COCA-COLA COMPANY VERSUS PEPSICO, INC.

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Coca-Cola Company versus PepsiCo, Inc.
John Simpson
Professor Susan Lightweis
Intermediate Accounting III
November 17th, 2011








COCA-COLA COMPANY VERSUS PEPSICO, INC. 2

1. Compare the pension plans of Coca-Cola and PepsiCo, including type of plan and
funded status at 2007 year-end.
Coca-Cola sponsors and/or contributes to pension plans covering substantially all U.S.
employees and certain employees in international locations. Coca-Cola also sponsors
nonqualified, unfunded defined benefit plans for certain officers and other employees.
PepsiCo sponsors noncontributory defined benefit pension plans covering substantially
all full-time U.S. employees and certain international employees. 2007 Funded Status
($millions) Pensions OPEB Coca-Cola ($ 89) ($ 192) PepsiCo ($266) ($1,354)
2. Calculate the relevant rates that were used by Coca-Cola and PepsiCo in computing
their pension amounts.
Relevant rates used to compute pension information:
Coca-Cola PepsiCo
Discount rate (expense) 5.5% 5.8%
Rate of increase in compensation levels 4.25% 4.7%
Expected long-term rate of return on plan
assets 7.75% 7.8%


3. Compare and contrast three classifications within net income and illustrate with an
example of each.
COCA-COLA COMPANY VERSUS PEPSICO, INC. 3

Three classifications within net income are income from continuing operations, income
from discontinued operations, and extraordinary items. Income from continuing
operations includes sales and revenues, cost of goods sold, selling expenses and
administrative expenses. The following is an example:
Net Sales $500,000
Cost of goods sold 120,000
Gross Profit 380,000
Operating expenses
Selling expenses $15,000
Administrative expenses 10,000 25,000
Income from continuing operations 355,000

Income from discontinued operations occurs when a company eliminates the results of
operations and cash flows of a component from its ongoing operations and when there is
no significant continuing involvement in that component after the disposal transaction.
The following is an example:
Income from continuing operations $355,000
Discontinued operations
Gain from disposal of business segment 65,000
Loss from operations of discontinued
business segment 12,000 53,000
Income before extraordinary item 408,000

Extraordinary items are events and transactions that are distinguished by their unusual
nature and by the infrequency of their occurrence. They must meet both criteria to be
considered an extraordinary item. The following is an example:
Income before extraordinary item $408,000
Extraordinary item
Loss from a flood 150,000
Net Income $258,000

COCA-COLA COMPANY VERSUS PEPSICO, INC. 4

4. Compare and contrast three classifications within other comprehensive income and
illustrate with an example of each.
Items included in other comprehensive income shall be classified based on their nature.
For example, under existing accounting standards, other comprehensive income shall be
classified separately into foreign currency items, minimum pension liability adjustments,
and unrealized gains and losses on certain investments in debt and equity securities.
Additional classifications or additional items within current classifications may result
from future accounting standards. The following is an example:
Net income 63,250
Other comprehensive income, net of
tax:
Foreign currency translation 8,000
adjustments
Unrealized gains on securities
Unrealized holding gains arising $ 13,000
during period
Less: reclassification (1,500) 11,500
adjustment for gains included
in net income
Minimum pension liability (2,500)
adjustment\c/
Other comprehensive income 17,000
Comprehensive income $ 80,250