Starbucks 2007 Annual Report Download - page 40

carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using
current enacted tax rates in effect for the years in which those temporary differences are expected to reverse.
Judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and
liabilities. These include establishing a valuation allowance related to the realizability of certain deferred tax assets,
and contingent tax liabilities provided for the possibility of unfavorable outcomes in certain tax positions. Although
the Company believes that its estimates are reasonable, actual results could differ from these estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpre-
tation of FASB Statement No. 109” (“FIN 48”), which seeks to reduce the diversity in practice associated with the
accounting and reporting for uncertainty in income tax positions. This Interpretation prescribes a comprehensive
model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions
taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15,
2006, and the Company will adopt the new requirements in its first fiscal quarter of 2008. The cumulative effect of
adopting FIN 48 will be recorded as an adjustment to retained earnings as of the beginning of the period of adoption.
The Company expects that the effect of adopting FIN 48 will result in an immaterial adjustment to fiscal year 2008
opening retained earnings.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal years. Early adoption is permitted.
Starbucks must adopt these new requirements no later than its first fiscal quarter of 2009. Starbucks has not yet
determined the effect on the Company’s consolidated financial statements, if any, upon adoption of SFAS 157, or if
it will adopt the requirements prior to the first fiscal quarter of 2009.
In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). The intent of
SAB 108 is to reduce diversity in practice for the method companies use to quantify financial statement
misstatements, including the effect of prior year uncorrected errors. SAB 108 establishes an approach that requires
quantification of financial statement errors using both an income statement and cumulative balance sheet approach.
SAB 108 was effective for annual financial statements for fiscal years ending after November 15, 2006, and the
Company adopted the new requirements in fiscal 2007 with no impact to its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS 159”). SFAS 159 permits companies to choose to measure many financial instruments and
certain other items at fair value. SFAS 159 is effective for financial statements issued for fiscal years beginning after
November 15, 2007, or Starbucks first fiscal quarter of 2009. Early adoption is permitted. Starbucks has not yet
determined if it will elect to apply any of the provisions of SFAS 159 or what the effect of adoption of the statement
would have, if any, on its consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is incorporated by reference to the section entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Commodity Prices, Availability
and General Risk Conditions” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Financial Risk Management” in Item 7 of this Report.
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