Starbucks Coffee Company Accounting

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Starbucks Coffee Company According to Young et al. (2019), under the new FASB accounting rules, all leases are required to be capitalized in the financial statements; but will allow the operating leases to be designated for the income statement specifically. Under FASB accounting rules, the lessee needs to specify if the asset being leased is for the purpose of purchasing the asset or merely rent it for simplicity's sake. There are some intangible assets that are leased that do not follow these rules specifically, such as natural resources. In short, the FASB rules boil the information down to whether the financing is to acquire an asset, or utilize it and give it back. Starbucks Corporation specifies in the lease disclosure that the majority of the leases are of the operating lease designation. In the explanation, Starbucks clarifies that operating leases are agreements with landlords to rent and improve, change, or implement contingent rent provisions (Starbucks 2022). The lease liability is expressed in present value over the life of the lease in a straight-line delineation of future payments over the lease term for all currently operating stores. There is a note as well that Starbucks increased the amortization of lease payments due to Covid-19 related concessions relating to store closures. Due to the nature of Starbucks business model, including frequency of changing store locations to drive increased traffic or gain locations with drive-thru access, there is a focus on operating leases for usefulness and not actually gaining the asset when completing the lease agreement. Because the asset isn't acquired, it should show up as an operating lease. Starbucks Coffee Company (2022, November 18). Starbucks FY22 Annual Report. Investor.Starbucks.com.
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