Introduction
The Coca-Cola Company is a corporation with several branches responsible for different products. To analyze information about its business’s annual development, Coca-Cola uses 10-K forms that include data on all business ventures that occurred during the past year. Equity method investments are one of the most significant economic success factors as they increase the corporation’s value and possibilities for influencing investees’ decisions.
Coca-Cola’s Application of the Equity Method
Coca-Cola considers large companies that provide new ways to cooperate with the market significant equity method investments. As of 2022, the company uses this technique in relationships with “CCEP; Monster; AC Bebidas, S. de R.L. de C.V.; Coca-Cola FEMSA, S.A.B. de C.V.; Coca-Cola HBC AG; and Coca-Cola Bottlers Japan Holdings Inc. (“CCBJHI”)” (The Coca-Cola Company, 2023).
The shares guarantee a portion of the income and control over future development in the listed entities for the duration of the contract. The fair value and possible influence on the investees are measured to evaluate if the investees suit the equity method. Some aspects, like representation on the board of directors, ability to participate in decision-making, and ownership interest, increase the possibility for the company to be suitable for the equity method.
Reported Equity Income of Coca-Cola
Economically, this method shows excellent results for both sides of the contract. The operating income is $9,719 million, $630 million more than in 2021. The equity method records net investments in investees instead of counting all the assets and liabilities as total gross. Thus, the proportionate shares are included in the total, consolidating the net income.
The reports include such terms as fair value and book value. Fair value is adjusted to the current market prices and shows the asset’s temporary value. Book value is the historical value recorded in the books, which is used in case of bankruptcy. Therefore, equity method investments greatly affect the company’s fair value.
Conclusion
In conclusion, the equity method investment is an excellent tactic for a big company to increase its value while gaining new techniques to influence the investee companies. It provides more freedom to change the number of shares and redirect the development to the most usable state. The 10-K report shows that the Coca-Cola Company successfully uses it in its business to benefit its income.
Reference
The Coca-Cola Company. (2023). Annual filings (10-K). The Coca-Cola Company. Web.