Starbucks 2009 Annual Report Download - page 65

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Location of Gain/(Loss)
Recognized in Earnings Gain/(Loss)
Recognized in Earnings
Derivatives not designated as hedging instruments for accounting purposes:
Foreign Exchange Interest income and other, net $22.8
Commodity Interest Income and other, net $ (0.6)
(1)
In fiscal 2009, $0.3 million of gain was recognized in Net interest income and other related to the ineffective
portion.
(2)
The Company entered into, dedesignated and settled forward interest rate contracts to hedge movements in
interest rates prior to issuing its $550 million 6.25% Senior Notes in fiscal 2007. The resulting net losses from
these contracts will continue to be reclassified to Interest expense on the consolidated statements of earnings
over the life of the Senior Notes due in 2017.
(3)
In fiscal 2009, $3.7 million of gain was recognized in Net interest income and other related to the ineffective
portion.
The Company had the following outstanding derivative contracts as of September 27, 2009, based on notional
amounts:
• $708 million in foreign exchange contracts
• $25 million in dairy contracts
• $7 million in diesel contracts
Note 5: Fair Value Measurements
The Company adopted the new fair value accounting guidance related to financial assets and liabilities effective
September 29, 2008, and will adopt the new fair value accounting guidance for nonfinancial assets and liabilities in
the first fiscal quarter of 2010. The new fair value accounting guidance allows for this two-step adoption approach.
The Company continues to evaluate the potential impact of the adoption of fair value measurements related to its
property, plant and equipment, goodwill and other intangible assets.
The guidance defines fair value, establishes a framework for measuring fair value under GAAP and expands
disclosures about fair value measurements. It also establishes a fair value hierarchy that prioritizes the inputs used to
measure fair value:
•Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in
active markets.
•Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly.
•Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed
methodologies that result in management’s best estimate of fair value.
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