Coke’s contingent liability for income taxes from a case in the U.S. Tax Court was covered in a vignette in Chapter 9. Up to the June 2024, the company maintained in its quarterly 10-Q filing that the probability of winning the case was more likely than not. The firm did increase the provision for the liability to $456 million from the $438 million in the vignette while reporting that it could be $6.0 billion (including interest) if the court case goes against it.
In July 2024, a judge ruled against the firm, requiring a $6.0 billion payment, refundable if Coke won on appeal. Coke appealed the decision but still maintained its “more likely than not” stance that it would not have to pay, the standard for recognizing a contingent liability. The judgment covered years 2007-2009 with other years yet to be litigated.
To finance the $6.0 billion, Coke issued debt. Contingent debt (not recognized on the balance sheet) became actual debt (recognized).