Summary
The Coca-Cola Company (KO) filed an 8-K on April 3, 2018, to disclose two significant accounting and reporting changes effective January 1, 2018. The first change involves reclassifying certain revenue streams and related costs of goods sold from the Bottling Investments operating segment to the North America operating segment. This internal reclassification aims to provide a more accurate operational view of the North America segment's performance. Investors should note this is a presentation change and does not impact the overall consolidated financial results of the company, but it will affect segment reporting going forward. The second key change is the adoption of Accounting Standards Update (ASU) 2017-07, which impacts the presentation of net periodic pension cost and net periodic postretirement benefit cost. Under this new standard, the non-service cost components of these benefit plans, along with certain other benefit plan and curtailment charges, have been moved from operating income to 'other income (loss) – net' in the income statement. This change will result in a restatement of prior periods and affects the calculation of operating income and net income, potentially impacting key operating metrics. Attached is Exhibit 99.1 with unaudited reclassified data reflecting these changes.
Key Highlights
- 1Reclassification of revenue and COGS: Certain items moved from Bottling Investments to North America operating segments.
- 2Impact on segment reporting: North America segment results will now include previously reported Bottling Investments' revenue and COGS.
- 3Adoption of ASU 2017-07: Changes presentation of pension and postretirement benefit costs.
- 4Pension/Benefit costs moved below operating income: Non-service cost components of net periodic pension and postretirement benefit costs now reported in 'other income (loss) – net'.
- 5Retrospective application: ASU 2017-07 requires retrospective application, meaning prior period financial statements will be restated.
- 6Unaudited reclassified data provided: Exhibit 99.1 contains a schedule reflecting these accounting changes.
- 7No impact on consolidated financials: These are presentation and classification changes, not affecting the overall financial health or consolidated results.