Starbucks 2012 Annual Report Download - page 65

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Stored Value Cards
Revenues from our stored value cards, primarily Starbucks Cards, are recognized when redeemed or 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 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 September 30, 2012, October 2, 2011, and October 3, 2010, income recognized
on unredeemed stored value card balances was $65.8 million, $46.9 million, and $31.2 million, respectively. In
fiscal 2012, we recognized additional income associated with unredeemed gift cards due to a recent court ruling
relating to state unclaimed property laws.
Customers in the US, Canada, and the UK 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. The value of Stars earned by our
program members towards free product 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.
Marketing & Advertising
Our annual marketing expenses include many components, one of which is advertising costs. We expense most
advertising costs as they are incurred, except for certain production costs that are expensed the first time the
advertising campaign takes place.
Annual marketing expenses totaled $277.9 million, $244.0 million, and $198.7 million in fiscal 2012, 2011, and
2010, respectively. Included in these costs were advertising expenses, which totaled $182.4 million, $141.4
million, and $176.2 million in fiscal 2012, 2011, and 2010, respectively.
Store Preopening Expenses
Costs incurred in connection with the start-up and promotion of new store openings are expensed as incurred.
Operating Leases
We lease retail stores, roasting, distribution and warehouse facilities, and office space under operating leases.
Most lease agreements contain tenant improvement allowances, rent holidays, lease premiums, rent escalation
clauses and/or contingent rent provisions. For purposes of recognizing incentives, premiums and minimum rental
expenses on a straight-line basis over the terms of the leases, we use the date of initial possession to begin
amortization, which is generally when we enter the space and begin to make improvements in preparation of
intended use.
For tenant improvement allowances and rent holidays, we record a deferred rent liability on the consolidated
balance sheets and amortize the deferred rent over the terms of the leases as reductions to rent expense on the
consolidated statements of earnings.
For premiums paid upfront to enter a lease agreement, we record a deferred rent asset on the consolidated balance
sheets and then amortize the deferred rent over the terms of the leases as additional rent expense on the
consolidated statements of earnings.
For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other
than the date of initial occupancy, we record minimum rental expenses on a straight-line basis over the terms of
the leases on the consolidated statements of earnings.