Starbucks 2008 Annual Report Download - page 59

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impact on the Company’s consolidated financial statements and continues to evaluate the potential impact of the
adoption of SFAS 157 related to its nonfinancial assets and liabilities.
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 will be effective for Starbucks first fiscal quarter of 2009. Starbucks
believes the adoption of SFAS 159 will not have a material impact on the Company’s consolidated financial
statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”),
which replaces SFAS 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities assumed, any resulting goodwill,
and any noncontrolling interest in the acquiree. SFAS 141R also provides for disclosures to enable users of the
financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R will be
effective for Starbucks first fiscal quarter of 2010 and must be applied prospectively to business combinations
completed on or after that date.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial State-
ments — an amendment of Accounting Research Bulletin No. 51” (“SFAS 160”), which establishes accounting and
reporting standards for noncontrolling interests (“minority interests”) in subsidiaries. SFAS 160 clarifies that a
noncontrolling interest in a subsidiary should be accounted for as a component of equity separate from the parent’s
equity. SFAS 160 will be effective for Starbucks first fiscal quarter of 2010 and must be applied prospectively,
except for the presentation and disclosure requirements, which will apply retrospectively. The Company is currently
evaluating the potential impact that adoption of SFAS 160 may have on its consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an
amendment of FASB Statement No. 133” (“SFAS 161”), which requires enhanced disclosures about an entity’s
derivative and hedging activities. SFAS 161 will be effective for Starbucks second fiscal quarter of 2009.
Note 2: Business Acquisitions
In the fourth quarter of fiscal 2008, the Company acquired substantially all of the assets, including development and
operating rights, of Coffee Vision, Inc. (“CVI”) and Coffee Vision Atlantic, Inc. (“CVAI”), its licensee in Quebec
and Atlantic Canada. In addition, Starbucks acquired full development and operation rights for the retail stores in
these provinces.
In the third quarter of fiscal 2008, Starbucks purchased 100% equity ownership in Coffee Equipment Company
(“CEC”), a Seattle-based manufacturer and seller of a single cup, commercial grade coffee brewer called the
Clover
TM
.
In the second quarter of fiscal 2008, the Company purchased the remaining 10% equity ownership in its operations
in Beijing, China. Starbucks has applied the consolidation method of accounting since the first quarter of fiscal
2007, when it acquired 90% of these previously-licensed operations.
Note 3: Restructuring Charges
In January of fiscal 2008, Starbucks began a transformation plan designed to address the deterioration of its US
retail business, reduce its global infrastructure costs and position the Company’s business for long-term profitable
growth. Since the announcement, a number of actions have been initiated, resulting in the recognition of certain
exit, impairment and severance costs. The total amount of these restructuring costs recognized in fiscal 2008 was
$266.9 million. Certain additional costs from these actions are expected to be recognized in fiscal 2009, nearly all
related to US store closures.
US Store Closures — The most significant action was the commitment to close approximately 600 underperform-
ing Company-operated stores in the US market and reduce the number of future store openings. The decision was a
result of a rigorous evaluation of the Company-operated store portfolio, and the Company closed the first 205 of
these stores during the fourth quarter of fiscal 2008. As a result of the announced store closures and actions taken to
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