HI5015 Legal Aspects of International Trade and Enterprise Sample Assignment
RESEARCH PAPER ON COCA COLA (U.S. BASED cONSUMER GOODS COMPANY)
HI5015 Legal Aspects of International Trade and Enterprise
EXECUTIVE SUMMARY
The main aim of this research paper is to provide the brief description of selected company which is operated in Australia. The Coca Cola Company (TCCC) is selected to execute the research. . TCCC is invented by pharmacist John Stith Pemberton in 1886 in Atlanta, Georgia. TCCC is the biggest non-alcoholic beverage company in the world. CCL has authorization to manufacture, distribute and sell the TCCC’s products and services in Australia. Moreover, legislative regulatory framework such as environmental regulation & performance, financial reporting requirements, Tax policies & strategies, etc. are discussed with the explanation. Apart from this, Agreements with suppliers is the main constituent which affects the Coca-Cola Amatil’s products and services in Australia.
BACKGROUND
INDUSTRY THE COCA COLA COMPANY (TCCC) WORKS IN
TCCC is the biggest non-alcoholic beverage company in the world. TCCC is invented by pharmacist John Stith Pemberton in 1886 in Atlanta, Georgia. The company operates in non-alcoholic beverage industry and its main competitors are such as Pepsico, Nestle, Red Bull, etc. TCCC is listed as KO under New York Stock Exchange and CCL is listed under Australian Stock Exchange. Coca-Cola, Diet Coke, Fanta and Sprite are the main brands of TCCC. (The Coca-Cola Company, 2019)
NUMBER OF EMPLOYEES IN AUSTRALIA
CCL manages and controls its products and services across six nations with 12,000 employees. (Coca-Cola Amatil, 2018)
NUMBER OF EMPLOYEES WORLDWIDE
Coca-Cola employs more than 62,600 employees which has brought opportunity to local communities globally. (Statista, 2019)
COCA COLA’S HEADQUARTERS
TCCC’s international headquarters is situated in Atlanta, Georgia, United States of America. The Australian headquarter of CCL is located in Sydney, New South Wales. (The Coca-Cola Company, 2019)
IDENTIFICATION OF ANY LEGISLATIVE REGULATORY FRAMEWORK AFFECTING COCA-COLA
ENVIRONMENTAL REGULATION & PERFORMANCE
Administration of environmental issues is a fundamental constituent of operational management within the CCL’s dealings. CCL is dedicated to understanding and lessening any hostile ecological influences of its drink and food manufacturing activities, identifying that the important parts of environmental effect are water and energy use, litter and the lifecycle of CCL’s packing. CCL policy is to safeguard all environmental laws and authorized circumstances are detected. CCL oversee its environmental subjects at an operational level, overlapped with a compliance arrangement supervised by the Risk & Sustainability Committee. Even though the CCL’s numerous operations include comparatively little intrinsic environmental hazards, substances of non-compliance are recognized from time to time and are spoken as fragment of routine management, and characteristically reported to the suitable monitoring expert.
ANNUAL FINANCIAL REPORTING REQUIREMENTS
The managements of the CCL are accountable for the establishment of the financial description that provides an accurate and impartial opinion according to Australian Accounting Standards and the Corporations Act 2001 and for such internal control since the managements control is obligatory to permit the arrangement of the financial report that provides an accurate and impartial opinion and is free from material misstatement, whether due to scam or fault. In formulating the financial report, the managements are accountable for evaluating the CCL’s capability to endure as a going concern, revealing, as appropriate, situations concerning to going concern and implementing the going concern base of accounting except the managements either aim to pay-off the Group or to conclude procedures, or have no accurate substitute but to do so. If any information is mispresented shown in annual report, then there would be significantly impact on the Coca Cola Amatil because as per the Corporation Act 2001, it would be violation and ASIC can take legal action against the company. (Coca-Cola Amatil Limited, 2017)
TAX POLICY, TAX STRATEGY & GOVERNANCE
Effective tax rate is calculated as income tax expense divided by profit before tax. Where nontrading items are recognised, effective tax rates are calculated on this same basis, excluding the impacts of these items. The effective tax rate for the CCL’s operations to the valid corporate income tax rate is 30%. It could be different to corporate income tax rate of United States of America. As of 1st January 2018, the corporate tax rate has reduced to 21% from 35%. Therefore, differences have made the CCL to earn more profits as compare to TCCC. It has direct impact on income statement and cash flow statement.
CCL is dedicated to accomplishing the uppermost values in the zones of corporate governance and corporate conduct and CCL’s tax accountabilities are achieved in line with this pledge. The Australian Taxation Office (the “ATO”) has acknowledged that Amatil maintains a cooperative and open relationship with them. CCL’s tax operating environment and framework is steered by a Board permitted “Group Tax Risk Management” strategy. An essential guiding code is the implementation of dealings is to be motivated by the anticipated business consequences not by the probable tax benefits/outcomes. CCL’s operating dealings do not implement a high level of expected tax risk and its money investment is not usually mobile or fluid. The accountabilities levied under the strategy are executed by qualified tax experts in the CCL tax function together with the tax functions positioned in each of CCL’s foremost dealings. CCL also lures on external tax proficiency via tax consultants in each of the controls it works in. CCL has an Audit and Finance Committee (“AFC”) and its aim is to supervise fiscal risk management and internal controls across CCL, as well as tax. There is consistent reporting on tax concerns to the AFC.
The ATO rates Amatil as a key taxpayer for income tax, goods and services tax (“GST”) and excise, under its risk-categorisation framework. As such, Amatil is engaged in ongoing dialogue with the ATO regarding its various review processes, particularly in relation to income tax. The completed reviews to date have predominantly found Amatil to be “low-risk” in respect of the matters examined, with no material adjustments made to Amatil’s tax payments in Australia. In addition, Amatil’s internal auditors conduct periodic reviews of Amatil’s controls, processes and systems for both GST and Fringe Benefits Tax.
In addition to the taxes directly borne by Amatil, Amatil collected net GST amounts, PAYG withholding taxes on salaries paid to Australian employees, and Wine Equalisation Tax (“WET”). (The Coca-Cola Amatil, 2017)
BUSINESS & SUSTAINABILITY RISKS
CCL is revealed to a variety of market, economic, operational, and socio-political hazards that could have an unfortunate fallout on CCL’s upcoming financial predictions. The essence and possible effect of these hazards can alter over period and fluctuate in extent with what CCL can regulate. CCL has a risk management framework in position with internal control systems to alleviate these significant company risks. CCL’s important business risks comprise but are not restricted to Beverage industry risks; Economic factors impacting demand and cost base; Cyber risk; Regulatory risks; Malicious product tampering risk; Litigation risk; Loss of social licence to operate; Relationship with The Coca-Cola Company (TCCC) and other brand partners; Key supplier risk; Climate change risk; Business continuity risk; Workplace Health and Safety (WHS) risk; and Foreign exchange risk. (Coca-Cola Amatil, 2018)
ANY TREATIES, CONVENTIONS OR AGREEMENTS AFFECTING COCA-COLA’S PRODUCTS/SERVICES IN AUSTRALIA
AGREEMENTS WITH SUPPLIERS
CCL’s suppliers are business partners who provide the company’s system with materials, including ingredients, packaging and machinery, as well as goods and services. The Company's Supplier Guiding Principles (SGP) communicate their values and expectations, emphasizing the importance of responsible environmental and workplace policies and practices. Suppliers' strategies and practices obligate to obey, at a least, with all appropriate laws and regulations, comprising those about child labor; involuntary labor; exploitation of labor; liberty of association and collective haggling; discrimination; etc. New contracts with suppliers need compliance with CCL’s SGP. CCL has communicated these hopes, qualified suppliers and commenced a wide-ranging auditing procedure. CCL has also operated with its bottling associates so that they have alike values to accomplish suppliers not protected by the CCL’s program. (TCCC, 2018)
The strategies of price and product contributed to a sugar reduction in consumed drinks of 2.2 per cent. It’s thanks to partnerships with suppliers like Coca-Cola Amatil that CCL is able to support these outcomes and CCL looks forward to ongoing collaboration with them.
RELATIONSHIP WITH THE COCA-COLA COMPANY (TCCC)
The CCL Board continues to have a robust and productive rapport with TCCC, both as a stakeholder and as the foremost supplier of components for the majority of CCL non-alcoholic beverage brands. As a key bottler within the global Coca-Cola system, CCL has a close relationship with, and is an important growth vehicle for, TCCC. In its six countries, CCL has access to a total population of more than 270 million people through over 690,000 active customers. CCL’s strength in these markets is due to its knowledge of local customs and consumer preferences, its historical relationships with suppliers and retail customers, and its established manufacturing and distribution infrastructure, which ensures maximum brand availability and efficient distribution of TCCC’s products in the region. CCL relationship with The Coca-Cola Company is governed in various markets by Bottler’s Agreements which set out the respective rights and responsibilities of Coca-Cola Amatil and The Coca-Cola Company. These agreements are typically 10 years in duration and have consistently been renewed. CCL’s bottler’s agreements provide us exclusive rights to produce, package, sell, and distribute the relevant trademarked products of The Coca-Cola Company in a territory. CCL’s agreements contain obligations in relation to manufacturing and marketing requirements of The Coca-Cola Company. The Coca-Cola Company and its subsidiaries take overall responsibility for the consumer marketing of its products, for product innovation and R&D, and the supply of proprietary concentrates and beverage bases to Coca-Cola Amatil. Coca-Cola Amatil is responsible for determining the pricing of products offered to customers.
Generally, CCL’s arrangements with The Coca-Cola Company prohibit them from producing, promoting or selling any non-alcoholic beverage without The Coca-Cola Company’s consent. However, with The Coca-Cola Company’s consent, CCL own outright and distribute the following brands: Mount Franklin, Kirks, Deep Spring, Bisleri, L&P and Pump (in New Zealand). CCL also requires to gain consent from The Coca-Cola Company for distributing or storing any products, other than those of The Coca-Cola Company, in vehicles or equipment that has The Coca-Cola Company branding.
BOTTLERS’ AGREEMENTS
CCL’s production of TCCC trademarked beverages is dependent on, and governed by, a series of bottlers’ agreements covering the six countries in which CCL produces, distributes and sells those beverages. These agreements have substantially similar terms with a range of expiry dates. All the bottlers’ agreements which are included in CCL’s present arrangements, the first of which was originally issued in 1939, have been renewed at the expiry of their terms. The bottlers’ agreements authorise CCL to produce, distribute and sell TCCC trademarked beverages in approved containers in specified geographic territories. They also permit CCL to use TCCC trademarks, designs and containers to market the beverages in each territory. (CCA, 2012)
CCL has a number of bottling agreements with TCCC which deliver CCL with the limited privileges to produce, dispense, market and wholesale TCCC trademarked brands in each of the six nations in which CCL works. CCL’s agreements are for primarily 10-year periods and replicate an extensive and continuing rapport between CCL and TCCC. No payment is owed upon renewal or extension of the agreements. In evaluating the useful life of the contracts, consideration is given in the form of substantial to the CCL history of transactions with TCCC since 1939, their recognized worldwide practices and equity interests in the CCL, contribution of applicants of TCCC CCL’s Board of Directors and the enduring viability of TCCC products. Consequently, no aspect can be recognized that would consequence in the contracts not being changed or extended and hence the contracts have been evaluated as having unspecified useful lives, which need yearly impairment testing.
LOW CARBON ENERGY & SECURITY
CCL is aiming to source at least 60 per cent of their manufacturing energy needs from low- and no-carbon sources by 2020, including natural gas, LPG, wood, direct renewables from on-site sources and indirect renewables supplied through grid connected power purchase agreements. In 2017 total renewable or low-carbon energy use was 58.81 per cent. In December 2017 we entered into a long-term wind-power purchase agreement as part of a consortium of large energy users led by Telstra. The agreement covers the 226-megawatt first stage of the Murra Warra Wind Farm near Horsham in western Victoria owned by RES Australia and Macquarie Capital. Coca-Cola Amatil believes this collaboration between Australian businesses demonstrates how working together, companies can achieve greater control over their energy costs and support the transition to renewable energy. (Coca-Cola Amatil , 2017)
REFERENCES
CCL, 2012. Information Memorandum. [Online]
Available at: https://www.CCLmatil.com/-/media/CCL/Corporate/Files/Funding-Programmes/A$2-Billion-Domestic-Debt-Securities-Issuance-Programme-Information-Memorandum.ashx?la=en
Coca-Cola Amatil , 2017. Sustainability Report. [Online]
Available at: https://www.CCLmatil.com/-/media/CCL/Corporate/Files/Annual-Reports/2018/Sustainability-Report-2017.ashx
Coca-Cola Amatil Limited, 2017. Financial and Statutory Reports. [Online]
Available at: https://www.CCLmatil.com/-/media/CCL/Corporate/Files/ASX-Announcements/2018/2017-Full-Year-Report.ashx
Coca-Cola Amatil, 2018. Annual Report. [Online]
Available at: https://www.CCLmatil.com/-/media/CCL/Corporate/Files/ASX-Announcements/2019/2018-Annual-Report.ashx
Coca-Cola Amatil, 2018. Corporate Governance Statement. [Online]
Available at: https://www.CCLmatil.com/-/media/CCL/Corporate/Files/ASX-Announcements/2019/Notice-of-2018-Corporate-Governance-Statement.ashx
Statista, 2019. Coca-Cola's global workforce 2007-2018. [Online]
Available at: https://www.statista.com/statistics/254562/coca-colas-number-of-employees-worldwide/
TCCC, 2018. Supplier and Customer Partnerships. [Online]
Available at: https://www.coca-colacompany.com/our-company/suppliers/supplier-and-customer-partnerships
The Coca-Cola Amatil, 2017. Tax Transparency. [Online]
Available at: https://www.CCLmatil.com/-/media/CCL/Corporate/Files/Presentations/2018/Tax-Transparency-Report-2017.ashx
The Coca-Cola Company, 2019. 2018 Annual Report on Form 10-K. [Online]
Available at: https://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2019/annual-shareholders-meeting/2018-Annual-Report-on-Form-10-K.pdf
