Starbucks 2007 Annual Report Download - page 45

STARBUCKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Years ended September 30, 2007, October 1, 2006, and October 2, 2005
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»beverages 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 expansion of its retail operations, to grow its Specialty
Operations and to selectively pursue other opportunities to leverage the Starbucks brand by introducing new
products and developing 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, including
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. Intercompany transactions and balances have been
eliminated.
Fiscal Year End
Starbucks Corporation’s fiscal year ends on the Sunday closest to September 30. Some fiscal years include
53 weeks. The fiscal years ended on September 30, 2007, October 1, 2006 and October 2, 2005 included 52 weeks.
Reclassifications
Certain reclassifications of prior year’s balances have been made to conform to the current format, including
reclassifications from “Other operating expenses” to “General and administrative expenses” on the consolidated
statements of earnings.
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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