Starbucks 2010 Annual Report Download - page 53

Stored Value Cards
Revenues from our stored value cards, such as Starbucks Cards, are recognized when tendered for payment, or upon
redemption. 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, among other things, 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 October 3, 2010, September 27, 2009 and
September 28, 2008, income recognized on unredeemed stored value card balances was $31.2 million, $26.0 million
and $13.6 million, respectively.
Customers in the US who register their Starbucks Card are automatically enrolled in the My Starbucks Reward
program and earn points (“stars”) with each purchase. A free beverage coupon is issued to the customer once 15
points have been accumulated. The value of points earned by our program members is included in deferred revenue
and recorded as a reduction in revenue at the time the points are earned, based on the value of points that are
projected to be redeemed.
Retail Revenues
Company-operated retail store revenues are recognized when payment is tendered at the point of sale. We maintain a
sales return allowance to reduce retail revenues for estimated future product returns based on historical patterns.
Retail store revenues are reported net of sales, use or other transaction taxes that are collected from customers and
remitted to taxing authorities.
Specialty Revenues
Specialty revenues consist primarily of product sales to customers other than through company-operated retail
stores, as well as royalties and other fees generated from licensing operations. Sales of coffee, tea and related
products are generally recognized upon shipment to customers, depending on contract terms. Shipping charges
billed to customers 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.
Specific to retail store licensing arrangements, initial nonrefundable development fees 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. For certain licensing arrangements, where we
intend to acquire an ownership interest, the initial nonrefundable development fees are deferred to other long-term
liabilities on the consolidated balance sheets until acquisition, at which point the fees are reflected as a reduction of
our investment.
Other arrangements involving multiple elements and deliverables as well as upfront fees are individually evaluated
for revenue recognition. Cash payments received in advance of product or service delivery are recorded in deferred
revenue until earned.
Advertising
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.
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