Starbucks 2012 Annual Report Download - page 64

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Insurance Reserves
We use a combination of insurance and self-insurance mechanisms, including a wholly owned captive insurance
entity and participation in a reinsurance treaty, to provide for the potential liabilities for certain risks, including
workers’ compensation, healthcare benefits, general liability, property insurance, and director and officers’
liability insurance. Liabilities associated with the risks that are retained by us are not discounted and are estimated,
in part, by considering historical claims experience, demographic, exposure and severity factors, and other
actuarial assumptions.
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.
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.
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.
CPG, Foodservice and Other Revenues
CPG, foodservice and other revenues primarily consist of domestic and international sales of packaged coffee and
tea as well as a variety of ready-to-drink beverages and single-serve coffee and tea products to grocery, warehouse
club and specialty retail stores, sales to our national foodservice accounts, and revenues from sales of products to
and license revenues from manufacturers that produce and market Starbucks and Seattle’s Best Coffee branded
products through licensing agreements. Sales of coffee, tea, ready-to-drink beverages and related products to
grocery and warehouse club stores are generally recognized when received by the customer or distributor,
depending on contract terms. We maintain a sales return allowance to reduce packaged goods revenues for
estimated future product returns based on historical patterns. Revenues are recorded net of sales discounts given to
customers for trade promotions and payments to customers for product placement in our customers’ stores.
Revenues from sales of products to manufacturers that produce and market Starbucks and Seattle’s Best Coffee
branded products through licensing agreements are generally recognized when the product is received by the
manufacturer or distributor. License revenues from manufacturers are based on a percentage of sales and are
recognized on a monthly basis when earned. National foodservice account revenues are recognized when the
product is received by the customer or distributor.