as either trading or available-for-sale with their cost basis determined by the specific identification method. Realized and unrealized gains and losses on trading securities and realized gains and losses on available-for-sale securities are included in net income. Unrealized gains and losses, net of deferred taxes, on available-for-sale securities are included in our consolidated balance sheets as a component of AOCI.

Our investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale.

Trading Securities

As of December 31, 2011 and 2010, our trading securities had a fair value of $211 million and $209 million, respectively. The Company had net unrealized losses on trading securities of $5 million, $3 million and $16 million as of December 31, 2011, 2010 and 2009, respectively. The Company's trading securities were included in the following captions in our consolidated balance sheets (in millions):



December 31,	2011		2010
Marketable securities	$	138	$	132
Other assets	73		77
Total trading securities	$	211	$	209

Available-for-Sale and Held-to-Maturity Securities

As of December 31, 2011 and 2010, available-for-sale and held-to-maturity securities consisted of the following (in millions):



			Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
2011
Available-for-sale securities:^1,2
Equity securities	$	834	$	237	$	—		$	1,071
Debt securities	332		1		(3		)	330
	$	1,166	$	238	$	(3	)	$	1,401
Held-to-maturity securities:
Bank and corporate debt	$	113	$	—	$	—		$	113
2010
Available-for-sale securities:¹
Equity securities	$	209	$	267	$	(5	)	$	471
Debt securities	14		—		—			14
	$	223	$	267	$	(5	)	$	485
Held-to-maturity securities:
Bank and corporate debt	$	111	$	—	$	—		$	111


¹	Refer to Note 16 for additional information related to the estimated fair value.


²	During 2011, the balance of available-for-sale securities increased significantly, primarily due to long-term investments made by our captive insurance company and an investment in Arca Continental, S.A.B. de C.V. ("Arca Contal"). Refer to Note 17 for a discussion of the Arca Contal transaction.

In 2011, the Company divested certain available-for-sale securities. These divestitures resulted in cash proceeds of $37 million, gross realized gains of $5 million and gross realized losses of $1 million. In addition to the sale of available-for-sale securities, the Company also had investments classified as available-for-sale securities in which our cost basis exceeded the fair value of our investment. Management assessed each of these investments on an individual basis to determine if the decline in fair value was other than temporary. Management's assessment as to the nature of a decline in fair value is based on, among other things, the length of time and the extent to which the market value has been less than our cost basis; the financial condition and near-term prospects of the issuer; and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value. Based on these assessments, management determined that the decline in fair value of certain investments was other than temporary. As a result, the Company recognized other-than-temporary impairment charges of $17 million. These impairment charges were recorded in other income (loss) — net. Refer to Note 16 and Note 17.

In 2010, the Company had several investments classified as available-for-sale securities in which our cost basis exceeded the fair value of the investment. Management assessed each of these investments on an individual basis to determine if the decline in fair value was other than temporary. Based on these assessments, management determined that the decline in fair value of certain investments was other than temporary. As a result, the Company recognized other-than-temporary impairment charges of $26 million. These impairment charges were recorded in other income (loss) — net. Refer to Note 16 and Note 17. The Company did not sell any available-for-sale securities during 2010.

In 2009, the Company divested certain available-for-sale securities. These divestitures were the result of both sales and a charitable donation. The sales of available-for-sale securities resulted in cash proceeds of $157 million, gross realized gains of $44 million and gross realized losses of $2 million. In addition to the sale of available-for-sale securities, the Company donated certain available-for-sale securities to The Coca-Cola Foundation. The donated investments had a cost basis of $7 million and a fair value of $106 million at the date of donation. The net impact of this donation was an expense equal to our cost basis in the securities, which was recorded in other income (loss) — net.

The Company's available-for-sale and held-to-maturity securities were included in the following captions in our consolidated balance sheets (in millions):



	December 31, 2011				December 31, 2010
	Available- for-Sale Securities		Held-to- Maturity Securities		Available- for-Sale Securities		Held-to- Maturity Securities
Cash and cash equivalents	$	—	$	112	$	—	$	110
Marketable securities	5		1		5		1
Other investments, principally bottling companies	986		—		471		—
Other assets	410		—		9		—
	$	1,401	$	113	$	485	$	111

The contractual maturities of these investments as of December 31, 2011, were as follows (in millions):



	Available-for-Sale Securities				Held-to-Maturity Securities
	Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	$	5	$	5	$	113	$	113
After 1 year through 5 years	32		32		—		—
After 5 years through 10 years	191		191		—		—
After 10 years	104		102		—		—
Equity securities	834		1,071		—		—
	$	1,166	$	1,401	$	113	$	113

The Company expects that actual maturities may differ from the contractual maturities above because borrowers have the right to call or prepay certain obligations.

Cost Method Investments

Cost method investments are originally recorded at cost, and we record dividend income when applicable dividends are declared. Cost method investments are reported as other investments in our consolidated balance sheets, and dividend income from cost method investments is reported in other income (loss) — net in our consolidated statements of income. We review all of our cost method investments quarterly to determine if impairment indicators are present; however, we are not required to determine the fair value of these investments unless impairment indicators exist. When impairment indicators exist, we generally use discounted cash flow analyses to determine the fair value. We estimate that the fair values of our cost method investments approximated or exceeded their carrying values as of December 31, 2011 and 2010. Our cost method investments had a carrying value of $155 million and $160 million as of December 31, 2011 and 2010, respectively.

In 2009, the Company recorded a charge of $27 million in other income (loss) — net as a result of an other-than-temporary decline in the fair value of a cost method investment. Refer to Note 16 and Note 17 for additional information related to this impairment.