Summary of Significant Accounting Policies

Financial Statement Preparation

The unaudited condensed consolidated financial statements as of December 29, 2013, and for the quarters ended December 29, 2013 and December 30, 2012, have been prepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial information for the quarters ended December 29, 2013 and December 30, 2012 reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. In this Quarterly Report on Form 10-Q (“10-Q”) Starbucks Corporation is referred to as “Starbucks,” the “Company,” “we,” “us” or “our.”

The financial information as of September 29, 2013 is derived from our audited consolidated financial statements and notes for the fiscal year ended September 29, 2013 (“fiscal 2013”) included in Item 8 in the Fiscal 2013 Annual Report on Form 10-K (the “10-K”). The information included in this 10-Q should be read in conjunction with the footnotes and management’s discussion and analysis of the financial statements in the 10-K.

The results of operations for the quarter ended December 29, 2013 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending September 28, 2014 ("fiscal 2014").

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board ("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 results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. 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 February 2013, the FASB issued guidance that adds additional disclosure requirements for items reclassified out of accumulated other comprehensive income. This guidance requires the disclosure of significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. The guidance became effective for us at the beginning of our first quarter of fiscal 2014 and the additional disclosures are provided in Note 7 of this 10-Q.

In January 2013, the FASB issued guidance clarifying the scope of disclosure requirements for offsetting assets and liabilities. The amended guidance limits the scope of balance sheet offsetting disclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement. The guidance became effective for us at the beginning of our first quarter of fiscal 2014 and did not have a material impact on our financial statements.

Correction of an Immaterial Error

Effective at the beginning of fiscal 2014, we reclassified certain fees related to our US and Seattle's Best Coffee foodservice operations in our Channel Development segment and All Other Segments, respectively, from other operating expenses to foodservice revenues included in CPG, foodservice and other net revenues in our consolidated statements of earnings. This reclassification results from a correction of an error in our prior period financial statements which we have determined to be immaterial. In order to align prior period classifications with the current period presentation, the historical consolidated financial statements have been corrected, resulting in reclassifications of $25.4 million and $22.7 million for fiscal years 2013 and 2012, respectively. The reclassification for the first quarter of fiscal 2013 was $6.4 million. The consolidated statements of earnings as corrected are presented below (in millions):



	Fiscal 2013															Fiscal 2012
	Q1			Q2			Q3			Q4			Full Year			Full Year
Net revenues
Company-operated stores	$	2,989.6		$	2,807.7		$	2,986.3		$	3,009.6		$	11,793.2		$	10,534.5
Licensed stores	350.2			322.1			342.0			346.3			1,360.5			1,210.3
CPG, foodservice and other	453.4			419.8			407.0			432.9			1,713.1			1,532.0
Total net revenues	3,793.2			3,549.6			3,735.3			3,788.8			14,866.8			13,276.8
Cost of sales including occupancy costs	1,620.7			1,530.4			1,597.6			1,633.7			6,382.3			5,813.3
Store operating expenses	1,089.5			1,038.4			1,084.1			1,073.9			4,286.1			3,918.1
Other operating expenses	126.1			105.8			98.9			101.1			431.8			407.2
Depreciation and amortization expenses	148.9			153.1			153.3			166.1			621.4			550.3
General and administrative expenses	231.9			230.3			249.6			226.1			937.9			801.2
Litigation charge	—			—			—			2,784.1			2,784.1			—
Total operating expenses	3,217.1			3,058.0			3,183.5			5,985.0			15,443.6			11,490.1
Income from equity investees	54.5			52.5			63.4			81.0			251.4			210.7
Operating income/(loss)	630.6			544.1			615.2			(2,115.2		)	(325.4		)	1,997.4
Interest income and other, net	(2.9		)	50.8			3.5			72.1			123.6			94.4
Interest expense	(6.6		)	(6.1		)	(6.3		)	(9.1		)	(28.1		)	(32.7		)
Earnings/(loss) before income taxes	621.1			588.8			612.4			(2,052.2		)	(229.9		)	2,059.1
Income taxes	188.7			198.1			194.6			(820.1		)	(238.7		)	674.4
Net earnings including noncontrolling interests	432.4			390.7			417.8			(1,232.1		)	8.8			1,384.7
Net earnings attributable to noncontrolling interests	0.2			0.3			—			(0.1		)	0.5			0.9
Net earnings attributable to Starbucks	$	432.2		$	390.4		$	417.8		$	(1,232.0	)	$	8.3		$	1,383.8

There was no impact on operating income or net earnings as a result of the error correction, nor any impact on our consolidated statements of comprehensive income, consolidated balance sheets or consolidated statements of cash flows. Additional disclosure regarding this change as it relates to our segment results is included at Note 11, Segment Reporting.