文档介绍：1/19/06 06:00 am Page 837
CHAPTERSEVENTEEN
INVESTMENTS
Who’s in The Coca-pany (Coke) owns 36 percent of the shares of Coca-Cola Enterprises
(a . bottling business); PepsiCo Inc. owns 46 percent of The Pepsi Bottling Group
(PBG) and 41 percent of PepsiAmericas. These bottling businesses are very important
Control Here? to Coca-Cola and PepsiCo, because they are the primary distributors of Coke and Pepsi
products. In return, panies depend on Coca-Cola and PepsiCo to provide sig-
nificant marketing and distribution development support. Indeed, it can be said that Coca-
Cola and PepsiCo control the panies, who would not exist without their support.
However, because The Coca-pany and PepsiCo own less than 50 percent of
the shares in panies, they do not prepare consolidated financial statements.
Instead, Coca-Cola and PepsiCo account for these investments using the equity method.
Under the equity method, for example, Coca-Cola reports a single e item for its profits
from the bottlers, and only amount of its investment in the balance sheet.
Equity-method accounting gives Coca-Cola and PepsiCo pristine balance sheets and
e statements, by separating the assets and liabilities and the profit margins of these
bottlers from its beverage-making business. What’s more, the International Accounting Stan-
dards Board (IASB) has issued IAS No. 28 which requires panies use the equity
method. Previously, many panies were permitted to use either the equity
method or proportional consolidation for investments similar to Coke’s and Pepsi’s. It is good
news that both . and panies are following the same rules. (On negative
side, however, some of panies should be consolidated but are not.)
A final point: In response to a recent FASB interpretation, companies are now starting
to consolidate more 20 to 50 percent–owned investments. Consolidation of entities, such as
the Coke and Pepsi bottlers, may be required if the risks