Starbucks 2015 Annual Report Download - page 61

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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.
Sales to customers through CPG channels and national foodservice accounts, including sales to national distributors, are
recognized net of certain fees paid to the customer. We characterize these fees as a reduction of revenue unless we are able to
identify a sufficiently separable benefit from the customer's purchase of our products such that we could have entered into an
exchange transaction with a party other than the customer in order to receive such benefit, and we can reasonably estimate the
fair value of such benefit.
Stored Value Cards
Stored value cards, primarily Starbucks Cards, can be loaded at our company-operated and most licensed store locations, online
at StarbucksStore.com or via mobile devices held by our customers, and at certain other third party locations, such as grocery
stores. When an amount is loaded onto a stored value card at any of these locations, we recognize a corresponding liability for
the full amount loaded onto the card, which is recorded within stored value card liability on our consolidated balance sheets.
Stored value cards can be redeemed at company-operated and most licensed stores, as well as online. When a stored value card
is redeemed at a company-operated store or online, we recognize revenue by reducing the stored value card liability. When a
stored value card is redeemed at a licensed store location, we reduce the corresponding stored value card liability and cash,
which is reimbursed to the licensee.
There are no expiration dates on our stored value cards, and we do not charge 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, based on historical experience, is deemed 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, unredeemed card balances may then be recognized as breakage income, which is
included in net interest income and other on our consolidated statements of earnings. In fiscal 2015, 2014, and 2013, we
recognized breakage income of $39.3 million, $38.3 million, and $33.0 million, respectively.
Loyalty Program
Starbucks has a loyalty program called My Starbucks Rewards® ("MSR"). Customers in the U.S., Canada, and certain other
countries who register their Starbucks Card are automatically enrolled in that program. They earn loyalty points ("Stars") with
each purchase at participating Starbucks®, Teavana®, and Evolution Fresh™ stores, as well as on certain packaged coffee
products purchased in select Starbucks® stores, online, and through CPG channels. After accumulating a certain number of
Stars, the customer earns a reward that can be redeemed for free product that, regardless of where the related Stars were earned
within that country, will be honored at company-operated stores and certain participating licensed store locations in that same
country.
We defer revenue associated with the estimated selling price of Stars earned by our program members towards free product as
each Star is earned, and a corresponding liability is established within stored value card liability on our consolidated balance
sheets. The estimated selling price of each Star earned is based on the estimated value of the product for which the reward is
expected to be redeemed, net of Stars we do not expect to be redeemed, based on historical redemption patterns. Fully earned
rewards generally expire if unredeemed after approximately 30 days. Stars generally expire if inactive for a period of one year.
When a customer redeems an earned reward, we recognize revenue for the redeemed product and reduce the related loyalty
program liability.
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 takes place.
Marketing expenses totaled $351.5 million, $315.5 million and $306.8 million in fiscal 2015, 2014, and 2013, respectively.
Included in these costs were advertising expenses, which totaled $227.9 million, $198.9 million and $205.8 million in fiscal
2015, 2014, and 2013, respectively.
Store Preopening Expenses
Costs incurred in connection with the start-up and promotion of new store openings are expensed as incurred.
Starbucks Corporation 2015 Form 10-K 57