Starbucks 2005 Annual Report Download - page 47

previously reported net earnings, cash flows from operating activities or shareholders' equity as a result of this
reclassification.
Additionally, the Company has reclassified its distributions received from equity investees on the consolidated
statement of cash flows, from investing activities to operating activities, for the fiscal years ended 2004 and
2003. These distributions represented returns on the underlying equity investments, and therefore have been
reclassified to be in accordance with the provisions of SFAS 95. There was no impact on the previously
reported consolidated statements of earnings or consolidated balance sheets as a result of this reclassification.
Collectively, these adjustments increased net cash used by investing activities in the consolidated statements
of cash flows by $91.0 million and $96.5 million for the fiscal years ended 2004 and 2003, respectively.
Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of
purchase to be cash equivalents. The Company maintains cash and cash equivalent balances with financial
institutions that exceed federally insured limits. The Company has not experienced any losses related to these
balances, and management believes its credit risk to be minimal.
Cash Management
The Company's cash management system provides for the reimbursement of all major bank disbursement
accounts on a daily basis. Checks issued but not presented for payment to the bank are reflected as a reduction
of cash and cash equivalents on the consolidated financial statements.
Short-term and Long-term Investments
The Company's short-term and long-term investments consist primarily of investment-grade marketable debt
securities as well as bond and equity mutual funds, all of which are classified as trading or available-for-sale.
Trading securities are recorded at fair value with unrealized holding gains and losses included in net earnings.
Available-for-sale securities are recorded at fair value, and unrealized holding gains and losses are recorded,
net of tax, as a separate component of accumulated other comprehensive income. Available-for-sale securities
with remaining maturities of less than one year and those identified by management at time of purchase for
funding operations in less than one year are classified as short-term, and all other available-for-sale securities
are classified as long-term. Unrealized losses are charged against net earnings when a decline in fair value is
determined to be other than temporary. Management reviews several factors to determine whether a loss is
other than temporary, such as the length of time a security is in an unrealized loss position, extent to which
fair value is less than amortized cost, the impact of changing interest rates in the short and long term, the
financial condition and near term prospects of the issuer and the Company's intent and ability to hold the
security for a period of time sufficient to allow for any anticipated recovery in fair value. Realized gains and
losses are accounted for on the specific identification method. Purchases and sales are recorded on a trade date
basis.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of
those instruments. The fair value of the Company's investments in marketable debt and equity securities, as
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