Coca Cola Accounting Cycle Essay Example

assets while shipping and handling costs are recorded as cost of goods sold. Time deposits and other investment that are highly liquid and have a maturity of three months or less are considered cash equivalents as well as short-term maturities of more than three month but less than a year.

The company uses “the equity method to account for investments in companies if their investment provides them with the ability to exercise significant influence over operating and financial policies of the investee” (The Coca-Cola Company, 2010, p. 39). The cost method is used when the company does not have controlling interest or account for with the equity method and record dividends when dividends are declared. Debt securities are recorded as amortized or at fair value.

Trade accounts receivable are recorded at net realizable value and the value includes allowances for anticipated uncollectable accounts which are charged to doubtful accounts. Inventory is recorded at cost and the cost is determined by average or first-in first-out methods. When appropriate the uses derivatives as a risk management tool for potential uncertainties in the market such as foreign currency exchange rates, commodity prices, and interest rates. Derivatives are recorded as prepaid expenses, other assets, accounts payable, or accrued expenses as necessary.

Property, plant, and equipment are record at cost and the straight-line method is used for estimated useful life of the assets. The company offers stock options and stock awards plans which are recognized as a “compensation expense on a straight-line basis over the period the award is earned by the employee” (The Coca-Cola Company, 2010, p. 99). Internal Controls Management is responsible for establishing and

maintaining internal controls over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.

Coca-Cola employs an Audit Committee who meets with independent auditors, management, and internal auditors to discuss accounting procedure and reviews reports. In addition meetings are held without management to ensure that the independent auditors and chief internal auditors have full access to the Audit Committee. The company also employs and independent public accounting firm to conduct audits. Conclusion The Coca-Cola Company is a global company with the world’s largest beverage distribution system.

Because the company has a global network it consolidates its financial statements and uses two methods of accounting equity and cost methods. Equity method is used when Coca-Cola has controlling interest or influence over operations of an entity. The cost method is used when the company does not have controlling interest or influence or when the company is selling finished product. Internal controls for accounting procedures are taken very seriously and uses procedures and committees internally and externally to ensure that all rules and regulations for accounting are followed.