Yihao Zhao(Jacky)
1. What happens when the Company sells its interest in a bottling operation to a bottling
partner?
The Company continues to participate in the bottler’s results of operations through
company’s share of the equity method investee’s earnings or losses. (P7)
2. Why does the Company make equity investments in non-controlling interest in bottling
operations?
Because it can lead to increases in unit case volume, net revenues and profits at the bottler
level, which in turn generate increased sales for Coca- Cola Company’s, concentrate business.
(P7)
3. When does the company account for an investment using the equity method of accounting
and what are the key factors in determining the level of influence over each equity method
investee?
At the point when Coca-Cola organization’s value venture furnishes them with the capacity to
practice noteworthy impact over the investee bottler’s working and budgetary approaches, the
company account for an investment using the equity method of accounting. And the key
factors in determining the level of influence over each equity method investee are Company’s
ownership interest, representation on the board of directors, participation in policy-making
decisions, other commercial arrangements and material intercompany transactions. (P34)
4. According to FASB ASC 810-10-10-1, what is the purpose of consolidated financial
statements?
According to FASB ASC 810-10-10-1, the purpose of consolidated financial is to present,
primarily for the benefit of the owners and creditors of the parent, the results of operations
and the financial position of a parent and all its subsidiaries as if the consolidated group were
a single economic entity. (Textbook P156)
5. What are the criteria as to which entities are consolidated?
The criteria as to which entities are consolidated are control by ownership of a majority
voting interest and the usual condition of consolidation (ownership of a majority voting
interest) does not apply. (P33)
6. What is a variable interest entity (VIE) and when must it be consolidated?
Yihao Zhao(Jacky)
A variable interest entity (VIE) is a term utilized by the United States Financial Accounting
Standards Board (FASB) in FIN 46 to allude to a substance (the investee) in which the
speculator holds a controlling premium that did not depend on the larger part of casting a
ballot rights. If it is determined to be the primary beneficiary of the VIE, it must be
consolidated. ( Textbook P167)
7. What are the three methods for determining the carrying values of investments in equity
securities?
The equity method, the cost method or the fair value method are the three methods for
determining the carrying values of investments in equity securities. (P34)
8. When will the Company adopt FASB ASU 2016-01? What changes are required as a result
of this ASU?
The Company will adopt FASB ASU 2016-01 in January 1, 2018.The changes are required as
a result of this ASU are recognize any changes in the fair value of certain equity investments
in net income. These changes are currently recognized in other comprehensive income. (P86)
