Starbucks 2006 Annual Report Download - page 54

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financial statement errors using both an income statement and cumulative balance sheet approach. SAB 108 is effective
for fiscal years beginning after November 15, 2006, and the Company will adopt the new requirements in fiscal 2008.
The adoption of SAB 108 is not currently expected to have a significant impact on the Company’s consolidated financial
statements.
Note 2: Business Acquisitions
In January 2006, Starbucks increased its equity ownership to 100% in its operations in Hawaii and Puerto Rico and
applied the consolidation method of accounting from the acquisition date. Previously the Company owned 5% of both
Coffee Partners Hawaii and Café del Caribe in Puerto Rico. Because Coffee Partners Hawaii was a general partnership,
the equity method of accounting was previously applied. Retroactive application of the equity method of accounting for
the Puerto Rico investment, which was previously accounted for under the cost method, resulted in a reduction of
retained earnings of $0.5 million as of April 2, 2006. Previously reported earnings per share amounts were not impacted
as a result of this acquisition.
As shown in the tables below, the cumulative effect of the accounting change for financial results previously reported
under the cost method and as restated in this report under the equity method reduced net earnings by $97 thousand for
the fiscal year ended October 2, 2005 and $93 thousand for the fiscal year ended October 2, 2004 (in thousands):
FISCAL YEAR ENDED Oct 2, 2005 Oct 3, 2004
Net earnings, as previously reported $494,467 $388,973
Effect of change to equity method (97) (93)
Net earnings, as restated for Puerto Rico acquisition $494,370 $388,880
Note 3: Cash and Cash Equivalents
Cash and cash equivalents consist of the following (in thousands):
FISCAL YEAR ENDED Oct 1, 2006 Oct 2, 2005
Operating funds and interest bearing deposits $ 84,943 $ 62,221
Money market funds 227,663 111,588
Total $312,606 $173,809
Note 4: Short-term and Long-term Investments
The Company’s short-term and long-term investments consist of the following (in thousands):
OCTOBER 1, 2006
Amortized
Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Fair
Value
Short-term investments — available-for-sale securities:
State and local government obligations $ 75,379 $ 9 $(332) $ 75,056
U.S. government agency obligations 10,000 — — 10,000
Corporate debt securities 2,488 — (2) 2,486
Total 87,867 $ 9 $(334) 87,542
Short-term investments — trading securities 55,265 53,496
Total short-term investments $143,132 $141,038
Long-term investments — available-for-sale securities:
State and local government obligations $ 5,893 $ — $ (82) $ 5,811
50 STARBUCKS CORPORATION, FORM 10-K