Starbucks 2011 Annual Report Download - page 48

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Deferred tax asset valuation allowances and our liability for unrecognized tax benefits require significant
management judgment regarding applicable statutes and their related interpretation, the status of various income tax
audits, and our particular facts and circumstances. Although we believe that the judgments and estimates discussed
herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material.
To the extent we prevail in matters for which a liability has been established, or are required to pay amounts in
excess of our established liability, our effective income tax rate in a given financial statement period could be
materially affected.
Litigation Accruals
We are involved in various claims and legal actions that arise in the ordinary course of business. Legal and other
contingency reserves and related disclosures are based on our assessment of the likelihood of a potential loss and our
ability to estimate the loss or range of loss, which includes consultation with outside legal counsel and advisors. We
record reserves related to legal matters when it is probable that a loss has been incurred and the range of such loss
can be reasonably estimated. Such assessments are reviewed each period and revised, based on current facts and
circumstances and historical experience with similar claims, as necessary.
Our disclosures of and accruals for litigation claims, if any, contain uncertainties because management is required to
use judgment to estimate the probability of a loss and a range of possible losses related to each claim. Footnote 15 to
the consolidated financial statements describes the Company’s legal and other contingent liability matters.
As we periodically review our assessments of litigation accruals, we may change our assumptions with respect to
loss probabilities and ranges of potential losses. Any changes in these assumptions could have a material impact on
our future results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 to the consolidated financial statements in this 10-K for a detailed description of recent accounting
pronouncements. We do not expect these recently issued accounting pronouncements to have a material impact on
our results of operations, financial condition, or liquidity in future periods.
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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