Starbucks 2013 Annual Report Download - page 60

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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 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 fee 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. Revenues are recorded net of sales discounts given to customers for trade
promotions and other incentives and for sales return allowances, which are determined based on historical patterns.
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 fee 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.
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 29, 2013, September 30, 2012, and October 2, 2011, income
recognized on unredeemed stored value card balances was $33.0 million, $65.8 million, and $46.9 million, respectively.
Customers in the US, Canada, the UK and Germany who register their Starbucks Card are automatically enrolled in the My
Starbucks Rewards™ program and earn reward 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.
Marketing expenses totaled $306.8 million, $277.9 million and $244.0 million in fiscal 2013, 2012, and 2011, respectively.
Included in these costs were advertising expenses, which totaled $205.8 million, $182.4 million and $141.4 million in fiscal
2013, 2012, and 2011, 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
amortize the deferred rent over the terms of the leases as additional rent expense on the consolidated statements of earnings.
2013 10-K
Starbucks Corporation Form