SPP 6.4 Marketing Expenses

SPP 6.
4 Marketing Expenses
Standard Practices and Procedures (SPP)
6.4 Marketing Expenses
This bulletin describes the standard practices and procedures for marketing expenses.
Bulletin Contents
The table below references the titles and locations of the topics covered in this bulletin.
Terms You Should Know Monitor Budget

Overview of Business Cycle Accounting Treatment for Marketing Expenses
Process Steps Sales Curve
Financial Policies Audit of Marketing Services Agencies
Annual Marketing Budget Internal Controls
Marketing Commitments Record Budgets
Marketing Accruals Record Commitments Immediately
Marketing Program Commitments Shifting Funds
Incremental Funds
Bottler Reimbursement Supplements
Accounts Sales Curve Calculation Description
Practices and Procedures Sales Curve Calculation Formulas
Business Plan Development Audit Program Template
Share Plan with Bottlers Standard Audit Report Template
Marketing Budget Exception Approval Form
Marketing Commitments Diagram of Auditor Workflow
Incremental Funds Curved and Non-Curved Expenses and Data Codes
Accounting for Marketing Commitments
Year-End Review of Commitments
Marketing Programs Figure 6.4.1 Marketing Expenses Business Cycle
Share Costs with Bottlers Figure 6.4.2 Exception Process Flowchart
Terms You Should Know

Before reading this section you should be familiar with the following terms. These terms are defined because they are specific to
Company operations or because they are not typically used in accounting:
Capability and Performance Programs (CAPPrs)
commitment
frozen funds
http://finance.na.ko.com/SPP/SPP0604_Marketing_Expenses.html[3/5/2009 1:12:03 PM]

SPP 6.4 Marketing Expenses
incremental funds
marketing expense control (MEC)
sales curve
shift
Overview of Business Cycle

The business cycle chart is provided to assist you in understanding marketing expenses and the related practices and procedures
described in this bulletin. A brief description of each process follows the illustration.
Figure 6.4.1 Marketing Expenses Business Cycle
Process Steps
1 BP Development
Each division develops a Business Plan (BP) which consists of the strategic plan, the financial impact of implementing strategies, an
evaluation of the bottler system and a summary of planned actions, programs and the specific resources needed in the upcoming
year.
2 Share Plan with Bottlers

After approval by Company management, the Business Plan details are discussed with and agreed upon by the bottler and the
Company.
3 Marketing Budget
An annual marketing budget is prepared and allocated by month based upon when the respective marketing activity will be incurred

and therefore accrued.
4 Marketing Commitments
Commitment of marketing funds should be documented and approved in accordance with the local Chart of Authority.
5 Marketing Programs
Planned marketing programs such as CAPPrs, promotional activities, advertising production and media buys are executed. (See
Bulletin 6.5, Marketing Program Expenses.)
6 Share Costs with Bottlers

If required by the marketing plan, bottlers are reimbursed for a certain percentage of expenses incurred by the bottling organization.
7 Monitor Budget
An automated subsystem is recommended for monitoring marketing expenditures.
8 Marketing Services Agency Audit

Marketing services agencies should be audited every three years depending on the amount of spend per agency.
Financial Policies
The significant financial policies followed by the Company are as follows:
Annual Marketing Budget
The annual budget will be allocated by month based upon when the respective marketing activity will be incurred and therefore
accrued.
Marketing Commitments
Commitments should be documented and approved in accordance with the local Chart of Authority and immediately recorded against
the appropriate budgeted item.
Marketing Accruals
Commitments for goods and services received within the month should be accrued to SAP account 215201XXX, Accrued Advertising
(legacy account 2221.XX).
Incremental Funds
Funds exceeding the current year Business Plan will be approved in accordance with the Delegation of Authority prior to commitment.
Marketing budgets may not be overcommitted without prior receipt of appropriate approvals as defined in the Delegation of Authority.
Bottler Reimbursement
Bottler reimbursement will be supported by original or copies of invoices, receipts or a list showing the details of how and to whom the
payments were made.
Sales Curve
All marketing deductions and expenses are submitted to Headquarters and then adjusted at the operating group level based on sales
curve methodology, which matches expenses in a consistent manner based on unit case sales forecasts. The adjustment is made
monthly and nets to zero on a full year basis.
Accounts
The books of account should always reflect accruals in the balance sheet and the related marketing expense accounts. Following are

the accounts to be used for marketing expenses. Refer to the Standard Accounts and Codes manual for account descriptions.
Legacy Account SAP Account Account Description

2221.XX 215201XXX Accrued Advertising (accruals for goods and services received)
85XX to 86XX 891001XXX - 891716XXX Advertising expense accounts
87XX to 89XX 893002XXX - 893308XXX Sales and Promotion expense accounts
N/A 893310XXX Sales Curve Adjustment - Revenue Deductions (HQ only)
N/A 890703XXX Sales Curve Adjustment - Direct Marketing (HQ only)
N/A 890704XXX Sales Curve Adjustment - Other Marketing (HQ only)
N/A 215608XXX Marketing Sales Curve Adjustment (HQ only)
Note that there are several marketing-type expense accounts that are reported in data codes for Deductions from Revenue. The
accounts are:
Legacy Account SAP Account Account Description

4311.XX 893302XXX Couponing
4321.XX 893201XXX Cooperative Trade Marketing (CTM)
4331.XX 893000XXX Bottler Incentives
4341.XX 893001XXX Package Participation
4351.XX 893003XXX Special Marketing Funds (SMF)
4361.XX 893309XXX Concession
4150.XX 893202XXX Strategic Availability
4127.XX 889101XXX Amrotization - BIIPs/CAPPrs
Practices and Procedures

Following are the important internal control procedures to be followed in the business cycle. Each operation should establish local
internal control systems based on its business risks and the size of its operation. Major deviations from key controls should receive
exemption approval from Headquarters Financial Procedures.
Business Plan Development
The Business Plan (BP) development process includes discussions, presentations and financial data submission by the business
units. The primary purpose of BP discussions and presentations is to review the business unit's objectives, the actions required to
achieve those objectives and how the business unit's objectives support the Company's goals.
The planning process should also consist of evaluation of the current year of the strategic plan, the financial impact of implementing
strategies and an evaluation of the bottler system. The current year situation provides a brief update on the plan and the expected
financial and marketing results for the current year.
The BP process has four goals:
To focus on future actions and events
To rank priorities for strategic emphasis and funding
To compare actual versus planned events after execution
To focus on value-creating strategies using economic profit as a management tool
Emphasis is placed on the first year of the BP, particularly the planned actions, programs and specific resources needed. The Capital
Expenditures Program, CAPPs, brand advertising and required marketing resources are important parts of each Division's plan.
For further BP information, please refer to the Reporting and Budgeting (RAB) manual Chapter 5.
Share Plan with Bottlers

The BP should be developed together with the bottler, if possible, from the start. After the plan is reviewed and approved by Company
management, local management should work on the plan details with the bottler and come to an agreement. Plan details include the
levels and types of marketing participation to be provided in the upcoming year. The agreement should be documented and signed by
both the bottler and Company.
To respond to market conditions at the time of signing, certain changes may be made to planned activities and programs within the
total approved budget. In such cases, an RFA is necessary to reflect the changes in the annual marketing budget based on the
details of the cooperative agreement. These changes require the approval of the Group President.
Marketing Budget
Using plans agreed with the bottler, each operation will prepare an annual marketing budget. The annual marketing budget is usually
detailed by bottler, brand, activity, customer and package (where applicable), and allocated by month based upon when the respective
marketing activity will be incurred and therefore accrued.
For example, the costs associated with a given media expenditure for television should be assigned to the accounting period(s) when
the respective TV ad will be aired. Likewise, if a consumer promotion is planned, the costs associated with the promotion should be
expensed in the accounting period(s) when the promotion will be run. Costs associated with ad development and production must be
expensed in the year the advertising is first aired, and should be allocated to the accounting period(s) when the ad is aired.
Revisions may be made based on directives issued from Headquarters or Group offices with regard to "freezing" and "releasing" direct
marketing expenditures from time to time.
Each year during the Business Plan process, Global Marketing will share codes for global marketing initiatives. These codes should
be assigned to global initiatives in marketing systems (MEM and PS) by January 31 of each year. Assignment of the codes locally will
facilitate the tracking of spending globally on these initiatives. Business units not on MEM or PS will continue to provide information
on global initiatives based on request by Global Marketing.
Marketing Commitments
Marketing commitments should be documented and approved in accordance with the local Chart of Authority. In addition,
commitments should be recorded immediately to ensure they are properly monitored.
In instances where significant goods or services are committed to, competitive bidding should take place. Please refer to Bulletin 6.5,
Marketing Expense Programs, in this manual. As part of the bidding process, selection criteria should be clearly defined and
adequately maintained by management. For example, business should be conducted with approved vendors only.
As part of the commitment process, significant purchases will require the approval of personnel independent of those negotiating the
transaction.
Incremental Funds
Please refer to the Delegation of Authority for the approval levels for unbudgeted expenses.
Accounting for Marketing Commitments
When a commitment has been made in the form of a purchase order or request, the amount should be recorded in the marketing
budget subsystem against the appropriate activity to avoid overcommitment of funds.
For commitments against which goods and services have been received, the amount should be accrued by debiting marketing
expenses and crediting legacy account 2221.XX, Accrued Advertising (SAP account 215201XXX).
Year-End Review of Commitments
All vendors and bottlers will be advised to expedite the submission of all bills applicable to the current year's operations sufficiently in
advance of the year-end. Bottlers will submit, when necessary, estimates of the balance of the Company's participation in their
marketing expense for the current year.
Amounts representing prepayments of expenses benefiting future periods appropriately should be debited to either legacy account

1440.XX, Prepaid Advertising (SAP account 125401XXX), or legacy account 1652.XX, Prepaid Advertising - Noncurrent (SAP account
140401XXX), and credited to the appropriate marketing expense account.
Amounts representing current year expenses for which no invoices have been received should be credited to legacy account
2221.XX, Accrued Advertising (SAP account 215201XXX), and debited to the appropriate marketing expense account.
Expenses paid by the Company on behalf of bottlers should be debited to the bottlers' receivable accounts and credited to the
appropriate marketing expense account.
Refer also to the Share Costs with Bottlers section below for more information on the accounting for bottlers receivables.
Marketing Programs
Following planning approval, marketing programs such as CAPPrs, promotional activities, advertising production and media buys are
executed. Please refer to Bulletin 6.5, Marketing Expense Programs, for further information.
Share Costs with Bottlers
The marketing plan will often require the Company to reimburse the bottler for a certain percentage of expenses incurred directly by
the bottling organization. In these cases a Cooperative Marketing Claim Statement will be used as documentation for the
reimbursement.
Since local requirements may vary from one operation to another, it is recommended that the Cooperative Marketing Claim
Statements be designed locally. Supplemented by local requirements, the form should include at least the following information:
Bottler's name and location
Months covered by the amount claimed
Total expenditure for the month for each item
Company's participation percentage share of each item
Grand total of Bottler's and Company's share
The Accountant-In-Charge should ensure the participation in costs are consistent with the signed Marketing Plan Agreement.
The various marketing expenses should be listed in the same sequence and grouped as they appear in the chart of accounts.
The Cooperative Marketing Claim Statement should be fully supported by either original or copies of invoices, receipts or a list
showing how and to whom the payments were made. Any exceptions shall require Division approval.
Expenses incurred by the Company on behalf of third party bottlers/customers should be debited to SAP account 115103XXX,
Customers Accounts Receivable-Other, a non-reconciliation account rolling up to WW07. This SAP account can be used to record
transactions directly to accounts receivable without having to use a Customer Account number. This is required since third party
bottlers/customers have a contractual obligation to the Company at the point the Company incurs the expense. The Company should
debit Accounts Receivable-Other (SAP account 115103XXX) when the Company incurs the expense regardless of whether the
Company has paid the charges, and should debit the Accounts Receivable-Marketing (SAP account 115103001) once the actual
invoice has been issued to recharge the bottler/customer.
For example, when an expense is incurred on behalf of the bottler, the following entry would be recorded:
Debit 115103XXX
Credit Marketing expense account
Once the invoice is paid and you are ready to rebill the bottler, the following entry would be recorded:
Debit 115103001
Credit 115103XXX

Subaccounts can be set up to track different marketing and promotional charges.
Since 115103XXX is a non-recon receivable account, company codes will have to manually edit the submission file for Form 108,
Accounts Receivable, to reflect these amounts as “Current” in order to satisfy the balancing rules. Unfortunately, this cannot be
automated since SAP reads at the customer level detail, receivable value date and payment terms to determine the aging for this
form. The only time it will be included automatically and aged accordingly is when invoices have been issued to the
bottlers/customers.
Monitor Budget
Since direct marketing is the largest expense category of the Company, it is very important to monitor its expenditure closely. A
subsystem should be used to record the budget by bottler, brand activity and package or a suitable combination of these. Such an
automated subsystem is available in SAP. Commitments should be recorded against the matching budgeted item category as soon as
they are made. The expense will be recorded against the commitment when paid.
If there are insufficient funds in a particular category to accommodate a commitment, the marketing manager should be advised
immediately to determine whether funds can be shifted from another budgeted item. Shifting of funds should be appropriately
documented and approved in accordance with the local Chart of Authority.
Accounting Treatment for Marketing Expenses
Accounting for marketing expenditures is based upon basic accrual accounting. In other words, a liability is recorded by crediting an
accrual in the period that goods or services are received.
The accounting for the debit portion of the above entry (for example, expense or deferral) is dependent upon the nature of the
marketing or advertising involved. As discussed in more detail below, goods or services received or payments made in an accounting
period in advance of the market impact should generally be deferred and recorded as prepaid. However, costs associated with ad
development and production must be expensed in the period the advertising is first aired, consistent with Statement of Position 93-7,
Reporting on Advertising Costs.
Deferred Expenses
DME is generally only deferrable after proof that the main concept has been identified. “Proof” refers to the identification of a specific
communication idea for a product, promotion or so forth that will be used by the Company in the future. For example, the Company
may engage a research company to develop ideas for potential consumer promotions. The research company incurs expenses while
developing its ideas. Once ideas are presented to the Company, our management may select one promotion to use. At that point, all
expenses incurred by the research company are expensed. Future expenses related to the selected promotion will be deferred until
the start of the promotion in the marketplace.
Other deferral situations include where we have paid in advance for a multi-year marketing asset management (MAM) sponsorship
(only if we have recourse in the event of termination or non-performance). Deferred expenses are booked as an asset to the balance
sheet and expensed in future periods.
The following are situations where deferral of expenses is appropriate. The situations apply to marketing initiatives such as consumer
promotions and new brands, visual identities and graphics. When the Rationale includes the phrase “the first time the initiative begins
in market,” this could include: the first time an advertisement airs, the start of a consumer promotion, the launch/introduction of a new
brand, or the first time a new graphic or visual identity is released.
Deferred Expense Rationale

Agency fees for marketing research, creative With proof of a finalized concept, Company will defer
and execution program expense – where the costs in order to match the expense with the first time
main concept has been identified the initiative begins in market.
Agency fees for packaging and graphics With proof of a finalized concept, Company will defer
expense – where the specific marketing initiative costs in order to match the expense with the first time
has been identified, such as launch of a new the initiative begins in market.
flavor extension for Diet Coke
Program graphics expense – where the With proof of a finalized concept, Company will defer
executional development of the program spans costs in order to match the expense with the first time
years the initiative begins in market.

Packaging plates development expense – where With proof of a finalized concept, Company will defer
the main concept has been identified costs in order to match the expense with the first time
the initiative begins in market.
Packaging artwork and production expense – With proof of a finalized concept, Company will defer
where the main concept has been identified costs in order to match the expense with the first time
the initiative begins in market.
Program POS (point of sale) / premium expense With proof of a finalized concept, Company will defer
– where the executional development of the costs in order to match the expense with the first time
program spans years the initiative begins in market.
Advertising creative conceptual expense – Once a concept is accepted by management and
television and radio made available to the system for the following year,
creative expense can be deferred to match to the time
the advertisement runs in market.
Marketing asset management (MAM) MAM sponsorship expense is recorded during the
sponsorship prepaids – also referred to as period in which the sponsorship benefits are received.
presence marketing. Includes agreements with Payments which provide benefit to the Company
theaters, theme parks, colleges or universities, beyond the current year are booked to the balance
and sports teams or organizations. Usually sheet as a prepaid as long as there is recourse in the
represents agreements whereby the Company event of termination or non-performance. However,
obtains the right to be the official sponsor, there are exceptions to this recourse provision in the
exclusive advertiser or other similar role. case of certain government and not-for-profit
organizations (such as FIFA and the IOC).
Period Expenses
By definition, all costs that are not deferrable to future years are expensed in the current year. However, as stated earlier, most DME
is adjusted within a calendar year based upon the sales curve.
The following are examples that should be expensed in the period incurred (note however, that there is some temporary deferral
allowed in certain situations such as advertising costs which are deferred until the advertising spot is first aired):
Period Expense Rationale

Agency fees for creative, conceptual, and Uncertainty of benefits to the Company, many of the
developmental program expense – when the concepts or ideas will never come to fruition.
main concept has not been identified
Agency fees for conceptual, developmental Uncertainty of benefits to the Company, many of the
packaging and graphics expense – costs for the concepts or ideas will never come to fruition.
creative development of new/existing product
graphic changes associated with the selection or
testing stage
Market research expense – for research aimed Uncertainty of benefits to the Company, expense to be
at generating ideas and concepts recorded in year that research is performed (based
upon performance criteria/delivery dates as specified in
contract).
System / customer communication expense – Loss of control – the Company does not know when
sales rally kits and customer/trade kits the customer/trade will open and use the kits.
Promotional items / premiums expense Company takes physical possession of the items and
the timing of the benefit has not been determined (a
decision has not been made as to when the items will
be used in the market).
Ingredient / formula expense for new Uncertainty of the benefits to the Company, many
product/flavor launches formulations will not reach the mass consumer.
Planning presentation materials expense Delivery of the services from vendor and presentation
(associated with future year programs) – final of proposed finalized concepts – to include videos,
stage of “conceptual” planning presentation decks and materials.
Advertising creative conceptual expense – Creative conceptual expense is recorded in the year
television and radio the expense is incurred. Once a concept is accepted
and made available to the system for the following
year, subsequent creative expense can be deferred to
match to the time the advertisement first runs in

market (see deferred expense section above).

Advertising production expense Ad production expense is recorded at the time the
advertisement first appears in the market. However, if
the Company decides the advertising is not going to
be aired, then the expense is recorded immediately.
Expense for ad production created to be available to
the system for ordering is recorded in the period when
the concept is first made available. When advertising
production costs are shared by several countries, each
country expenses their portion of the costs when the
advertisement first appears in their country.
Advertising talent expense TV, radio and print talent expense is recorded at the
time the advertisement is aired in the market.
Coupon expense Coupon redemption, production, and artwork expense

(While coupon expense is accounted for with is recorded in the year in which the coupon first
deductions from revenue, this information is appears in the market (ensure there is a period in
included here since coupon activity is closely which the coupon is valid). If the future
aligned with marketing activities.) refunds/rebates cannot be reasonably and reliably
estimated, please call your Finance Manager who will
collaborate with Corporate Accounting Research.
Media expense Media expense is recorded in the year the media spot
airs or is run in the market.
Marketing asset management (MAM) MAM sponsorship expense is recorded during the
sponsorship expense period in which the sponsorship benefits are received.
Examples include:
Professional sports teams - expense is recorded in

current year based on the regular season. However,
for seasons that straddle calendar years, the expense
needs to be allocated between years.
Professional sports leagues - expense is recorded

based on the regular and post season. For seasons
that straddle calendar years, the expense needs to be
allocated between years.
Colleges and universities - expense is recorded based

on the school year. School semesters that straddle a
calendar year are allocated between years.
All other local properties (such as zoos, Minor League

Baseball, water parks) – If seasons/benefits received
from the property straddle a calendar year, the
expense is allocated between calendar years.
Variable cinema funding (rate based on volume or

attendance) - expense is recorded as earned based
upon actual volume and attendance per the customer
agreement. However, when it is clear that actual
volume trends will be below those described in the
customer agreement, amortization of the costs should
be adjusted accordingly.
Fixed cinema funding (such as ads and boards) –

expense is recorded based upon the benefit received
in the contract year.
Marketing Expense Accruals

Regardless of whether a marketing cost is treated as a period expense or deferred, any marketing costs incurred must be accrued as
a liability on the balance sheet in the period in which the good or service is received, even if an invoice is not received by period-
end. This notion goes beyond liabilities for services rendered by third party vendors; it also includes items such as recording liabilities
for anticipated payouts of consumer prizes won but not paid.
The existence of subsequent sales curve adjustments does not alleviate the business unit's responsibility for recording timely
accruals. Senior management frequently requires analysis "with and without" sales curve adjustments, and thus the underlying
financial statements must properly reflect the Company's liabilities at period-end.
The following are examples that should be accrued as liabilities on the balance sheet in the period incurred:
Accrued Expense Rationale

Program fulfillment expense – where the Company will accrue costs as a liability on the balance
program spans years, such as prizes and sheet in order to match the expense with the first time
fulfillment agency fees; for example, a promotion the promotion begins in market.
to give away trips whereby the trip is awarded in
one year, but not taken until the subsequent
year.
Goods or services received, but no invoice Company records a liability on the balance sheet (for
received. example, by posting a goods receipt in SAP) even
though an invoice has not yet been received.
For deferrable expenses, the debit is to prepaids,

which will be expensed in the period when the
initiative begins in market. See further discussion of
this treatment in the “Deferred Expenses” section
above.
For period expenses, the debit is to expense. See

further discussion on this treatment in the “Period
Expenses” section above.
Sales Curve
The "sales curve" is terminology used to describe the Company's approved method of matching marketing expenses to accounting
periods based on forecasted unit case sales volume. The purpose of the sales curve adjustment is to appropriately record marketing
expenses across all periods and Groups in a consistent manner. The methodology used for the sales curve adjustment is based on
full year unit case sales forecasts and full year curveable marketing expense forecasts. Operating units record marketing expenses for
each marketing activity in an accounting period based upon when the respective marketing activity will be incurred. These amounts
are then adjusted after consolidation at Headquarters based on forecast projections of unit case sales and curveable marketing
expenses. This method of allocation provides a better matching of expenses with the ultimate impact of those expenditures – our
belief that these expenditures impact the timing of sales of actual unit cases.
The sales curve adjustment is calculated for Actuals, Rolling Estimate and Business Plan submissions. The amounts used are “year-
to-date” figures, defined as January of the current year through the current month. The calculation uses actual unit cases recorded for
the Business Unit for all MAUs designated for inclusion in the sales curve calculation. Full year unit case estimates are taken from the
last weekly unit case reporting estimate available on the day of submission; for example, the week five weekly unit case report will be
used in the quarter-end Actuals calculation. The calculation also uses full year forecasted curveable marketing expenses from the
most recent forecast cycle.
There are certain non-operating Business Units (such as, Eurasia Other) that may record curveable marketing expenses. For the non-
operating Business Units, the unit cases used in the calculation will be at the Group level (for example, Eurasia Group unit cases).
Corporate expenses will continue to be curved using consolidated unit cases. Note that the sales curve adjustments for each month
will be reversed in the next month, and the full year sales curve accrual will be zero at the end of the calendar year.
Headquarters calculates the adjustment at the Business Unit level and records any required adjustments to the Group level. A report
by Business Unit will be provided to each Group to identify all sales curve adjustments recorded by Headquarters. Sales curve
estimation templates for Actuals, Rolling Estimate and Business Plan are available on the Global Finance website, Financial Reports,
Tools and Templates.

While closing each reporting period, Headquarters will evaluate whether the latest Rolling Estimate and weekly unit case sales used
in the sales curve calculation reflect the Company’s best estimates at the time the sales curve calculation is performed. If it is
determined the forecast does not reflect a best estimate, appropriate adjustments will be made.
Field locations are not allowed to record local sales curve adjustments.
In summary:
The sales curve is calculated by Headquarters only. No local sales curve adjustments may be recorded.
The templates provided on the Global Finance website are for local analysis purposes only.
The sales curve calculation uses the Business Unit level, with a combination of forecast data from the weekly unit case sales
and RE processes, and uses a year-to-date methodology.
The sales curve results are recorded in the sales curve Group level MAUs.
The sales curve process impacts all Business Units having MAUs with balances in deductions from revenue, direct marketing expense
and other marketing expense data codes that have been designated for inclusion in the sales curve calculation, with the exception of
Beverage Partners Worldwide (BPW) MAUs. BPW MAUs are not included in the Company's sales curve calculation since their
account balances are eliminated from Company results.
Supplements 6.4.1, 6.4.2 and 6.4.7 provide examples and additional information related to the sales curve.
Audit of Marketing Services Agencies
The Company engages thousands of external marketing agencies each year to support the various marketing services needs of its
global business. While there is a distinction between services being provided, the Global Audit Protocol (the Protocol) has been
established to standardize the way we evaluate compliance to the contracts under which these organizations operate. These services
can include but are not limited to the following: advertising, media, strategy and planning, concepting, promotions, packaging,
interactive, creative, marketing research, marketing fulfillment, experiential/event, sports and entertainment, media merchandising,
multicultural, and games management.
The Protocol’s key objectives are to ensure that we receive the anticipated value from our substantial investments with marketing
agencies and to ensure that they are in compliance with their contractual requirements.
Policies Regarding Agency Audits
The following are the Protocol’s policies that cover planning, executing and reporting on marketing services agency audits. Further
details are contained in subsequent sections of the Bulletin.
General
The Protocol applies to all agencies providing marketing services (for example, media, creative, design, promotion, market research
and games management).
For all business units, agencies representing 80% of a total spend per marketing service category (advertising, media, promotions,
market research and other marketing) should be audited. (For this section of the bulletin, "business unit" refers to that level in the
organization previously called "Division.") The required audits are to be performed every three years and are limited to agencies with
which we spend more than U.S. $500,000 annually. See the following examples.
Example 1: A business unit has a total DME spend of U.S. $3,500,000 within the marketing service category of
advertising, of which U.S. $2,800,000 represents 80%. Five agencies have provided U.S. $500,001 each in services,
while ten agencies have provided only U.S. $100,000 each in services. Following the rule, the five agencies with which
we have spent more than U.S. $500,000 would be audited in year one and will be subject to audits in year three, if
spend continues to be greater than U.S. $500,000.
Example 2: A business unit has a total DME spend of U.S. $3,500,000 within the marketing service category of
promotions and other marketing, of which U.S. $2,800,000 represents 80%. Fifty agencies have provided services to this
business unit, however none greater than U.S. $500,000. Following the rule, none of the agencies would be audited.
Example 3: A business unit has a total DME spend of U.S. $552,000 within the marketing service category of media

which was spent with one agency. Following the rule, the one agency would be audited in year one and in subsequent
year three if spend continues to be greater than U.S. $500,000 annually.
The scope of the audit will be compliance with the current relevant agency contract, covering agency compliance against contract
terms and conditions and will comply specifically with the standard procedures defined in Supplement 6.4.3, Audit Program Template.
Planning & Executing
Global Procurement & Trading (GP&T) will provide an initial Audit Candidate List to the appropriate business unit marketing and
finance managers by February 28th of each year. This list will include current audits on schedule as well as new candidates based on
the 80%/$500,000 rule mentioned above. Business units will determine which agencies on the list will be audited in which year of the
three year cycle and report that plan back to GP&T by March 31st of each year. Agencies can be removed from the audit plan if the
business commits in writing that the business unit is no longer doing business with that agency. The overall Global Plan of proposed
audits will be forwarded to the Corporate Audit Department (CAD) for their review. If an agency qualifies for an audit, the audit must
be performed within three years, assuming continued business with the agency. Global/regional/local Marketing and/or Finance (or
their designees) determine audit schedule requirements (which agencies, when), and ensure those requirements are met. GP&T must
be notified once an agency is scheduled for an audit throughout the year and will notify CAD of all scheduled audit dates. Local
marketing organizations are accountable for determining how the audits will be funded.
Each agency audit will be performed by appropriately skilled auditors, collaboratively selected by Marketing, Finance and Procurement
from the list of authorized supply chain. The use of internal resources is only permitted by exception and must be approved in
advance by CAD. See "Engage an Auditor" below. Procurement will evaluate audit vendor performance. Vendor performance data
may be obtained either by direct shadowing or through a collection of collaborative feedback for local operations.
In preparation for the audit, the agency will need to provide certain specific information (such as billing data, overhead calculation, job
detail reports). Company Finance and Marketing representatives will also need to provide certain specific information to the auditors at
least 4 weeks prior to the audit (for example, contracts and spending).
Reporting Audit Results
Final audit reports will be consistent across all audits, and will identify Critical Risk, High Risk, Potential Risk and Operational
Opportunity. Agencies that fail an audit as defined by CAD (any audit within a 12 month period that results in one or more findings of
Critical Risk or three or more findings of High Risk) must be audited again within the 12 months following the final audit report date.
See "Audit Report" section below for detailed definitions of ratings and report distribution.
Findings are to be remedied in the timeframes determined by the severity of the findings.
Critical Risk requires immediate remedy

High Risk requires remedy within 30 days
Potential Risk requires an action plan within 60 days
Business unit Marketing and Finance are accountable for ensuring audit findings are appropriately remedied within these time frames.
See "Addressing Audit Findings" below for complete discussion.
Audit findings will be delivered to and reviewed with the agency by the Marketing and/or Finance organization. Marketing and/or
Finance may, at its discretion, designate Procurement as a party to these discussions.
Final Audit Reports and/or Executive Summaries of all final audit reports will be distributed to Company local operations and GP&T
personnel by the audit firm. Local Marketing, Finance, Procurement and Legal are responsible for developing a Management Action
Plan based on identified issues no later than 2 weeks after receipt of the final report and are responsible for distributing their reports
to the appropriate personnel, including Group Finance Managers, GP&T, as well as local and region Finance, Marketing, Procurement
and Legal, as needed (see "Audit Reporting Process and Timelines" for appropriate distribution). GP&T will forward to CAD all final
Audit Reports and Executive Summaries that contain Critical or High Risk findings. The same reports will be forwarded to Corporate
Marketing by specific request.
Reporting Audit Issues
Throughout the course of any audit, there may be a need to escalate issues/concerns immediately. Issues/concerns may be:
Lack of cooperation from marketing service provider (auditee) impacting audit timing or scope to be performed

Unusual or suspect activity at the agency of the local Company market

Significant changes to the local audit plan resulting in fee or resource concerns
NOTE: The auditor contacts the Company's local team to notify them of issues/concerns unless the Code of Business Conduct is
violated. If a Code of Business Conduct violation is identified or suspected either with the agency or with the Company, CAD should
be notified immediately prior to any notification of local operations. CAD will determine next steps in matters of Code of Business
Conduct violations.
Audit Process
Engage an Auditor
While the Company’s Financial and Auditing personnel have some of the necessary internal competencies to conduct some audit
procedures, they do not currently have sufficient expertise or resources for marketing services agency audits. Therefore, an external
audit firm should be retained to conduct the audit.
An external auditing firm with experience directly related to marketing services can be extremely effective and efficient in performing
these services. In addition, they can educate our associates as to best practice methodology for these types of audits.
Over time, the Company may choose to develop all of the necessary skills and capabilities to execute these services internally
through CAD. By shadowing the external auditing firms with proven capabilities in providing these services, Company resources will
enhance their understanding of not only the audits, but the resources required to conduct them. Therefore, CAD will review the
Global Plan (proposed audit schedule finalized in March of each year) and determine if there are audits they wish to shadow. CAD
will notify the regional contact of their attendance at the audit prior to commencement of the audit.
In rare cases where operating groups feel they have the qualified internal resources available to conduct the audits, they will need to
file an exception with and obtain approval from CAD. Refer to Figure 6.4.2, Exception Process Flowchart, and Supplement 6.4.5,
Exception Approval Form.
Figure 6.4.2

Auditing Firms
The Audit Committee of the Board of Directors of the Company approved Ernst & Young (E&Y) as a global external service provider
for executing the Protocol. A global contract has been negotiated with Ernst & Young for the benefit of our entire system. However,
geographies do have the option to engage other firms listed in the table below who also have contracts with the Company. These
auditors are considered preferred vendors with appropriate expertise, and only vendors on this list, whether global or local, are
permitted to provide services in association with this policy. GP&T will review the preferred auditing partners over time to determine if
the current list is meeting the needs of the Coca-Cola system. Additional audit providers may be added at a local level if needed but
will be evaluated and authorized through GP&T. Maximum pricing has been negotiated for preferred vendors. Contact Tierney Barnes,
GP&T, for pricing information.
Individual business units using E&Y do not need to submit RFAs for pre-approval of these agency audit services. The required pre-
approval will be obtained globally each year by GP&T.
Auditor Contact
Audit Location Preferred Auditing Partners Auditor Contact Name Number
North America E&Y Kevin Sheehan 404-817-5895
FirmDecisions Sandy Frank 212-699-3776
Habif, Agrogeti & Wynne (local) Rob Casey 404-898-7432
Bob McDonough (local) Bob McDonough 770-675-3795
Europe FirmDecisions Verity Linfield +44 207 637 4466
ASJP (local) Alison Sanderson and Jeremy +44 776 691 7964
E&Y Pilmore +33 1 46 93 42 75
Marco Perron
Asia E&Y Eric Chia +852 2629 3737

Biren Parekh (Middle East/Eurasia) +91 22 5665 5205

FirmDecisions Greg Flint +617 3720 1501
Australia/New Zealand E&Y Dan Hutchens +61 2 92485504
Firm Decisions Greg Flint +617 3720 1501
Latin America E&Y Ricardo Belo +55 11 2112 5623
Angel Fernandez (Mexico only) +42 44 4283 1480
FirmDecisions Tony Newcomb +55 11 3045 5399
Africa E&Y Derek Engelbrecht +27117723567
FirmDecisions Stephen Broderick +44 0207 637 4466
Scope of an Audit
The audit process and procedures are included in the auditor contract. The standard audit procedures should be evaluated when
conducting a compliance audit, in order to ensure coverage within all pertinent areas of the contract and to maintain global
consistency. Execution of the audit should comply with the minimum acceptable standard steps (refer to Supplement 6.4.3, Audit
Program Template, for the standard agency audit procedures). Some parts of the procedures may not be applicable based upon the
nature of the contract with the agency (for example, the media section will not apply to a promotional agency). In addition, each
agency relationship should be evaluated by local operations to determine if more procedures should be added. Any steps other than
those listed below may result in additional costs for the audit and should be discussed when engaging an auditor. The auditor will
ensure that all sections of the contract are audited for compliance.
An audit will thoroughly evaluate the current state, usually the most recent 12 month period. The scope of the audit is to ensure
compliance with the terms and conditions outlined in the Company's contract with that agency. This can include an evaluation of:
• Compliance with the remuneration requirements in the executed contract.
• Review of the business requirements as specified in the Terms and Conditions of the contract between the Company and the
agency from the initial request for services through the post report of program results.
• Review of the payment and approval process from the signing of an initial estimate through final invoicing.
Data Requirements
A sound audit requires the exchange of information between three parties: the Company, the marketing agency and the auditors.
Initially, the agency will need to provide a summary spreadsheet of all billings during the established 12 month period, as well as
system generated details from their accounting software to ensure accuracy and completeness.
Four weeks prior to the scheduled audit start date, the Company’s Finance and Marketing representatives should provide the auditors
with:
• Copies of the executed contracts between the Company and the agency
• Reports generated by our accounting systems (such as purchase order information) to validate the data with the agency
• Summary of the marketing spend with the agency by project or brand that is not included in the summary spreadsheet (for
example, agency fees, production costs, travel and out-of-pocket expenses)
The auditors need to communicate the general audit plan. Given the volume of work, an appropriate sample size should be
established upon review of the initial data requirements. Sampling methods can include statistical, random, or judgmental. Actual
sample sizes, and the method to be used, can be based on multiple criteria:
• Volume of spending (such as, population)
• Area(s) of focus or risk (for example, spot media vs. national network, broadcast vs. print production.)
• History or issues with the agency to be audited
• Initial testing results - if many exceptions are found during an initial review, it may make sense to choose a larger sample.

Conversely, if there are minimal exceptions found during the initial review, it may make sense to re-direct efforts to another
possible area of risk.
Auditors will determine the sample size and methodology to be employed for the audit (20% or greater) using the standard agency
audit procedures. Note: Media samples are left at 15% due to the typically larger amounts of total spend with these agencies.
Once a sample has been selected, additional information will be needed from the agency, including, but not limited to, the following:
• Client bills
• All payment details
• Job detail reports
• Third party supplier invoices
• Authorized Statements of Work/Project Statements/Media Plans
• Signed estimates
• Time summary by person to support the agreed staffing plan
• Individual timesheets
• Explanation details for all internal charges (for example, production)
• Competitive bids on production jobs
• Overhead calculation summary
• List of production jobs/projects and costs
• Trial Balance
Audit Report
The audit report should provide a clear understanding of the review findings to both organizations. It addresses compliance by the
agency, and also highlights areas of risk and/or opportunity when terms or conditions were not met. The audit report may include
observations regarding issues that are not captured in the current relevant agency contract (such as best practices). Therefore, it is as
important to standardize the audit report as it is to standardize the audit process. In addition, third party audit firms have been
retained to ensure independent evaluation of the agencies. There may be discussion between the auditors and the local operations
regarding the findings, but the final decision maker with regards to report content and ratings is the independent audit firm.
Refer to Supplement 6.4.4 for the Standard Audit Report Template.
Category of Findings Definition
The Protocol uses a standard format for identifying findings and recommendations. This format defines the degree of risk, as defined
by CAD, and Company exposure and ranks the findings according to the need for management attention. The findings are grouped
into four categories: Critical Risk, High Risk, Potential Risk and Operational Opportunities.
I. Critical Risk – Significant instance(s) of non-compliance with the Master Services Agreement were identified and/or significant
Internal Control deficiencies were noted. Unless corrected, the instance(s) of non-compliance or control weaknesses could
adversely affect the Company’s financial standing, public image and/or the value of patents, copyrights or trademarks. Further,
items can be rated as Critical Risk if 10% or more of the audit population is determined to be unallowable charges and
reimbursement to the Company or the Operation is required.
Immediate corrective actions must be taken. A formal progress report is required within 30 days of this report’s issuance date.

II. High Risk – Instance(s) of non-compliance with the Master Services Agreement were identified and/or major Internal Control
deficiencies were noted. Items are rated as High Risk if either supporting documentation for billed charges is inadequate or
internal control processes to track and account for billing information do not exist or are poorly implemented. Further, items can
be rated as High Risk if 10% of the audit sample size is determined to be unallowable charges and reimbursement to the
Company or the Operation should be considered.
Corrective actions should begin within one month of this report's issuance date. A formal progress report is required within 60
days.
III. Potential Risk – Instances of non-compliance with the Master Services Agreement were identified and/or certain Internal Control
deficiencies were noted; however, the business risk to the Company or the Operation is currently not significant.
Corrective action should be included as a priority activity within the agency's on-going business activities and referenced in the
next audit to see if risks have been addressed. Formal progress reporting on these items is not required.
IV. Operational Opportunities – A process has the potential for improvement and management attention is suggested.
A re-audit of the agency must occur within the 12 months following the final audit report date when the initial audit results in failure.
Failure of an audit is defined as any audit within a 12 month period that results in one or more findings of Critical Risk or three or
more findings of High Risk as defined above.
Audit Reporting Process and Timelines
In order to maintain a good client-agency relationship, it is important that the agency is notified of the results of the audit in a timely
manner. Therefore, the following steps and timelines should be adhered to once the fieldwork for an audit has been completed.
The audit reports from all approved auditors, with the exception of E&Y (covered in the next section), will consist of an Executive
Summary and a Detail Report, both containing risk ratings for each finding. Please review the following process or refer to Figure
6.4.3, Report Flowchart. In addition, see Supplement 6.4.6 for the Auditor Workflow diagram.
1) Auditor issues draft Detail Report and Executive Summary to Company local operations within 2 weeks after
completion of audit fieldwork.
2) Company local operations approves draft within 4 weeks of receipt of the draft. Within this time, local operations
must review the draft, respond to auditor with any comments or questions, and develop a Management Action Plan
which is forwarded to the auditor to be included in the final Executive Summary. The Management Action Plan is
jointly developed by local Marketing and Finance and will describe what is being done by the Agency and the
Company for resolution of the identified issues. If, after 4 weeks , the local operation has not approved the draft and
forwarded the Management Action Plan to the auditors, the auditors will notify the geographical CAD Manager for
followup.**
3) Auditor issues final Detail Report and Executive Summary to Company local operations within 1 week of draft report
approval, with a copy of the Executive Summary to GP&T. Note: Auditor will also forward a copy of the Detail Report
to GP&T when Critical and High Risk findings occur.
4) Company local operations forwards Executive Summary with Action Plan to Group Finance Managers. Note:
Company local operations should also forward a copy of the Detail Report to Group Finance Managers when Critical
and High Risk findings occur.
5) GP&T enters Executive Summary information into Global Audit Tracking Database and forwards Critical and High
Risk Executive Summaries to Corporate Marketing and CAD.
** Please Note: Timeframes listed above are critical to the process. If there is any delay in responding to draft reports
(if it will take longer than 4 weeks for scheduling reasons), please notify the auditor.
Since E&Y is the Company’s financial auditor of record, the risk ratings for all marketing services audits performed by E&Y will be
determined by CAD. Therefore, E&Y will submit only a Detail Report to Company local operations. All final Detail Reports submitted
by E&Y will require routing to CAD where risk ratings will be applied prior to final distribution as described below. The process for
E&Y audits is as follows:
1) E&Y issues draft Detail Audit Report to Company local operations within 2 weeks after completion of audit fieldwork.

2) Company local operations approves draft within 4 weeks of receipt of the draft. Within this time, local operations
must review the draft, respond to E&Y with any comments or questions, and develop a Management Action Plan.
The Management Action Plan is jointly developed by local Marketing and Finance and will describe what is being
done by the Agency and the Company for resolution of the identified issues. If, after 4 weeks , the local operations
has not approved the draft, E&Y will notify the geographical CAD Manager for followup.**
3) E&Y issues final Detail Audit Report to Company local operations within 1 week of draft report approval and emails
summary to CAD without ratings.
4) Company local operations forwards the E&Y final Detail Report and the Management Action Plan to CAD
immediately upon receipt.
5) Company local operations notifies GP&T of completion of audit reporting and distribution to CAD.
6) CAD reviews report and applies initial risk ratings.
7) CAD discusses and agrees on risk ratings with Company local operations.
8) CAD issues Executive Memo to Company local operations and GP&T within 15 days of E&Y Detail Report &
Management Action Plan receipt. CAD will also distribute detail report to GP&T if there are Critical and High Risk
findings.
9) GP&T enters Executive Summary information into Global Audit Tracking database and forwards Critical and High Risk
Executive Summaries to Corporate Marketing.
** Please Note: Timeframes listed above are critical to the process. If there is any delay in responding to draft reports
(if it will take longer than 4 weeks for scheduling reasons), please notify E&Y.
All audit findings will be maintained by GP&T in the Agency Audit Tracking Database. This database will be used to track audit
schedules and progress over time as well as to look for common findings among agency networks.
Figure 6.4.3, Report Flowchart

The Company's contacts for the Protocol are listed below. Please contact the appropriate individual for specific questions related to
their category:
Department Contact Category

Corporate Marketing Manager, Worldwide Creative Agency Operations Creative/Advertising
Ivan Isayev (404-676-3072)
Director, WW Media & Communications Operations Media/Creative/Advertising

Sarah Armstrong (404-676-2262)
Corporate Marketing Vice President, Identity Design Design
David Butler (404-676-2840)
Global Procurement & Global Procurement Manager, Marketing Procurement Global Audit Protocol policy
Trading Gina Collins (404-676-3580)
Procurement Manager, Marketing Procurement

Tierney Barnes (404-676-1247)
Length of Compliance Audit
Once the Company has authorized an audit, and informed the selected agency, the process should take approximately 15 calendar
weeks. A typical plan could resemble the following:
Task Timing
The Company initiates and authorizes work Week 1
Request and receive summary report and initial Week 1 - 2
systems report from the agency
Company communicates audit details such as: third Week 2 - 4
party selected to conduct audit, audit scope, sample *This is dependent on the agency's
size ability to be efficient in the collection of
their own data*
Agency collates requested data for the selected
sample
Audit performs audit and writes draft report Week 5 - 6
Marketing, Finance check for factual accuracy of initial Week 7
findings
Internal review is conducted and changes/amendments Week 7 - 10
discussed with the Auditor, Management Action Plan is
jointly developed by local Finance, Marketing,
Procurement and Legal. Agency is notified of current
audit status as a courtesy. Agency should be given an
idea as to when to expect results to be presented.
Final agreed report is presented to the Company by Week 11 - 12
the Auditor, Executive Summary is forwarded to GP&T.
The Executive Summary with Action Plan is forwarded Week 13 - 14
to Group Finance Managers and GP&T (see "Audit
Reporting Process and Timelines" for exact steps and
E&Y process).
Findings and Action Plan are presented to agency by Week 15
Marketing and/or core team
Addressing Audit Findings
Each agency relationship is unique to the market which it supports and can also have a multi-geographical impact given some of the
Company’s large network relationships. All network agencies should be audited locally because all contracts are negotiated within
each individual country. Therefore, careful consideration should be given to the both the strategic and tactical decisions stemming
from the results of the audit.
As referenced above, the local Finance, Marketing, Procurement and Legal organizations (as applicable) are jointly accountable for
developing the Management Action Plan based on audit findings as well as forwarding the final Detail Report and/or Executive
Summary with Management Action Plan to Group Finance Managers and GP&T. The Protocol uses a standardized approach for
identifying the degree of Company exposure for any given finding. It is recommended that the same approach be leveraged when
determining remedial actions. The urgency and completeness of change is much higher given the rank of the finding in correlation
with the need for management attention.
Category of Findings Timing of Solution*

Critical Risk Immediate corrective actions must be taken. A formal
progress report is required within 30 days of the report's
issuance date.
High Risk Corrective actions should begin within 30 days of the report's
issuance date. A formal progress report is required within 60
days.
Potential Risk Corrective action should be included as a priority activity
within the agency's on-going business activities and
referenced in the next audit to see if risks have been
addressed. Formal progress reporting on these items is not

required.
Operational Opportunities Both parties will mutually agree to an acceptable timeframe
for a change, if needed
*From the date the agency receives the final audit report.
The performance review process stated in the contract with the agency should be used as the review cycle for both parties to track
the progress of the remedial action of a concluded audit. They should also be revisited as new reviews take place.
Audit Funding
Funding is a local Marketing decision. The standard, recommended approach for the protocol is for the Company to pay for the initial
audit. Another option for payment would be that the Company and the marketing agency split the cost equally. Furthermore, if a re-
audit occurs due to failure of the initial audit as defined above, the cost of the follow up audit can be negotiated with the marketing
agency.
When evaluating payment options, the most critical consideration is being certain that the external auditor’s compensation is in no
way linked to the outcome of the audit findings. The external auditor should be paid a fixed fee, regardless of the ultimate impact of
the review. Therefore, the recommended approach of the Company paying for the initial audit promotes the spirit of fairness within
the client-agency relationship and encourages the agency to be compliant with the established Terms and Conditions. You can ensure
this possibility by stating this language in future agency contracts as well as specifying that agencies pay for any reaudits following
Critical and High Risk findings. However, under certain circumstances, flexibility in payment terms with the audit firm may be
considered.
The standard compliance audit using preferred global auditors averages between $15,000 and $30,000 depending on scope variations
and geography. European Union Group audits are priced on a per audit basis due to contracted volume commitment. All other audits
globally are priced based on size of spend with the agency during the time period being audited and are categorized as follows:
small - $500 - $5,000,000

medium $5,000,001 - $10,000,000
large - $10,000,001 - $20,000,000
custom - >$20,000,000
Internal Controls
To assure the accuracy of financial records and reports and to safeguard assets, the following internal controls included under
Practices and Procedures are presented by control objective.
Record Budgets
Record budgets in a subsystem by bottler, brand, activity, customer and package or an appropriate combination of these.
Record Commitments Immediately
Commitments should be recorded against their appropriate budget category as soon as made. The budget category should be
reviewed to ensure sufficient funds are available to accommodate the commitment.
Shifting Funds
Shifting of funds should be documented and approved by the Division in accordance with the local Chart of Authority. This includes
shifts between brands and shifts between advertising, sales promotions, external affairs advertising and external affairs programs.
Supplements
Supplement 6.4.1 provides a description of the sales curve calculation performed and recorded at Headquarters.
Supplement 6.4.2 provides the sales curve calculation formulas.

Supplement 6.4.3 contains the Audit Program Template
Supplement 6.4.4 contains the Standard Audit Report Template
Supplement 6.4.5 provides the Exception Approval Form
Supplement 6.4.6 provides a diagram of the Auditor Workflow
Supplement 6.4.7 provides a listing of curved and non-curved expenses and deductions.
Back to top
For Internal Use Only. Copyright © 2001 The Coca-Cola Company.

Maintained by Lisa R. Hutchins, The Controller's Group

SPP 6.4 Marketing Expenses

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SPP 6.4 Marketing Expenses

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SPP 6.

Standard Practices and Procedures (SPP)

6.4 Marketing Expenses

Terms You Should Know Monitor Budget

Terms You Should Know

Capability and Performance Programs (CAPPrs)

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marketing expense control (MEC)

Overview of Business Cycle

Figure 6.4.1 Marketing Expenses Business Cycle

2 Share Plan with Bottlers

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and therefore accrued.

6 Share Costs with Bottlers

8 Marketing Services Agency Audit

Annual Marketing Budget

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Legacy Account SAP Account Account Description

Legacy Account SAP Account Account Description

Practices and Procedures

Business Plan Development

The BP process has four goals:

To focus on future actions and events

To rank priorities for strategic emphasis and funding

To compare actual versus planned events after execution

To focus on value-creating strategies using economic profit as a management tool

Share Plan with Bottlers

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Accounting for Marketing Commitments

Year-End Review of Commitments

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Share Costs with Bottlers

Bottler's name and location

Months covered by the amount claimed

Total expenditure for the month for each item

Company's participation percentage share of each item

Grand total of Bottler's and Company's share

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Subaccounts can be set up to track different marketing and promotional charges.

Accounting Treatment for Marketing Expenses

Deferred Expense Rationale

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Period Expense Rationale

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market (see deferred expense section above).

Coupon expense Coupon redemption, production, and artwork expense

Professional sports teams - expense is recorded in

Professional sports leagues - expense is recorded

Colleges and universities - expense is recorded based

All other local properties (such as zoos, Minor League

Variable cinema funding (rate based on volume or

Fixed cinema funding (such as ads and boards) –

Marketing Expense Accruals

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Accrued Expense Rationale

For deferrable expenses, the debit is to prepaids,

For period expenses, the debit is to expense. See

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Audit of Marketing Services Agencies

Policies Regarding Agency Audits

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Planning & Executing

Reporting Audit Results