Starbucks 2005 Annual Report Download - page 53

stock options under these plans unless there is an increase, above the grant price, in the market price of the
Company's stock. Such an increase in stock price would benefit all shareholders commensurately.
For option grants made in November 2003 and thereafter, the Company may provide for immediate vesting
for optionees who have attained at least 10 years of service and are age 55 or older. For purposes of the pro
forma presentation of stock-based compensation expense, the Company currently amortizes the expense over
the related vesting period with acceleration of expense upon retirement. When the Company adopts
SFAS No. 123R, ""Share-Based Payment'' (""SFAS 123R'') in its first quarter of fiscal 2006, the accounting
treatment for retirement features will change. Expense for awards made prior to adoption of SFAS 123R will
continue to be amortized over the vesting period until retirement, at which point any remaining unrecognized
expense will be immediately recognized. For awards made on or after October 3, 2005, the related expense will
be recognized either from grant date through the date the employee reaches the years of service and age
requirements, or from grant date through the stated vesting period, whichever is shorter.
As required by SFAS 123, the Company has determined that the weighted average estimated fair values of
options granted during fiscal 2005, 2004 and 2003 were $8.10, $5.30 and $4.15 per share, respectively.
Foreign Currency Translation
The Company's international operations generally use their local currency as their functional currency. Assets
and liabilities are translated at exchange rates in effect at the balance sheet date. Income and expense
accounts are translated at the average monthly exchange rates during the year. Resulting translation
adjustments are recorded as a separate component of accumulated other comprehensive income/(loss).
Income Taxes
The Company computes income taxes using the asset and liability method, under which deferred income taxes
are provided for the temporary differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
Stock Split
On October 21, 2005, the Company effected a two-for-one stock split of its $0.001 par value common stock for
holders of record on October 3, 2005. All applicable share and per-share data in these consolidated financial
statements and related disclosures have been retroactively adjusted to give effect to this stock split.
Earnings per Share
The computation of basic earnings per share is based on the weighted average number of shares and common
stock units that were outstanding during the period. The computation of diluted earnings per share includes
the dilutive effect of common stock equivalents consisting of certain shares subject to stock options.
Common Stock Share Repurchases
The Company is allowed to repurchase shares of its common stock under a program authorized by its Board of
Directors pursuant to a contract, instruction or written plan meeting the requirements of Rule 10b5-1(c)(1)
of the Securities Exchange Act of 1934. Share repurchases are not displayed separately as treasury stock on
the consolidated balance sheets or consolidated statements of shareholders' equity in accordance with the
Washington Business Corporation Act. Instead, the par value of repurchased shares is deducted from
""Common stock'' and the remaining excess repurchase price over par value is deducted from ""Additional
paid-in capital.'' See Note 13 for additional information.
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