Question

1)What temporary and permanent differences does the coca cola company disclose in their footnotes? What are some other examples of temporary and permanent differences?

2)Does the coca cola company have a defined benefit or defined contribution plan? What are the key elements of the plan discussed in the footnotes? What amounts on the balance sheet relate to this plan? What are the differences between defined benefit and defined contribution plans?

Answer 1

Coca Cola Company normally disclose fines and Penalties, life insurance and manufacturing Incentive as permanent difference, Depreciation and Tax estimate as temporary difference.

A permanent difference is a business transaction that is reported differently for financial and tax reporting purposes, and for which the difference will never be eliminated. Some Examples are :-

Fines and Penalties

Life insurance

Meals and entertainment

Special dividend received deduction.

Temporary differences occur because financial accounting and tax accounting rules are somewhat inconsistent. Some examples of temporary differences are

Depreciation

Accrued liabilities

Estimates

Coca Cola Company has a defined benefit or defined contribution plan. Key element are defining the plan, providing explanation about funding , usage of funds etc. In 2017, the Company's total pension expense related to defined benefit plans was $368 million, which included $28 million of net periodic benefit cost and $340 million of settlement charges, curtailment charges and special termination benefit costs.

The main difference between a defined benefit scheme and a defined contribution scheme is that the former promises a specific income and the latter depends on factors such as the amount you pay into the pension and the fund's investment performance. Also A defined benefit plan, most often known as a pension, is a retirement account for which your employer ponies up all the money and promises you a set payout when you retire. A defined contribution plan, like a 401(k) or 403(b), requires you to put in your own money.