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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2022
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to                                     
Commission File Number 001-02217
ko-20220401_g1.jpg
COCA COLA CO
(Exact name of Registrant as specified in its charter)
Delaware 58-0628465
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
One Coca-Cola Plaza
AtlantaGeorgia30313
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (404) 676-2121
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.25 Par ValueKONew York Stock Exchange
0.500% Notes Due 2024KO24New York Stock Exchange
1.875% Notes Due 2026KO26New York Stock Exchange
0.750% Notes Due 2026KO26CNew York Stock Exchange
1.125% Notes Due 2027KO27New York Stock Exchange
0.125% Notes Due 2029KO29ANew York Stock Exchange
0.125% Notes Due 2029KO29BNew York Stock Exchange
0.400% Notes Due 2030KO30BNew York Stock Exchange
1.250% Notes Due 2031KO31New York Stock Exchange
0.375% Notes Due 2033KO33New York Stock Exchange
0.500% Notes Due 2033KO33ANew York Stock Exchange
1.625% Notes Due 2035KO35New York Stock Exchange
1.100% Notes Due 2036KO36New York Stock Exchange
0.950% Notes Due 2036KO36ANew York Stock Exchange
0.800% Notes Due 2040KO40BNew York Stock Exchange
1.000% Notes Due 2041KO41New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes     No 



Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes     No 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
Class of Common Stock  Shares Outstanding as of April 26, 2022
$0.25 Par Value 4,335,028,727




THE COCA-COLA COMPANY AND SUBSIDIARIES
Table of Contents
  Page
 
 



FORWARD-LOOKING STATEMENTS
This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to volume growth, share of sales and earnings per share growth, and statements expressing general views about future operating results — are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause our Company’s actual results to differ materially from historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, the possibility that the assumptions used to calculate our estimated aggregate incremental tax and interest liability related to the potential unfavorable outcome of the ongoing tax dispute with the U.S. Internal Revenue Service could significantly change; those described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2021; and those described from time to time in our future reports filed with the Securities and Exchange Commission.
1


Part I. Financial Information
Item 1. Financial Statements
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions except per share data)
Three Months Ended
April 1,
2022
April 2,
2021
Net Operating Revenues$10,491 $9,020 
Cost of goods sold4,091 3,505 
Gross Profit6,400 5,515 
Selling, general and administrative expenses2,967 2,669 
Other operating charges28 124 
Operating Income3,405 2,722 
Interest income78 66 
Interest expense182 442 
Equity income (loss) — net262 279 
Other income (loss) — net(105)138 
Income Before Income Taxes3,458 2,763 
Income taxes 665 508 
Consolidated Net Income2,793 2,255 
Less: Net income (loss) attributable to noncontrolling interests12 10 
Net Income Attributable to Shareowners of The Coca-Cola Company$2,781 $2,245 
Basic Net Income Per Share1
$0.64 $0.52 
Diluted Net Income Per Share1
$0.64 $0.52 
Average Shares Outstanding — Basic4,332 4,307 
Effect of dilutive securities25 23 
Average Shares Outstanding — Diluted4,357 4,330 
1 Calculated based on net income attributable to shareowners of The Coca-Cola Company.
Refer to Notes to Consolidated Financial Statements.


2


THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Three Months Ended
April 1,
2022
April 2,
2021
Consolidated Net Income$2,793 $2,255 
Other Comprehensive Income:
Net foreign currency translation adjustments1,009 4 
Net gains (losses) on derivatives64 104 
 Net change in unrealized gains (losses) on available-for-sale debt securities(35)(60)
Net change in pension and other postretirement benefit liabilities85 420 
Total Comprehensive Income3,916 2,723 
Less: Comprehensive income (loss) attributable to noncontrolling interests
145 10 
Total Comprehensive Income Attributable to Shareowners of The Coca-Cola Company$3,771 $2,713 
Refer to Notes to Consolidated Financial Statements.



3


THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions except par value)
April 1,
2022
December 31,
2021
ASSETS
Current Assets 
Cash and cash equivalents$7,681 $9,684 
Short-term investments736 1,242 
Total Cash, Cash Equivalents and Short-Term Investments8,417 10,926 
Marketable securities1,939 1,699 
Trade accounts receivable, less allowances of $512 and $516, respectively
4,641 3,512 
Inventories3,741 3,414 
Prepaid expenses and other current assets3,418 2,994 
Total Current Assets22,156 22,545 
Equity method investments18,198 17,598 
Other investments788 818 
Other noncurrent assets6,392 6,731 
Deferred income tax assets2,006 2,129 
Property, plant and equipment, less accumulated depreciation of $9,104 and $8,942, respectively
9,784 9,920 
Trademarks with indefinite lives14,388 14,465 
Goodwill19,598 19,363 
Other intangible assets754 785 
Total Assets$94,064 $94,354 
LIABILITIES AND EQUITY
Current Liabilities  
Accounts payable and accrued expenses$13,272 $14,619 
Loans and notes payable3,610 3,307 
Current maturities of long-term debt1,039 1,338 
Accrued income taxes866 686 
Total Current Liabilities18,787 19,950 
Long-term debt37,052 38,116 
Other noncurrent liabilities8,252 8,607 
Deferred income tax liabilities3,132 2,821 
The Coca-Cola Company Shareowners’ Equity  
Common stock, $0.25 par value; authorized — 11,200 shares; issued — 7,040 shares
1,760 1,760 
Capital surplus18,388 18,116 
Reinvested earnings69,969 69,094 
Accumulated other comprehensive income (loss)(13,340)(14,330)
Treasury stock, at cost — 2,709 and 2,715 shares, respectively
(51,932)(51,641)
Equity Attributable to Shareowners of The Coca-Cola Company24,845 22,999 
Equity attributable to noncontrolling interests1,996 1,861 
Total Equity26,841 24,860 
Total Liabilities and Equity$94,064 $94,354 
Refer to Notes to Consolidated Financial Statements.
4


THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 Three Months Ended
 April 1,
2022
April 2,
2021
Operating Activities  
Consolidated net income$2,793 $2,255 
Depreciation and amortization324 366 
Stock-based compensation expense87 58 
Deferred income taxes41 377 
Equity (income) loss — net of dividends(247)(250)
Foreign currency adjustments100 (20)
Significant (gains) losses — net25 1 
Other operating charges38 69 
Other items(70)157 
Net change in operating assets and liabilities(2,468)(1,377)
Net Cash Provided by Operating Activities623 1,636 
Investing Activities  
Purchases of investments(835)(1,466)
Proceeds from disposals of investments1,323 1,375 
Acquisitions of businesses, equity method investments and nonmarketable securities(5)(4)
Proceeds from disposals of businesses, equity method investments and nonmarketable securities218 2 
Purchases of property, plant and equipment(217)(216)
Proceeds from disposals of property, plant and equipment16 11 
Other investing activities(354)17 
Net Cash Provided by (Used in) Investing Activities146 (281)
Financing Activities 
Issuances of debt1,052 5,588 
Payments of debt(1,045)(3,044)
Issuances of stock449 183 
Purchases of stock for treasury(546)(104)
Dividends(1,906)(1,810)
Other financing activities(979)(449)
Net Cash Provided by (Used in) Financing Activities(2,975)364 
Effect of Exchange Rate Changes on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
173 (18)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period(2,033)1,701 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period10,025 7,110 
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents at End of Period7,992 8,811 
Less: Restricted cash and restricted cash equivalents at end of period311 327 
Cash and Cash Equivalents at End of Period$7,681 $8,484 
Refer to Notes to Consolidated Financial Statements.

5



THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by U.S. GAAP for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K of The Coca-Cola Company for the year ended December 31, 2021.
When used in these notes, the terms “The Coca-Cola Company,” “Company,” “we,” “us” and “our” mean The Coca-Cola Company and all entities included in our consolidated financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended April 1, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. Sales of our ready-to-drink beverages are somewhat seasonal, with the second and third calendar quarters typically accounting for the highest sales volumes. The volume of sales in the beverage business may be affected by weather conditions.
Each of our quarterly reporting periods, other than the fourth quarter, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The first quarter of 2022 and the first quarter of 2021 ended on April 1, 2022 and April 2, 2021, respectively. Our fourth quarter and our fiscal year end on December 31 regardless of the day of the week on which December 31 falls.
Advertising Costs
The Company’s accounting policy related to advertising costs for annual reporting purposes is to expense production costs of print, radio, television and other advertisements as of the first date the advertisements take place. All other marketing expenditures are expensed in the annual period in which the expenditure is incurred.
For quarterly reporting purposes, we allocate our estimated full year marketing expenditures that benefit multiple quarters to each of those quarters. We use the proportion of each quarter’s actual unit case volume to the estimated full year unit case volume as the basis for the allocation. This methodology results in our marketing expenditures being recognized at a standard rate per unit case. At the end of each quarter, we review our estimated full year unit case volume and our estimated full year marketing expenditures that benefit multiple quarters in order to evaluate if a change in estimate is necessary. The impact of any change in the full year estimate is recognized in the quarter in which the change in estimate occurs. Our full year marketing expenditures are not impacted by this interim accounting policy.
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
We classify time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents or restricted cash equivalents, as applicable. Restricted cash and restricted cash equivalents generally consist of amounts held by our captive insurance companies, which are included in the line item other noncurrent assets on our consolidated balance sheet. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor our concentrations of credit risk.
The following tables provide a summary of cash, cash equivalents, restricted cash and restricted cash equivalents that constitute the total amounts shown in our consolidated statements of cash flows (in millions):
April 1,
2022
December 31,
2021
Cash and cash equivalents$7,681 $9,684 
Restricted cash and restricted cash equivalents included in other noncurrent assets1,2
311 341 
Cash, cash equivalents, restricted cash and restricted cash equivalents$7,992 $10,025 
1Amounts represent restricted cash and restricted cash equivalents in our solvency capital portfolio set aside primarily to cover pension obligations in certain of our European and Canadian pension plans. Refer to Note 4.
2Restricted cash and restricted cash equivalents include amounts related to assets held for sale. Refer to Note 2.
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April 2,
2021
December 31,
2020
Cash and cash equivalents$8,484 $6,795 
Restricted cash and restricted cash equivalents included in other noncurrent assets1
327 315 
Cash, cash equivalents, restricted cash and restricted cash equivalents$8,811 $7,110 
1Amounts represent restricted cash and restricted cash equivalents in our solvency capital portfolio set aside primarily to cover pension obligations in certain of our European and Canadian pension plans. Refer to Note 4.
NOTE 2: ACQUISITIONS AND DIVESTITURES
Acquisitions
Our Company’s acquisitions of businesses, equity method investments and nonmarketable securities totaled $5 million and $4 million during the three months ended April 1, 2022 and April 2, 2021, respectively.
Divestitures
Proceeds from disposals of businesses, equity method investments and nonmarketable securities during the three months ended April 1, 2022 and April 2, 2021 totaled $218 million and $2 million, respectively. In 2022, we sold our ownership interest in one of our equity method investments for cash proceeds of $123 million. We recognized a net gain of $13 million as a result of the sale, which was recorded in the line item other income (loss) — net in our consolidated statement of income.
Assets and Liabilities Held for Sale
The Company had certain bottling operations in Asia Pacific that met the criteria to be classified as held for sale. As a result, we were required to record their assets and liabilities at the lower of carrying value or fair value less any costs to sell. As the fair value less any costs to sell exceeded the carrying value, the related assets and liabilities were recorded at their carrying value. These assets and liabilities were included in the Bottling Investments operating segment. The Company expects these bottling operations to be refranchised during the second half of 2022.
The following table presents information related to the major classes of assets and liabilities that were classified as held for sale and were included in the line items prepaid expenses and other current assets and accounts payable and accrued expenses, respectively, in our consolidated balance sheets (in millions):
April 1,
2022
December 31, 2021
Cash, cash equivalents and short-term investments$220 $228 
Trade accounts receivable, less allowances15 21 
Inventories50 55 
Prepaid expenses and other current assets42 36 
Other noncurrent assets36 9 
Deferred income tax assets6 6 
Property, plant and equipment — net287 282 
Goodwill36 37 
  Assets held for sale$692 $674 
Accounts payable and accrued expenses$137 $139 
Accrued income taxes5 4 
Other noncurrent liabilities9 9 
Deferred income tax liabilities5 5 
  Liabilities held for sale$156 $157 
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NOTE 3: NET OPERATING REVENUES
The following table presents net operating revenues disaggregated between the United States and International and further by line of business (in millions):
United StatesInternationalTotal
Three Months Ended April 1, 2022
Concentrate operations$1,641 $4,083 $5,724 
Finished product operations1,882 2,885 4,767 
Total $3,523 $6,968 $10,491 
Three Months Ended April 2, 2021
Concentrate operations$1,410 $3,572 $4,982 
Finished product operations1,483 2,555 4,038 
Total $2,893 $6,127 $9,020 
Refer to Note 16 for disclosures of net operating revenues by operating segment and Corporate.
NOTE 4: INVESTMENTS
Equity Securities
The carrying values of our equity securities were included in the following line items in our consolidated balance sheets (in millions):
Fair Value with Changes Recognized in IncomeMeasurement Alternative — No Readily Determinable Fair Value
April 1, 2022
Marketable securities$357 $ 
Other investments745 43 
Other noncurrent assets1,493  
Total equity securities$2,595 $43 
December 31, 2021
Marketable securities$376 $ 
Other investments771 47 
Other noncurrent assets1,576  
Total equity securities$2,723 $47 
The calculation of net unrealized gains and losses recognized during the period related to equity securities still held at the end of the period is as follows (in millions):
Three Months Ended
April 1,
2022
April 2,
2021
Net gains (losses) recognized during the period related to equity securities$(100)$155 
Less: Net gains (losses) recognized during the period related to equity securities sold
during the period
(132)14 
Net unrealized gains (losses) recognized during the period related to equity securities
still held at the end of the period
$32 $141 
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Debt Securities
Our debt securities consisted of the following (in millions):
Gross UnrealizedEstimated
Fair Value
CostGainsLosses
April 1, 2022
Trading securities
$41 $ $(1)$40 
Available-for-sale securities
1,933 25 (165)1,793 
Total debt securities
$1,974 $25 $(166)$1,833 
December 31, 2021
Trading securities
$39 $1 $ $40 
Available-for-sale securities
1,648 33 (132)1,549 
Total debt securities
$1,687 $34 $(132)$1,589 
The carrying values of our debt securities were included in the following line items in our consolidated balance sheets (in millions):
April 1, 2022December 31, 2021
Trading Securities Available-for-Sale Securities Trading Securities Available-for-Sale Securities
Marketable securities
$40 $1,542 $40 $1,283 
Other noncurrent assets
 251  266 
Total debt securities$40 $1,793 $40 $1,549 
The contractual maturities of these available-for-sale debt securities as of April 1, 2022 were as follows (in millions):
CostEstimated
Fair Value
Within 1 year$70 $68 
After 1 year through 5 years1,649 1,504 
After 5 years through 10 years43 57 
After 10 years171 164 
Total$1,933 $1,793 
The Company expects that actual maturities may differ from the contractual maturities above because borrowers have the right to call or prepay certain obligations.
The sale and/or maturity of available-for-sale debt securities resulted in the following realized activity (in millions):
Three Months Ended
April 1,
2022
April 2,
2021
Gross gains$1 $1 
Gross losses(5)(4)
Proceeds231 158 
Captive Insurance Companies
In accordance with local insurance regulations, our consolidated captive insurance companies are required to meet and maintain minimum solvency capital requirements. The Company elected to invest a majority of its solvency capital in a portfolio of marketable equity and debt securities. These securities are included in the disclosures above. The Company uses one of our consolidated captive insurance companies to reinsure group annuity insurance contracts that cover the obligations of certain of our European and Canadian pension plans. This captive’s solvency capital funds included total equity and debt securities of $1,580 million and $1,670 million as of April 1, 2022 and December 31, 2021, respectively, which are classified in the line item other noncurrent assets in our consolidated balance sheets because the assets are not available to satisfy our current obligations.
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NOTE 5: INVENTORIES
Inventories consisted of the following (in millions):
April 1,
2022
December 31,
2021
Raw materials and packaging$2,274 $2,133 
Finished goods 1,165 982 
Other 302 299 
Total inventories $3,741 $3,414 
NOTE 6: HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS
The following table presents the fair values of the Company’s derivative instruments that were designated and qualified as part of a hedging relationship (in millions):
 
Fair Value1,2
Derivatives Designated as Hedging Instruments
Balance Sheet Location1
April 1,
2022
December 31,
2021
Assets:   
Foreign currency contractsPrepaid expenses and other current assets$189 $151 
Foreign currency contractsOther noncurrent assets66 27 
Interest rate contractsPrepaid expenses and other current assets 1 
Interest rate contractsOther noncurrent assets 282 
Total assets $255 $461 
Liabilities:   
Foreign currency contractsAccounts payable and accrued expenses$40 $15 
Foreign currency contractsOther noncurrent liabilities38 17 
Interest rate contractsOther noncurrent liabilities442 14 
Total liabilities $520 $46 
1All of the Company’s derivative instruments are carried at fair value in our consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 15 for the net presentation of the Company’s derivative instruments.
2Refer to Note 15 for additional information related to the estimated fair value.
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The following table presents the fair values of the Company’s derivative instruments that were not designated as hedging instruments (in millions):
 
Fair Value1,2
Derivatives Not Designated as Hedging Instruments
Balance Sheet Location1
April 1,
2022
December 31, 2021
Assets:   
Foreign currency contractsPrepaid expenses and other current assets$90 $53 
Foreign currency contractsOther noncurrent assets11  
Commodity contractsPrepaid expenses and other current assets270 131 
Commodity contractsOther noncurrent assets18 3 
Other derivative instrumentsPrepaid expenses and other current assets20 9 
Total assets $409 $196 
Liabilities:   
Foreign currency contractsAccounts payable and accrued expenses$68 $34 
Foreign currency contractsOther noncurrent liabilities1 9 
Commodity contractsAccounts payable and accrued expenses 6 
Commodity contractsOther noncurrent liabilities3 1 
Total liabilities $72 $50 
1All of the Company’s derivative instruments are carried at fair value in our consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 15 for the net presentation of the Company’s derivative instruments.
2Refer to Note 15 for additional information related to the estimated fair value.
Credit Risk Associated with Derivatives
We have established strict counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or better. We monitor counterparty exposures regularly and review any downgrade in credit rating immediately. If a downgrade in the credit rating of a counterparty were to occur, we have provisions requiring collateral for substantially all of our transactions. To mitigate presettlement risk, minimum credit standards become more stringent as the duration of the derivative financial instrument increases. In addition, the Company’s master netting agreements reduce credit risk by permitting the Company to net settle for transactions with the same counterparty. To minimize the concentration of credit risk, we enter into derivative transactions with a portfolio of financial institutions. Based on these factors, we consider the risk of counterparty default to be minimal.
Cash Flow Hedging Strategy
The Company uses cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates, commodity prices or interest rates. The changes in the fair values of derivatives designated as cash flow hedges are recorded in accumulated other comprehensive income (loss) (“AOCI”) and are reclassified into the line item in our consolidated statement of income in which the hedged items are recorded in the same period the hedged items affect earnings. The changes in the fair values of hedges that are determined to be ineffective are immediately reclassified from AOCI into earnings. The maximum length of time for which the Company hedges its exposure to the variability in future cash flows is typically three years.
The Company maintains a foreign currency cash flow hedging program to reduce the risk that our U.S. dollar net cash inflows from sales outside the United States and U.S. dollar net cash outflows from procurement activities will be adversely affected by fluctuations in foreign currency exchange rates. We enter into forward contracts and purchase foreign currency options and collars (principally euro, British pound sterling and Japanese yen) to hedge certain portions of forecasted cash flows denominated in foreign currencies. When the U.S. dollar strengthens against the foreign currencies, the decline in the present value of future foreign currency cash flows is partially offset by gains in the fair value of the derivative instruments. Conversely, when the U.S. dollar weakens, the increase in the present value of future foreign currency cash flows is partially offset by losses in the fair value of the derivative instruments. The total notional values of derivatives that were designated and qualified for the Company’s foreign currency cash flow hedging program were $7,569 million and $7,399 million as of April 1, 2022 and December 31, 2021, respectively.
The Company uses cross-currency swaps to hedge the changes in cash flows of certain of its foreign currency denominated debt and other monetary assets or liabilities due to changes in foreign currency exchange rates. For this hedging program, the Company recognizes in earnings each period the changes in carrying values of these foreign currency denominated assets and
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liabilities due to changes in exchange rates. The changes in fair values of the cross-currency swap derivatives are recorded in AOCI with an immediate reclassification into earnings for the changes in fair values attributable to fluctuations in foreign currency exchange rates. The total notional values of derivatives that were designated as cash flow hedges for the Company’s foreign currency denominated assets and liabilities were $1,524 million and $1,994 million as of April 1, 2022 and December 31, 2021.
The Company has entered into commodity futures contracts and other derivative instruments on various commodities to mitigate the price risk associated with forecasted purchases of materials used in our manufacturing process. These derivative instruments were designated as part of the Company’s commodity cash flow hedging program. The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of certain commodities. The total notional value of derivatives that were designated and qualified for this program was $10 million as of December 31, 2021. As of April 1, 2022, we did not have any commodity futures contracts nor other derivative instruments on various commodities designated as a cash flow hedge.
Our Company monitors our mix of short-term debt and long-term debt regularly. We manage our risk to interest rate fluctuations through the use of derivative financial instruments. From time to time, the Company enters into interest rate swap agreements and designates these instruments as part of the Company’s interest rate cash flow hedging program. The objective of this hedging program is to mitigate the risk of adverse changes in benchmark interest rates on the Company’s future interest payments. As of April 1, 2022 and December 31, 2021, we did not have any interest rate swaps designated as a cash flow hedge.
The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on other comprehensive income (“OCI”), AOCI and earnings (in millions):
Gain (Loss)
Recognized
in OCI
Location of Gain (Loss) Recognized in IncomeGain (Loss) Reclassified from AOCI into Income
Three Months Ended April 1, 2022
Foreign currency contracts$81 Net operating revenues$8 
Foreign currency contracts6 Cost of goods sold1 
Foreign currency contracts Interest expense(1)
Foreign currency contracts(5)Other income (loss) — net(11)
Total$82 $(3)
Three Months Ended April 2, 2021
Foreign currency contracts$(23)Net operating revenues$(23)
Foreign currency contracts(5)Cost of goods sold(1)
Foreign currency contracts Interest expense(1)
Foreign currency contracts87 Other income (loss) — net66 
Interest rate contracts121 Interest expense(5)
Total
$180  $36 
As of April 1, 2022, the Company estimates that it will reclassify into earnings during the next 12 months net gains of $93 million from the pretax amount recorded in AOCI as the anticipated cash flows occur.
Fair Value Hedging Strategy
The Company uses interest rate swap agreements designated as fair value hedges to minimize exposure to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. The Company also uses cross-currency interest rate swaps to hedge the changes in the fair value of foreign currency denominated debt relating to fluctuations in foreign currency exchange rates and benchmark interest rates. The changes in the fair values of derivatives designated as fair value hedges and the offsetting changes in the fair values of the hedged items are recognized in earnings. As a result, any difference is reflected in earnings as ineffectiveness. When a derivative is no longer designated as a fair value hedge for any reason, including termination and maturity, the remaining unamortized difference between the carrying value of the hedged item at that time and the face value of the hedged item is amortized to earnings over the remaining life of the hedged item, or immediately if the hedged item has matured or has been extinguished. The total notional values of derivatives that were designated and qualified as fair value hedges of this type were $11,717 million and $12,113 million as of April 1, 2022 and December 31, 2021, respectively.
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The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on earnings (in millions):
Hedging Instruments and Hedged ItemsLocation of Gain (Loss) Recognized in IncomeGain (Loss)
Recognized in Income
Three Months Ended
April 1,
2022
April 2,
2021
Interest rate contractsInterest expense$(711)$(395)
Fixed-rate debtInterest expense709 396 
Net impact to interest expense $(2)$1 
Net impact of fair value hedging instruments$(2)$1 
The following table summarizes the amounts recorded in our consolidated balance sheets related to hedged items in fair value hedging relationships (in millions):
Cumulative Amount of Fair Value Hedging Adjustments1
Carrying Values of
Hedged Items
Included in the Carrying Values of Hedged ItemsRemaining for Which Hedge Accounting Has Been Discontinued
Balance Sheet Location of Hedged ItemsApril 1,
2022
December 31,
2021
April 1,
2022
December 31,
2021
April 1,
2022
December 31,
2021
Current maturities of long-term debt$ $200 $ $1 $ $ 
Long-term debt11,443 12,353 (445)255 220 228 
1Cumulative amount of fair value hedging adjustments does not include changes due to foreign currency exchange rate fluctuations.
Hedges of Net Investments in Foreign Operations Strategy
The Company uses forward contracts and a portion of its foreign currency denominated debt, a non-derivative financial instrument, to protect the value of our net investments in a number of foreign operations. For derivative financial instruments that are designated and qualify as hedges of net investments in foreign operations, the changes in the fair values of the derivative financial instruments are recognized in net foreign currency translation adjustments, a component of AOCI, to offset the changes in the values of the net investments being hedged. For non-derivative financial instruments that are designated and qualify as hedges of net investments in foreign operations, the changes in the carrying values of the designated portions of the non-derivative financial instruments due to fluctuations in foreign currency exchange rates are recorded in net foreign currency translation adjustments. Any ineffective portions of net investment hedges are reclassified from AOCI into earnings during the period of change.
The following table summarizes the notional values and pretax impact of changes in the fair values of instruments designated as net investment hedges (in millions):
Notional ValuesGain (Loss) Recognized in OCI
as ofThree Months Ended
 April 1,
2022
December 31,
2021
April 1,
2022
April 2,
2021
Foreign currency contracts$54 $40 $(6)$(8)
Foreign currency denominated debt12,457 12,812 355 483 
Total$12,511 $12,852 $349 $475 
The Company did not reclassify any gains or losses related to net investment hedges from AOCI into earnings during the three months ended April 1, 2022 and April 2, 2021. In addition, the Company did not have any ineffectiveness related to net investment hedges during the three months ended April 1, 2022 and April 2, 2021. The cash inflows and outflows associated with the Company’s derivative contracts designated as net investment hedges are classified in the line item other investing activities in our consolidated statement of cash flows.
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Economic (Non-Designated) Hedging Strategy
In addition to derivative instruments that are designated and qualify for hedge accounting, the Company also uses certain derivatives as economic hedges of foreign currency, interest rate and commodity exposure. Although these derivatives were not designated and/or did not qualify for hedge accounting, they are effective economic hedges. The changes in the fair values of economic hedges are immediately recognized in earnings.
The Company uses foreign currency economic hedges to offset the earnings impact that fluctuations in foreign currency exchange rates have on certain monetary assets and liabilities denominated in nonfunctional currencies. The changes in the fair values of economic hedges used to offset those monetary assets and liabilities are immediately recognized in earnings in the line item other income (loss) — net in our consolidated statement of income. In addition, we use foreign currency economic hedges to minimize the variability in cash flows associated with fluctuations in foreign currency exchange rates, including those related to certain acquisition and divestiture activities. The changes in the fair values of economic hedges used to offset the variability in U.S. dollar net cash flows are immediately recognized in earnings in the line items net operating revenues, cost of goods sold or other income (loss) — net in our consolidated statement of income, as applicable. The total notional values of derivatives related to our foreign currency economic hedges were $5,623 million and $4,258 million as of April 1, 2022 and December 31, 2021, respectively.
The Company uses interest rate contracts as economic hedges to minimize exposure to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. The total notional value of derivatives related to our economic hedges of this type was $200 million as of December 31, 2021. As of April 1, 2022, we did not have any interest rate contracts used as economic hedges.
The Company also uses certain derivatives as economic hedges to mitigate the price risk associated with the purchase of materials used in the manufacturing process and vehicle fuel. The changes in the fair values of these economic hedges are immediately recognized in earnings in the line items net operating revenues, cost of goods sold, or selling, general and administrative expenses in our consolidated statement of income, as applicable. The total notional values of derivatives related to our economic hedges of this type were $859 million and $908 million as of April 1, 2022 and December 31, 2021, respectively.
The following table presents the pretax impact that changes in the fair values of derivatives not designated as hedging instruments had on earnings (in millions):
Derivatives Not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized in IncomeGain (Loss)
Recognized in Income
Three Months Ended
April 1,
2022
April 2,
2021
Foreign currency contractsNet operating revenues$(15)$(1)
Foreign currency contractsCost of goods sold13 (8)
Foreign currency contractsOther income (loss) — net42 (28)
Interest rate contractsInterest expense (187)
Commodity contractsCost of goods sold160 82 
Other derivative instrumentsSelling, general and administrative expenses(3)8 
Other derivative instrumentsOther income (loss) — net (3)
Total $197 $(137)
NOTE 7: DEBT AND BORROWING ARRANGEMENTS
During the three months ended April 1, 2022, the Company retired upon maturity fixed interest rate U.S. dollar-denominated debentures of $288 million with an interest rate of 8.500 percent.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Guarantees
As of April 1, 2022, we were contingently liable for guarantees of indebtedness owed by third parties of $567 million, of which $87 million was related to variable interest entities. Our guarantees are primarily related to third-party customers, bottlers and vendors and have arisen through the normal course of business. These guarantees have various terms, and none of these guarantees is individually significant. These amounts represent the maximum potential future payments that we could be required to make under the guarantees. However, management has concluded that the likelihood of any significant amounts being paid by our Company under these guarantees is not probable.
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We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations.
Legal Contingencies
The Company is involved in various legal proceedings. We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Management has also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.
Tax Audits
The Company is involved in various tax matters, with respect to some of which the outcome is uncertain. We establish reserves to remove some or all of the tax benefit of any of our tax positions at the time we determine that it becomes uncertain based upon one of the following conditions: (1) the tax position is not “more likely than not” to be sustained; (2) the tax position is “more likely than not” to be sustained but for a lesser amount; or (3) the tax position is “more likely than not” to be sustained but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; (2) the technical merits of a tax position are derived from authorities, such as legislation and statutes, legislative intent, regulations, rulings and caselaw and their applicability to the facts and circumstances of the tax position; and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken. A number of years may elapse before a particular uncertain tax position is audited and finally resolved. The number of years subject to tax audits or tax assessments varies depending on the tax jurisdiction. The tax benefit that has been previously reserved because of a failure to meet the “more likely than not” recognition threshold would be recognized in income tax expense in the quarter in which the uncertainty disappears under any one of the following conditions: (1) the tax position is “more likely than not” to be sustained; (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the tax position has expired. Refer to Note 14.
On September 17, 2015, the Company received a Statutory Notice of Deficiency (“Notice”) from the U.S. Internal Revenue Service (“IRS”) seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets.
The Notice concerned the Company’s transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm’s-length pricing of transactions between related parties such as the Company’s U.S. parent and its foreign affiliates.
To resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm’s-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (“Closing Agreement”). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company’s income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years.
The IRS audited and confirmed the Company’s compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006.
The September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so.
The IRS designated the Company’s matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS’ designation of the Company’s matter for litigation, the Company was forced to either accept the IRS’ newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS’ litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.
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The Company consequently initiated litigation by filing a petition in the U.S. Tax Court (“Tax Court”) in December 2015, challenging the tax adjustments enumerated in the Notice.
Prior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS’ potential tax adjustment by approximately $138 million.
The trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.
On November 18, 2020, the Tax Court issued an opinion (“Opinion”) in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. The Tax Court reserved ruling on the effect of Brazilian legal restrictions on the payment of royalties by the Company’s licensee in Brazil until after the Tax Court issues its opinion in the separate case of 3M Co. & Subs. v. Commissioner, T.C. Docket No. 5816-13 (filed March 11, 2013). Once the Tax Court issues its opinion in 3M Co. & Subs. v. Commissioner, the Company expects the Tax Court thereafter to render another opinion, and ultimately a final decision, in the Company’s case.
The Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company’s foreign licensees to increase the Company’s U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its claims on appeal and vigorously defend its position.
In determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinion and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company’s tax positions, that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinion (“Tax Court Methodology”), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company’s tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinion and the Company’s analysis.
The Company’s conclusion that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal is unchanged as of April 1, 2022. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company’s tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of April 1, 2022 to $410 million.
While the Company strongly disagrees with the IRS’ positions and the portions of the Opinion affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company’s financial position, results of operations and cash flows.
The Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinion, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2021 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2021. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $13 billion as of December 31, 2021. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three months ended April 1, 2022 would increase the potential aggregate incremental tax and interest liability by approximately $250 million. Additionally, we currently project the continued application of the Tax Court Methodology in future years, assuming similar
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facts and circumstances as of December 31, 2021, would result in an incremental annual tax liability that would increase the Company’s effective tax rate by approximately 3.5 percent.
The Company does not know when the Tax Court will issue its opinion regarding the effect of Brazilian legal restrictions on the payment of royalties by the Company’s licensee in Brazil for the 2007 through 2009 tax years. After the Tax Court issues its opinion on the Company’s Brazilian licensee, the Company and the IRS will be provided time to agree on the tax impact, if any, of both opinions, after which the Tax Court would render a final decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit and pay the tax liability and interest related to the 2007 through 2009 tax years. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $5.0 billion (including interest accrued through April 1, 2022), plus any additional interest accrued through the time of payment. Some or all of this amount would be refunded if the Company were to prevail on appeal.
Risk Management Programs
The Company has numerous global insurance programs in place to help protect the Company from the risk of loss. In general, we are self-insured for large portions of many different types of claims; however, we do use commercial insurance above our self-insured retentions to reduce the Company’s risk of catastrophic loss. Our reserves for the Company’s self-insured losses are estimated using actuarial methods and assumptions of the insurance industry, adjusted for our specific expectations based on our claims history. Our self-insurance reserves totaled $228 million and $229 million as of April 1, 2022 and December 31, 2021, respectively.
NOTE 9: OTHER COMPREHENSIVE INCOME
AOCI attributable to shareowners of The Coca-Cola Company is separately presented in our consolidated balance sheet as a component of The Coca-Cola Company’s shareowners’ equity, which also includes our proportionate share of equity method investees’ AOCI. OCI attributable to noncontrolling interests is allocated to, and included in, our consolidated balance sheet as part of the line item equity attributable to noncontrolling interests.
AOCI attributable to shareowners of The Coca-Cola Company consisted of the following, net of tax (in millions):
April 1,
2022
December 31,
2021
Net foreign currency translation adjustments$(11,719)$(12,595)
Accumulated net gains (losses) on derivatives84 20 
Unrealized net gains (losses) on available-for-sale debt securities(97)(62)
Adjustments to pension and other postretirement benefit liabilities(1,608)(1,693)
Accumulated other comprehensive income (loss)$(13,340)$(14,330)
The following table summarizes the allocation of total comprehensive income between shareowners of The Coca-Cola Company and noncontrolling interests (in millions):
Three Months Ended April 1, 2022
Shareowners of
The Coca-Cola Company
Noncontrolling
Interests
Total
Consolidated net income$2,781 $12 $2,793 
Other comprehensive income:
Net foreign currency translation adjustments876 133 1,009 
Net gains (losses) on derivatives1
64  64 
Net change in unrealized gains (losses) on available-for-sale debt securities2
(35) (35)
Net change in pension and other postretirement benefit liabilities85  85 
Total comprehensive income (loss)$3,771 $145 $3,916 
1Refer to Note 6 for additional information related to the net gains or losses on derivative instruments.
2Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.
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The following tables present OCI attributable to shareowners of The Coca-Cola Company, including our proportionate share of equity method investees’ OCI (in millions):
Three Months Ended April 1, 2022Before-Tax Amount Income TaxAfter-Tax Amount
Foreign currency translation adjustments:
Translation adjustments arising during the period$1,324 $(240)$1,084 
Reclassification adjustments recognized in net income200  200 
Gains (losses) on intra-entity transactions that are of a long-term investment nature(670) (670)
Gains (losses) on net investment hedges arising during the period1
349 (87)262 
Net foreign currency translation adjustments$1,203 $(327)$876 
Derivatives:
Gains (losses) arising during the period$83 $