Starbucks 2011 Annual Report Download - page 57

Revenue Recognition
Consolidated revenues are presented net of intercompany eliminations for wholly owned subsidiaries and investees
controlled by us and for licensees accounted for under the equity method, based on our percentage ownership.
Additionally, consolidated revenues are recognized net of any discounts, returns, allowances and sales incentives,
including coupon redemptions and rebates.
Any revenue 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.
Company-operated Stores Revenues
Company-operated store revenues are recognized when payment is tendered at the point of sale. Retail store
revenues are reported net of sales, use or other transaction taxes that are collected from customers and remitted to
taxing authorities.
Stored Value Cards
Revenues from our stored value cards, primarily Starbucks Cards, are recognized when redeemed, or when we
recognize breakage income. We recognize breakage income when the likelihood of redemption, based on historical
experience, is deemed to be remote. Outstanding customer balances are included in deferred revenue on the
consolidated balance sheets. There are no expiration dates on our stored value cards, and we do not charge any
service fees that cause a decrement to customer balances. While we will continue to honor all stored value cards
presented for payment, management may determine the likelihood of redemption to be remote for certain cards 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 balances may then
be recognized in the consolidated statements of earnings, in net interest income and other. For the fiscal years ended
October 2, 2011, October 3, 2010, and September 27, 2009, income recognized on unredeemed stored value card
balances was $46.9 million, $31.2 million, and $26.0 million, respectively.
Customers in the US who register their Starbucks Card are automatically enrolled in the My Starbucks Reward®
program and earn points (“Stars”) with each purchase. Reward program members receive various benefits
depending on the number of Stars earned in a 12-month period. Customers at the highest level of the rewards
program receive a free beverage coupon after a specified number of purchases. The value of Stars earned by our
program members is included in deferred revenue and recorded as a reduction in revenue at the time the Stars are
earned, based on the value of Stars that are projected to be redeemed.
Licensed Stores Revenues
Licensed stores revenues consist of product sales to licensed stores, as well as royalties and other fees paid by
licensees to use the Starbucks brand. Sales of coffee, tea and related products are generally recognized upon
shipment to licensees, depending on contract terms. Shipping charges billed to licensees 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.
Initial nonrefundable development fees for licensed stores 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.
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