Starbucks 2006 Annual Report Download - page 45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended October 1, 2006, October 2, 2005, and October 3, 2004
Note 1: Summary of Significant Accounting Policies
Description of Business
Starbucks Corporation (together with its subsidiaries, “Starbucks” or the “Company”) purchases and roasts high-quality
whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended
beverages, a variety of complementary food items, coffee-related accessories and equipment, a selection of premium teas
and a line of compact discs, primarily through its Company-operated retail stores. Starbucks also sells coffee and tea
products and licenses its trademark through other channels and, through certain of its equity investees, Starbucks
produces and sells ready-to-drink beverages which include, among others, bottled Frappuccino»coffee drinks and
Starbucks DoubleShot»espresso drinks, and a line of superpremium ice creams. All channels outside the Company-
operated retail stores are collectively known as “Specialty Operations.” The Company’s objective is to establish Starbucks
as one of the most recognized and respected brands in the world. To achieve this goal, the Company plans to continue
rapid expansion of its retail operations, to grow its Specialty Operations and to selectively pursue other opportunities to
leverage the Starbucks brand through the introduction of new products and the development of new channels of
distribution. The Company’s brand portfolio includes superpremium Tazo»teas, Starbucks Hear Music»compact discs,
Seattle’s Best Coffee»and Torrefazione Italia»coffee.
Principles of Consolidation
The consolidated financial statements reflect the financial position and operating results of Starbucks, which include
wholly owned subsidiaries and investees controlled by the Company.
Investments in entities that the Company does not control, but has the ability to exercise significant influence over
operating and financial policies, are accounted for under the equity method. Investments in entities in which Starbucks
does not have the ability to exercise significant influence are accounted for under the cost method.
All significant intercompany transactions have been eliminated.
Fiscal Year End
Starbucks Corporation’s fiscal year ends on the Sunday closest to September 30. The fiscal years ended on October 1,
2006 and October 2, 2005, included 52 weeks. The fiscal year ended October 3, 2004, included 53 weeks, with the
53rd week falling in the fiscal fourth quarter.
Reclassifications
Certain reclassifications of prior year’s balances have been made to conform to the current format.
Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) 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.
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