Starbucks 2010 Annual Report Download - page 60

Fair Value Measurements at Reporting Date Using
Balance at
Sept 27, 2009
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Trading securities ................. $ 44.8 $44.8 $ 0.0 $ 0.0
Available-for-sale securities ......... 92.7 19.0 18.0 55.7
Derivatives ...................... 13.2 0.0 13.2 0.0
Total ........................... $150.7 $63.8 $31.2 $55.7
Liabilities:
Derivatives ...................... $ 33.2 $ 0.0 $33.2 $ 0.0
Trading securities include equity mutual funds and exchange-traded funds. For these securities, we use quoted prices
in active markets for identical assets to determine their fair value, thus they are considered to be Level 1 instruments.
Available-for-sale securities include government treasury securities, corporate and agency bonds and ARS. For
government treasury securities, we use quoted prices in active markets for identical assets to determine their fair
value, thus they are considered to be Level 1 instruments. We use observable direct and indirect inputs for corporate
and agency bonds, which are considered Level 2 instruments. Level 3 instruments are comprised solely of ARS, all
of which are considered to be illiquid due to the auction failures that began in 2008. We value ARS using an
internally developed valuation model, using inputs that include interest rate curves, credit and liquidity spreads, and
effective maturity.
Derivative assets and liabilities include foreign currency forward contracts, commodity swaps and futures contracts.
Where applicable, we use quoted prices in an active market for identical derivative assets and liabilities that are
traded on exchanges. Derivative assets and liabilities included in Level 2 are over-the-counter currency forward
contracts and commodity swaps whose fair values are estimated using industry-standard valuation models. Such
models project future cash flows and discount the future amounts to a present value using market-based observable
inputs, including interest rate curves and forward and spot prices for currencies and commodities.
Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis (in millions):
Oct 3, 2010 Sep 27, 2009
BeginningbalanceofARS ......................................... $55.7 $59.8
Total (increase)/decrease in unrealized losses included in other comprehensive
income ...................................................... (1.5) 3.9
Realized losses recognized in net earnings ............................. (0.2) 0.0
Calls .......................................................... (12.0) (8.0)
Transfersin(out)ofLevel3 ....................................... (0.7) 0.0
EndingbalanceofARS ........................................... $41.3 $55.7
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Effective September 28, 2009, we adopted new fair value measurement guidance for all nonfinancial assets and
liabilities recognized or disclosed at fair value in the financial statements on a nonrecurring basis. These assets and
liabilities include items such as property, plant and equipment, goodwill and other intangible assets that are
measured at fair value resulting from impairment, if determined to be necessary.
We measure certain financial assets, including equity and cost method investments, at fair value on a nonrecurring
basis. These assets are recognized at fair value when they are determined to be other-than-temporarily impaired.
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