Starbucks 2014 Annual Report Download - page 62

58 Starbucks Corporation 2014 Form 10-K
results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of
their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the
provision for income taxes.
In addition, our income tax returns are periodically audited by domestic and foreign tax authorities. These audits include review
of our tax filing positions, including the timing and amount of deductions taken and the allocation of income between tax
jurisdictions. We evaluate our exposures associated with our various tax filing positions and recognize a tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the relevant
taxing authorities, including resolutions of any related appeals or litigation processes, based on the technical merits of our
position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon ultimate settlement. For uncertain tax positions that do not meet
this threshold, we record a related liability. We adjust our unrecognized tax benefit liability and income tax expense in the
period in which the uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing
authority to examine the tax position, or when new information becomes available.
Starbucks recognizes interest and penalties related to income tax matters in income tax expense in the consolidated statements
of earnings. Accrued interest and penalties are included within the related tax liability on the consolidated balance sheets.
Earnings per Share
Basic earnings per share is computed based on the weighted average number of shares of common stock outstanding during the
period. Diluted earnings per share is computed based on the weighted average number of shares of common stock and the
effect of dilutive potential common shares outstanding during the period, calculated using the treasury stock method. Dilutive
potential common shares include outstanding stock options and RSUs. Performance-based RSUs are considered dilutive when
the related performance criterion has been met.
Common Stock Share Repurchases
We may repurchase shares of Starbucks common stock under a program authorized by our Board of Directors, including
pursuant to a contract, instruction or written plan meeting the requirements of Rule 10b5-1(c)(1) of the Securities Exchange Act
of 1934. Under applicable Washington State law, shares repurchased are retired and not displayed separately as treasury stock
on the financial statements. Instead, the par value of repurchased shares is deducted from common stock and the excess
repurchase price over par value is deducted from additional paid-in capital and from retained earnings, once additional paid-in
capital is depleted.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued guidance outlining a single comprehensive model for
entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition
guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Additionally, this guidance expands related disclosure requirements. The guidance will become effective for us at the beginning
of our first quarter of fiscal 2018 and will require full or modified retrospective application. We are currently evaluating the
impact this guidance will have on our financial statements as well as the expected adoption method.
In April 2014, the FASB issued guidance that changes the criteria for reporting discontinued operations. To qualify as a
discontinued operation under the amended guidance, a component or group of components of an entity that has been disposed
of or is classified as held for sale must represent a strategic shift that has or will have a major effect on the entity's operations
and financial results. This guidance also expands related disclosure requirements. The guidance will become effective for us at
the beginning of our first quarter of fiscal 2016. We do not expect the adoption of this guidance will have a material impact on
our financial statements.
In July 2013, the FASB issued guidance on the financial statement presentation of an unrecognized tax benefit when a net
operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This guidance requires the unrecognized tax
benefit to be presented in the financial statements as a reduction to a deferred tax asset. When a deferred tax asset is not
available, or the asset is not intended to be used for this purpose, the unrecognized tax benefit should be presented in the
financial statements as a liability and not netted with a deferred tax asset. The guidance will become effective for us at the
beginning of our first quarter of fiscal 2015. We do not expect the adoption of this guidance will have a material impact on our
financial statements.
In March 2013, the FASB issued guidance on a parent's accounting for the cumulative translation adjustment upon
derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. This
guidance requires a parent to release any related cumulative translation adjustment into net income only if the sale or transfer