Starbucks 2009 Annual Report Download - page 56

and are estimated, in part, by considering historical claims experience, demographic factors, severity factors and
other actuarial assumptions.
Revenue Recognition
Consolidated revenues are presented net of intercompany eliminations for wholly owned subsidiaries and investees
controlled by the Company and for licensees accounted for under the equity method, based on the Company’s
percentage ownership. Additionally, consolidated revenues are recognized net of any discounts, returns, allowances
and sales incentives, including coupon redemptions and rebates.
Stored Value Cards
Revenues from the Company’s stored value cards, such as the Starbucks Card, and gift certificates are recognized
when tendered for payment, or upon redemption. Outstanding customer balances are included in Deferred revenue
on the consolidated balance sheets. There are no expiration dates on the Company’s stored value cards or gift
certificates, and Starbucks does not charge any service fees that cause a decrement to customer balances.
While the Company will continue to honor all stored value cards and gift certificates presented for payment,
management may determine the likelihood of redemption to be remote for certain card and certificate balances due
to, among other things, long periods of inactivity. In these circumstances, if management also determines there is no
requirement for remitting balances to government agencies under unclaimed property laws, card and certificate
balances may then be recognized in the consolidated statements of earnings in Net interest income and other.For the
fiscal years ended September 27, 2009, September 28, 2008 and September 30, 2007 income recognized on
unredeemed stored value card balances and gift certificates was $26.0 million, $13.6 million and $12.9 million,
respectively.
Retail Revenues
Company-operated retail store revenues are recognized when payment is tendered at the point of sale. Starbucks
maintains a sales return allowance to reduce retail revenues for estimated future product returns, including brewing
equipment, based on historical patterns. Retail store revenues are reported net of sales, use or other transaction taxes
that are collected from customers and remitted to taxing authorities.
Specialty Revenues
Specialty revenues consist primarily of product sales to customers other than through Company-operated retail
stores, as well as royalties and other fees generated from licensing operations. Sales of coffee, tea and related
products are generally recognized upon shipment to customers, depending on contract terms. Shipping charges
billed to customers are also recognized as revenue, and the related shipping costs are included in Cost of sales
including occupancy costs on the consolidated statements of earnings.
Specific to retail store licensing arrangements, initial nonrefundable development fees are recognized upon
substantial performance of services for new market business development activities, such as initial business, real
estate and store development planning, as well as providing operational materials and functional training courses
for opening new licensed retail markets. Additional store licensing fees are recognized when new licensed stores are
opened. Royalty revenues based upon a percentage of reported sales and other continuing fees, such as marketing
and service fees, are recognized on a monthly basis when earned. For certain licensing arrangements, where the
Company intends to acquire an ownership interest, the initial nonrefundable development fees are deferred to Other
long-term liabilities on the consolidated balance sheets until acquisition, at which point the fees are reflected as a
reduction of the Company’s investment.
Other arrangements involving multiple elements and deliverables as well as upfront fees are individually evaluated
for revenue recognition. Cash payments received in advance of product or service delivery are recorded in Deferred
revenue until earned.
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