[OpenSpending] Fwd: Coca-Cola's sweet financial bubble

Thu Dec 10 08:49:28 UTC 2015

Today I learned: some people, when bored, engage in corporate accounting.

---------- Forwarded message ----------
From: Khadija Sharife
Date: Thu, Dec 10, 2015 at 3:11 AM
Subject: Coca-Cola's sweet financial bubble
To: Khadija Sharife

Hi folks

If anyone is bored and has free reading time: a curiosity of the accounting
world:

Publicly accessible data in company reports can tell you quite a bit about
what is (or isn't) happening in a company's financial sheets.

Coca-Cola and other companies involved in tech, beverage, pharma etc derive
the bulk of their value from internally generated intangible capital, like
patents, trademarks and the like. But these assets are not logged on
balance sheets - save as expenses. Only acquired intangibles are logged.
So, if Coke bought Pepsi, only Pepsi would listed on Coke's balance sheet.

Simply put, there is no method to assess the veracity of expenses, paving
the way for gross transfer pricing abuse or manipulation between
subsidiaries of the same parent company.

In Coke's case, some $33 billion 'offshore' with about $11.5 billion in
avoided tax.

And market cap less net tangible assets shows that the company is
significantly dependent - over 95% - on these very same assets that don't
exist on paper.

The law, however, is on their side: the IASB confirms that internally
developed intangibles don't need to be logged nor do they see a need or an
audience (given that the only people reports are produced for, according to
IASB, are investors and the like).

A short analysis below (Coke declined to respond to most questions but the
IASB's Upton was kind enough to chat)...

https://100r.org/2015/12/trade-secrets-coca-colas-hidden-formula-for-avoiding-taxes-4/

Many thanks to the folks that helped think through it: Nick, Tiziana,
Heinrich and Len.

Khadija
ᐧ
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