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

Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENTS (Tables)

FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Assets and liabilities measured at fair value on a recurring basis

The following tables summarize those assets and liabilities measured at fair value on a recurring basis (in millions):



	December 31, 2019
	Level 1		Level 2			Level 3		Other³		Netting Adjustment			⁴	Fair Value Measurements
Assets:
Equity securities with readily determinable values¹	$	1,877	$	219		$	14	$	109	$	—			$	2,219
Debt securities¹	—		3,291			37		—		—				3,328
Derivatives²	9		579			—		—		(392		)	⁵	196			⁶
Total assets	$	1,886	$	4,089		$	51	$	109	$	(392	)		$	5,743
Liabilities:
Derivatives²	$	—	$	(162	)	$	—	$	—	$	130			$	(32	)	⁶
Total liabilities	$	—	$	(162	)	$	—	$	—	$	130			$	(32	)


¹	Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.


²	Refer to Note 6 for additional information related to the composition of our derivative portfolio.

³Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.

⁴Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There are no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 6.

⁵The Company is obligated to return $261 million in cash collateral it has netted against its derivative position.

⁶The Company's derivative financial instruments are recorded at fair value in our consolidated balance sheet as follows: $196 million in the line item other assets and $32 million in the line item other liabilities. Refer to Note 6 for additional information related to the composition of our derivative portfolio.



	December 31, 2018
	Level 1			Level 2			Level 3		Other³		Netting Adjustment			⁴	Fair Value Measurements
Assets:
Equity securities with readily determinable values¹	$	1,681		$	186		$	6	$	61	$	—			$	1,934
Debt securities¹	—			5,018			19		—		—				5,037
Derivatives²	2			313			—		—		(261		)	⁵	54			⁷
Total assets	$	1,683		$	5,517		$	25	$	61	$	(261	)		$	7,025
Liabilities:
Derivatives²	$	(14	)	$	(221	)	$	—	$	—	$	182		⁶	$	(53	)	⁷
Total liabilities	$	(14	)	$	(221	)	$	—	$	—	$	182			$	(53	)

¹Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.

²Refer to Note 6 for additional information related to the composition of our derivative portfolio.

⁵The Company is obligated to return $96 million in cash collateral it has netted against its derivative position.

⁶The Company has the right to reclaim $4 million in cash collateral it has netted against its derivative position.

⁷The Company's derivative financial instruments are recorded at fair value in our consolidated balance sheet as follows: $54 million in the line item other assets; $3 million in the line item accounts payable and accrued expenses; and $50 million in the line item other liabilities. Refer to Note 6 for additional information related to the composition of our derivative portfolio.

Assets measured at fair value on a nonrecurring basis

The gains and losses on assets measured at fair value on a nonrecurring basis are summarized in the following table (in millions):



	Gains (Losses)
Year Ended December 31,	2019				2018
Other-than-temporary impairment charges	$	(767	)	¹	$	(591	)	¹
CCBA asset adjustments	(160		)	²	(554		)	²
Investment in former equity method investee	(118		)	³	(32		)	³
Other long-lived asset impairment charges	—				(312		)	⁵
Intangible asset impairment charges	(42		)	⁴	(138		)	⁵
Total	$	(1,087	)		$	(1,627	)

During the year ended December 31, 2019, the Company recorded other-than-temporary impairment charges of $406 million related to CCBJHI, an equity method investee. Based on the extent to which the market value of our investment in CCBJHI has been less than our carrying value and the financial condition and near-term prospects of the issuer, management determined that the decline in fair value was other than temporary in nature. These impairment charges were determined using the quoted market prices (a Level 1 measurement) of CCBJHI. During the year ended December 31, 2019, we also recorded other-than-temporary impairment charges of $255 million related to certain equity method investees in the Middle East. These impairment charges were derived using Level 3 inputs and were primarily driven by revised projections of future operating results largely related to instability in the region and changes in local excise taxes. During the year ended December 31, 2019, we recorded an other-than-temporary impairment charge of $57 million related to one of our equity method investees in North America. This impairment charge was derived using Level 3 inputs and was primarily driven by revised projections of future operating results. During the year ended December 31, 2019, we also recorded an other-than-temporary impairment charge of $49 million related to one of our equity method investees in Latin America. This impairment charge was derived using Level 3 inputs and was primarily driven by revised projections of future operating results. During the year ended December 31, 2018, we recognized other-than-temporary impairment charges of $334 million related to certain equity method investees in the Middle East. These impairments were primarily driven by revised projections of future operating results largely related to instability in the region, which include sanctions imposed locally. During the year ended December 31, 2018, we recognized an other-than-temporary impairment charge of $205 million related to our equity method investee in Indonesia. This impairment was primarily driven by revised projections of future operating results reflecting unfavorable macroeconomic conditions and foreign currency exchange rate fluctuations. This impairment charge was derived using discounted cash flow analyses based on Level 3 inputs. During the year ended December 31, 2018, we recognized an other-than-temporary impairment charge of $52 million related to one of our equity method investees in Latin America. This impairment was primarily driven by revised projections of future operating results. This impairment charge was derived using discounted cash flow analyses based on Level 3 inputs.

²During the year ended December 31, 2018, the Company recorded an impairment charge of $554 million related to assets held by CCBA. This charge was incurred primarily as a result of management's view of the proceeds that were expected to be received upon the sale of CCBA based on revised projections of future operating results and foreign currency exchange rate fluctuations. The fair value of these assets was derived using discounted cash flow analyses based on Level 3 inputs. As a result of CCBA no longer being classified as held for sale, during the year ended December 31, 2019, the Company was required to measure CCBA's property, plant and equipment and definite-lived intangible assets at the lower of their current fair values or their carrying amounts before they were classified as held for sale, adjusted for depreciation and amortization expense that would have been recognized had the business been classified as held and used during the period that CCBA was classified as held for sale. As a result, we reduced the carrying value of CCBA's property, plant and equipment and definite-lived intangible assets by $34 million and $126 million, respectively, based on Level 3 inputs. Refer to Note 2.

³During the year ended December 31, 2019, the Company recognized a net loss of $118 million in conjunction with our acquisition of the remaining equity ownership interest in CHI, which included the remeasurement of our previously held equity interest in CHI to fair value and the reversal of the related cumulative translation adjustments. The fair value of this investment was derived using discounted cash flow analyses based on Level 3 inputs. During the year ended December 31, 2018, the Company recognized a loss of $32 million, which included the remeasurement of our previously held equity interest in the Philippine bottling operations to fair value and the reversal of the related cumulative translation adjustments. The fair value of our previously held equity investment was determined using a discounted cash flow model based on Level 3 inputs. Refer to Note 2.

⁴The Company recorded an impairment charge of $42 million related to a trademark in Asia Pacific, which was primarily driven by revised projections of future operating results for the trademark. The fair value of this trademark was derived using discounted cash flow analyses based on Level 3 inputs.

⁵The Company recognized charges of $312 million related to CCR's property, plant and equipment and $138 million related to CCR's intangible assets. These charges were a result of management's revised estimate of the proceeds that were expected to be received for the remaining bottling territories upon their refranchising. These charges were determined by comparing the fair value of the reporting unit, based on Level 3 inputs, to its carrying value.

Summary of the fair value of pension plan assets for U.S. and non-U.S. pension plans

ollowing table summarizes the levels within the fair value hierarchy for our pension plan assets (in millions):



	December 31, 2019												December 31, 2018
	Level 1		Level 2		Level 3			Other ¹			Total		Level 1		Level 2		Level 3			Other ¹			Total
Cash and cash equivalents	$	597	$	144	$	—		$	—		$	741	$	461	$	22	$	—		$	—		$	483
Equity securities:
U.S.-based companies	1,876		7		21			—			1,904		1,728		15		17			—			1,760
International-based companies	1,354		33		—			—			1,387		1,098		23		—			—			1,121
Fixed-income securities:
Government bonds	—		536		—			—			536		—		463		—			—			463
Corporate bonds and debt securities	—		924		40			—			964		—		819		16			—			835
Mutual, pooled and commingled funds	40		258		—			600		³	898		46		130		—			699		³	875
Hedge funds/limited partnerships	—		—		—			689		⁴	689		—		—		—			828		⁴	828
Real estate	—		—		—			342		⁵	342		—		—		—			391		⁵	391
Other	—		—		273		²	346		⁶	619		—		—		270		²	403		⁶	673
Total	$	3,867	$	1,902	$	334		$	1,977		$	8,080	$	3,333	$	1,472	$	303		$	2,321		$	7,429


¹	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 15.


²	Includes purchased annuity insurance contracts.


³	This class of assets includes actively managed emerging markets equity funds and a collective trust fund for qualified plans, invested primarily in equity securities of companies in developed and emerging markets. There are no liquidity restrictions on these investments.

⁴

This class of assets includes hedge funds that can be subject to redemption restrictions, ranging from monthly to semi-annually, with a redemption notice period of up to 180 days and/or initial lock-up periods of up to one year, and private equity funds that are primarily closed-end funds in which the Company's investments are generally not eligible for redemption. Distributions from these private equity funds will be received as the underlying assets are liquidated or distributed.

⁵

This class of assets includes funds invested in real estate, including a privately held real estate investment trust, a real estate commingled pension trust fund, infrastructure limited partnerships and commingled investment funds. These funds seek current income and capital appreciation through the investments and can be subject to redemption restrictions, ranging from quarterly to semi-annually, with a redemption notice period of up to 90 days.


⁶	This class of assets includes segregated portfolios of private investment funds that are invested in a portfolio of insurance-linked securities. These assets can be subject to a semi-annual redemption, with a redemption notice period of 90 days, subject to certain gate restrictions.

Reconciliation of the beginning and ending balance of Level 3 assets for U.S. and non-U.S. pension plans

ollowing table provides a reconciliation of the beginning and ending balance of Level 3 assets for our U.S. and non-U.S. pension plans (in millions):



	Equity Securities			Fixed-Income Securities			Real Estate			Other				Total
2018
Balance at beginning of year	$	14		$	24		$	2		$	263			$	303
Actual return on plan assets held at the reporting date	(2		)	(1		)	—			19				16
Purchases, sales and settlements — net	3			(7		)	(2		)	1				(5		)
Transfers into (out of) Level 3 — net	2			—			—			—				2
Foreign currency translation adjustments	—			—			—			(13		)		(13		)
Balance at end of year	$	17		$	16		$	—		$	270		¹	$	303
2019
Actual return on plan assets held at the reporting date	1			—			—			10				11
Purchases, sales and settlements — net	1			21			—			1				23
Transfers into (out of) Level 3 — net	2			3			—			—				5
Foreign currency translation adjustments	—			—			—			(8		)		(8		)
Balance at end of year	$	21		$	40		$	—		$	273		¹	$	334

Includes purchased annuity insurance contracts.

Summary of the fair value of postretirement benefit plan assets

ollowing table summarizes the levels within the fair value hierarchy for our other postretirement benefit plan assets (in millions):



	December 31, 2019								December 31, 2018
	Level 1		Level 2		Other ¹		Total		Level 1		Level 2		Other ¹		Total
Cash and cash equivalents	$	56	$	1	$	—	$	57	$	73	$	—	$	—	$	73
Equity securities:
U.S.-based companies	124		—		—		124		93		—		—		93
International-based companies	9		—		—		9		7		—		—		7
Fixed-income securities:
Government bonds	—		3		—		3		—		2		—		2
Corporate bonds and debt securities	—		47		—		47		—		16		—		16
Mutual, pooled and commingled funds	—		2		82		84		—		—		82		82
Hedge funds/limited partnerships	—		—		7		7		—		—		8		8
Real estate	—		—		4		4		—		—		4		4
Other	—		—		4		4		—		—		4		4
Total	$	189	$	53	$	97	$	339	$	173	$	18	$	98	$	289


¹	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 15.