SEGMENT INFORMATION: Next, the reporting of segment information is required for publicly held companies, which basically means the “operating segments of an entity in the disclosures accompanying its financial statements”(Bragg, 2013). Segment reporting’s goal is to give pertinent operating information to creditors and investors concerning the financial results and companies financial position, which can be used as the foundation for their decisions related to the company. According to the GAAP, operating segment participates in corporation activities “from which it may earn revenue and incur expenses” (Bragg, 2013), had private financial information available, and their results are regularly reviewed by the company’s principal operating decision maker for performance appraisal. Starbucks’ segment reporting includes their chief executive officer and chief operating officer preparing the same foundation that the chief operating decision maker manages the segment, evaluates the financial results, and makes key operating decisions. It was noted on Starbucks’ Annual Report (2017) that the “ Americas segment is our most mature business and has achieved significant scale ”. The Americas operations sell coffee, beverages, complementary food, and packaged coffee products, which are focused, 13
Running head: Starbucks Financial Analysis: Final Paper selected, merchandise. Starbucks made changes to their segments to generate sales appropriate to its locations; however, none of the changes made material impact on the composition of revenue mix by product type. ESTIMATES AND ASSUMPTIONS: Estimates and assumptions are explained to be just that an estimation or an “approximation in financial statements of the amount to be credited or debited on items for which there is no precise means if measurement” (Murko, 2017). Because these are estimations, Starbucks’ calculations contain uncertainties because they require management to make an educated guess or assumptions to determine future cash flow and assets. Some methods used by management include projected revenue growth, operating expenses, and the use of forecasting assets and selecting an appropriate discount rate. These estimations are of course subjective and the ability to realize cash flow and assets for a future date is affected by certain ongoing factors such as maintenance, changes in the economy and operating performance. Starbucks reported no significant changes in any of the previous estimates or assumptions that had a material impact on the outcome of the impairment calculations. As a routine, Starbucks reassess estimated future cash flows and asset values often that may cause material impairment concerns in the future. INVESTMENTS AND FAIR VALUE: Fair value is known to be the “practice of measuring assets and liabilities at estimates of their current value” (Ramanna, 2013). Many investments are viewed as 14
Running head: Starbucks Financial Analysis: Final Paper
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