Comparative Analysis Case

The Coca-Cola Company and PepsiCo, Inc.

The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online.

Instructions

Use the companies’ financial information to answer the following questions.

(a)???What are the amounts of Coca-Cola’s and PepsiCo’s provision for income taxes for the year 2014? Of each company’s 2014 provision for income taxes, what portion is current expense and what portion is deferred expense?

(b)???What amount of cash was paid in 2014 for income taxes by Coca-Cola and by PepsiCo?

(c)???What was the U.S. federal statutory tax rate in 2014? What was the effective tax rate in 2014 for Coca-Cola and PepsiCo? Why might their effective tax rates differ?

(d)???For year-end 2014, what amounts were reported by Coca-Cola and PepsiCo as (1) gross deferred tax assets and (2) gross deferred tax liabilities?

(e)???Do either Coca-Cola or PepsiCo disclose any net operating loss carrybacks and/or carryforwards at year-end 2014? What are the amounts, and when do the carryforwards expire?

APPENDIX C Specimen Financial Statements: The Coca-Cola Company
The Coca-Cola Company is the world’s largest beverage company. It owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages, but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. Finished beverage products bearing Coca-Cola trademarks, sold in the United States since 1886, are now available in more than 200 countries. To access Coca-Cola’s complete annual report, including notes to the financial statements, follow these steps:

1. Go to http://www.coca-colacompany.com/investors/ .

2. Select Financial Reports and Information and then click on 2014 Annual Report on Form 10-K.

3. The Notes to Consolidated Financial Statements begin on page 78.

APPENDIX D Specimen Financial Statements: PepsiCo, Inc.
Pepsico, Inc. is a leading global food and beverage company with a complementary portfolio of enjoyable brands, including Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. Through its operations, authorized bottlers, contract manufacturers, and other third parties, PepsiCo makes, markets, distributes, and sells a wide variety of convenient and enjoyable beverages, foods, and snacks, serving customers and consumers in more than 200 countries and territories. To access PepsiCo’s complete annual report, including notes to the financial statements, follow these steps:

1. Go to http://www.pepsico.com/Investors .

2. Select SEC Filings and then the 10K, dated 2/12/2015 (select the pdf version).

3. Select Entire document.

4. The Notes to Consolidated Financial Statements begin on page 73.

1. Consolidated Statement of Income

2. PepsiCo, Inc. and Subsidiaries

3. Fiscal years ended December 27, 2014, December 28, 2013 and December 29, 2012

4. (in millions except per share amounts)