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Microsoft Excel LibreOffice Calc

Starbucks Corp. (SBUX)


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

Starbucks computes income taxes using the asset and liability method, under which deferred income taxes are recognized based on the differences between the financial statement carrying amounts and the respective tax basis of the assets and liabilities. Deferred tax assets and liabilities are measured using current enacted tax rates expected to apply to taxable income in the years in which Starbucks expects the temporary differences to reverse. The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date.

Starbucks routinely evaluates the likelihood of realizing the benefit of the deferred tax assets and may record a valuation allowance if, based on all available evidence, Starbucks determines that some portion of the tax benefit will not be realized. In evaluating the ability to recover the deferred tax assets within the jurisdictions from which they arise, Starbucks considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. If Starbucks determines that Starbucks would be able to realize the deferred tax assets in the future in excess of their net recorded amount, Starbucks would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

In addition, Starbucks’ income tax returns are periodically audited by domestic and foreign tax authorities. These audits include review of Starbucks’ tax filing positions, including the timing and amount of deductions taken and the allocation of income between tax jurisdictions. Starbucks evaluates the exposures associated with the various tax filing positions and recognizes 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 the 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, Starbucks records a related liability. Starbucks adjusts the 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 on the consolidated statements of earnings. Accrued interest and penalties are included within the related tax liability on Starbucks’ consolidated balance sheets.

Source: 10-K (filing date: 2018-11-16).


Income Tax Expense (Benefit)

Starbucks Corp., income tax expense (benefit), continuing operations

USD $ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
U.S. federal hidden hidden hidden hidden hidden hidden
U.S. state and local hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Current taxes hidden hidden hidden hidden hidden hidden
U.S. federal hidden hidden hidden hidden hidden hidden
U.S. state and local hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Deferred taxes hidden hidden hidden hidden hidden hidden
Income tax expense (benefit) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

Item Description The company
Current taxes Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Starbucks Corp.’s current taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Deferred taxes Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Starbucks Corp.’s deferred taxes declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
Income tax expense (benefit) Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Starbucks Corp.’s income tax expense (benefit) increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Effective Income Tax Rate (EITR)

Starbucks Corp., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Statutory U.S. federal income tax rate hidden hidden hidden hidden hidden hidden
State income taxes, net of federal tax benefit hidden hidden hidden hidden hidden hidden
Benefits and taxes related to foreign operations hidden hidden hidden hidden hidden hidden
Domestic production activity deduction hidden hidden hidden hidden hidden hidden
Gain resulting from acquisition of joint venture hidden hidden hidden hidden hidden hidden
Impact of the Tax Act hidden hidden hidden hidden hidden hidden
Other, net hidden hidden hidden hidden hidden hidden
Effective income tax rate hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

Item Description The company
Effective income tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Starbucks Corp.’s effective income tax rate increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

Starbucks Corp., components of deferred tax assets and liabilities

USD $ in thousands

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Property, plant and equipment hidden hidden hidden hidden hidden hidden
Accrued occupancy costs hidden hidden hidden hidden hidden hidden
Accrued compensation and related costs hidden hidden hidden hidden hidden hidden
Other accrued liabilities hidden hidden hidden hidden hidden hidden
Asset retirement obligation asset hidden hidden hidden hidden hidden hidden
Stored value card liability and deferred revenue hidden hidden hidden hidden hidden hidden
Asset impairments hidden hidden hidden hidden hidden hidden
Tax credits hidden hidden hidden hidden hidden hidden
Stock-based compensation hidden hidden hidden hidden hidden hidden
Net operating losses hidden hidden hidden hidden hidden hidden
Litigation charge hidden hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden hidden
Deferred tax assets hidden hidden hidden hidden hidden hidden
Valuation allowance hidden hidden hidden hidden hidden hidden
Deferred tax asset, net of valuation allowance hidden hidden hidden hidden hidden hidden
Property, plant and equipment hidden hidden hidden hidden hidden hidden
Intangible assets and goodwill hidden hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden hidden
Deferred tax liabilities hidden hidden hidden hidden hidden hidden
Net deferred tax asset (liability) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

Item Description The company
Deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Starbucks Corp.’s deferred tax assets declined from 2016 to 2017 and from 2017 to 2018.
Deferred tax asset, net of valuation allowance Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Starbucks Corp.’s deferred tax asset, net of valuation allowance declined from 2016 to 2017 and from 2017 to 2018.
Net deferred tax asset (liability) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Starbucks Corp.’s net deferred tax asset (liability) declined from 2016 to 2017 and from 2017 to 2018.

Deferred Tax Assets and Liabilities, Classification

Starbucks Corp., deferred tax assets and liabilities, classification

USD $ in thousands

Microsoft Excel LibreOffice Calc

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

Item Description The company
Long-term deferred income tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Starbucks Corp.’s long-term deferred income tax assets declined from 2016 to 2017 and from 2017 to 2018.
Long-term deferred income tax liabilities (included in Other long-term liabilities) Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Starbucks Corp.’s long-term deferred income tax liabilities (included in Other long-term liabilities) declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Analyst Adjustments: Removal of Deferred Taxes

Starbucks Corp., adjustments to financial data

USD $ in thousands

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Adjustment to Current Assets
Current assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden hidden
Current assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax assets, net hidden hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Current Liabilities
Current liabilities (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax liabilities, net hidden hidden hidden hidden hidden hidden
Current liabilities (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Total Liabilities
Total liabilities (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax liabilities, net hidden hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax liabilities, net hidden hidden hidden hidden hidden hidden
Total liabilities (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden hidden
Shareholders’ equity (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Net Earnings Attributable To Starbucks
Net earnings attributable to Starbucks (as reported) hidden hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Net earnings attributable to Starbucks (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).


Starbucks Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Starbucks Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Current Ratio
Reported current ratio hidden hidden hidden hidden hidden hidden
Adjusted current ratio hidden hidden hidden hidden hidden hidden
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden hidden
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Starbucks Corp.’s adjusted current ratio improved from 2016 to 2017 and from 2017 to 2018.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Starbucks Corp.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Starbucks Corp.’s adjusted total asset turnover improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Starbucks Corp.’s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Starbucks Corp.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Starbucks Corp.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.

Starbucks Corp., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
As Reported
Selected Financial Data (USD $ in thousands)
Current assets hidden hidden hidden hidden hidden hidden
Current liabilities hidden hidden hidden hidden hidden hidden
Ratio
Current ratio1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted current assets hidden hidden hidden hidden hidden hidden
Adjusted current liabilities hidden hidden hidden hidden hidden hidden
Ratio
Adjusted current ratio2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

2018 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Starbucks Corp.’s adjusted current ratio improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
As Reported
Selected Financial Data (USD $ in thousands)
Net earnings attributable to Starbucks hidden hidden hidden hidden hidden hidden
Net revenues hidden hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted net earnings attributable to Starbucks hidden hidden hidden hidden hidden hidden
Net revenues hidden hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

2018 Calculations

1 Net profit margin = 100 × Net earnings attributable to Starbucks ÷ Net revenues
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net earnings attributable to Starbucks ÷ Net revenues
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Starbucks Corp.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
As Reported
Selected Financial Data (USD $ in thousands)
Net revenues hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Net revenues hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

2018 Calculations

1 Total asset turnover = Net revenues ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net revenues ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Starbucks Corp.’s adjusted total asset turnover improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
As Reported
Selected Financial Data (USD $ in thousands)
Total assets hidden hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted total assets hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

2018 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Starbucks Corp.’s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
As Reported
Selected Financial Data (USD $ in thousands)
Net earnings attributable to Starbucks hidden hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted net earnings attributable to Starbucks hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

2018 Calculations

1 ROE = 100 × Net earnings attributable to Starbucks ÷ Shareholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net earnings attributable to Starbucks ÷ Adjusted shareholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Starbucks Corp.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
As Reported
Selected Financial Data (USD $ in thousands)
Net earnings attributable to Starbucks hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted net earnings attributable to Starbucks hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

2018 Calculations

1 ROA = 100 × Net earnings attributable to Starbucks ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net earnings attributable to Starbucks ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Starbucks Corp.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.