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Microsoft Excel LibreOffice Calc

Starbucks Corp. (NASDAQ:SBUX)

Analysis of Income Taxes

Advanced level

Accounting Policy on Income Taxes

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 bases 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 balances Starbucks’ consolidated balance sheets.

Source: 10-K (filing date: 2019-11-15).

Income Tax Expense (Benefit)

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

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
U.S. federal
U.S. state and local
Foreign
Current taxes
U.S. federal
U.S. state and local
Foreign
Deferred taxes
Income tax expense

Based on: 10-K (filing date: 2019-11-15), 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).

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 decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Deferred taxes Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Starbucks Corp.’s deferred taxes increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Income tax expense Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Starbucks Corp.’s income tax expense decreased from 2017 to 2018 and from 2018 to 2019.

Effective Income Tax Rate (EITR)

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

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Statutory U.S. federal income tax rate
State income taxes, net of federal tax benefit
Foreign rate differential
Excess tax benefits of stock-based compensation
Residual tax on foreign earnings
Foreign derived intangible income
Tax impacts related to sale of certain operations
Domestic production activity deduction
Gain resulting from acquisition of joint venture
Other, net
Effective income tax rate, before impact of the Tax Act
Impact of the Tax Act
Effective income tax rate

Based on: 10-K (filing date: 2019-11-15), 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).

Item Description The company
Effective income tax rate, before impact of the Tax Act Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Starbucks Corp.’s effective income tax rate, before impact of the Tax Act decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

Starbucks Corp., components of deferred tax assets and liabilities

US$ in thousands

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Property, plant and equipment
Intangible assets and goodwill
Accrued occupancy costs
Accrued compensation and related costs
Other accrued liabilities
Asset retirement obligation asset
Stored value card liability and deferred revenue
Asset impairments
Tax credits
Stock-based compensation
Net operating losses
Litigation charge
Other
Deferred tax assets
Valuation allowance
Deferred tax asset, net of valuation allowance
Property, plant and equipment
Intangible assets and goodwill
Other
Deferred tax liabilities
Net deferred tax asset (liability)

Based on: 10-K (filing date: 2019-11-15), 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).

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 decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
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 decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
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) decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Deferred Tax Assets and Liabilities, Classification

Starbucks Corp., deferred tax assets and liabilities, classification

US$ in thousands

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Current deferred income tax assets
Long-term deferred income tax assets
Current deferred income tax liabilities (included in Accrued liabilities)
Long-term deferred income tax liabilities (included in Other long-term liabilities)

Based on: 10-K (filing date: 2019-11-15), 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).

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 decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
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) increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

Starbucks Corp., adjustments to financial statements

US$ in thousands

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Adjustment to Current Assets
Current assets (as reported)
Less: Current deferred tax assets, net
Current assets (adjusted)
Adjustment to Total Assets
Total assets (as reported)
Less: Current deferred tax assets, net
Less: Noncurrent deferred tax assets, net
Total assets (adjusted)
Adjustment to Current Liabilities
Current liabilities (as reported)
Less: Current deferred tax liabilities, net
Current liabilities (adjusted)
Adjustment to Total Liabilities
Total liabilities (as reported)
Less: Current deferred tax liabilities, net
Less: Noncurrent deferred tax liabilities, net
Total liabilities (adjusted)
Adjustment to Shareholders’ Equity (deficit)
Shareholders’ equity (deficit) (as reported)
Less: Net deferred tax assets (liabilities)
Shareholders’ equity (deficit) (adjusted)
Adjustment to Net Earnings Attributable To Starbucks
Net earnings attributable to Starbucks (as reported)
Add: Deferred income tax expense (benefit)
Net earnings attributable to Starbucks (adjusted)

Based on: 10-K (filing date: 2019-11-15), 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).

Starbucks Corp., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Starbucks Corp., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
Current Ratio
Reported current ratio
Adjusted current ratio
Net Profit Margin
Reported net profit margin
Adjusted net profit margin
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE
Adjusted ROE
Return on Assets (ROA)
Reported ROA
Adjusted ROA

Based on: 10-K (filing date: 2019-11-15), 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).

Financial 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 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Starbucks Corp.’s adjusted net profit margin ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Starbucks Corp.’s adjusted total asset turnover ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 not reaching 2017 level.
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 ratio increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Starbucks Corp.’s adjusted ROE improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Starbucks Corp.’s adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019.

Starbucks Corp., Financial Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in thousands)
Current assets
Current liabilities
Liquidity Ratio
Current ratio1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted current assets
Adjusted current liabilities
Liquidity Ratio
Adjusted current ratio2

Based on: 10-K (filing date: 2019-11-15), 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).

2019 Calculations

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

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

Liquidity 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 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in thousands)
Net earnings attributable to Starbucks
Net revenues
Profitability Ratio
Net profit margin1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net earnings attributable to Starbucks
Net revenues
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2019-11-15), 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).

2019 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

Profitability 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 ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in thousands)
Net revenues
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Net revenues
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-11-15), 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).

2019 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

Activity 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 ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 not reaching 2017 level.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in thousands)
Total assets
Shareholders’ equity (deficit)
Solvency Ratio
Financial leverage1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted total assets
Adjusted shareholders’ equity (deficit)
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2019-11-15), 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).

2019 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity (deficit)
= hidden ÷ hidden = hidden

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

Solvency 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 ratio increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in thousands)
Net earnings attributable to Starbucks
Shareholders’ equity (deficit)
Profitability Ratio
ROE1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net earnings attributable to Starbucks
Adjusted shareholders’ equity (deficit)
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2019-11-15), 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).

2019 Calculations

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

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

Profitability 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 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Oct 1, 2017 Oct 2, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in thousands)
Net earnings attributable to Starbucks
Total assets
Profitability Ratio
ROA1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net earnings attributable to Starbucks
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2019-11-15), 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).

2019 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

Profitability 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 2017 to 2018 and from 2018 to 2019.