Project-Case Study – Cheap Research Essays

In this project, you will use a modified version of the Starbucks Integrative Case Study 6.1 found in the “Accounting Quality” chapter of your textbook. The objective of this assignment is to evaluate the accounting quality of a public listed company by examining management’s choice of accounting policy.
Required:
Use the note information presented in the case to evaluate Starbucks’ accounting quality by focusing on the following issues related to Investments and Operations of the company for the financial year 2012.
Accounting issues related to the Starbucks Experience and Brand Asset
The Starbucks Experience and Brand is considered a key success factor in the Starbucks business model. Starbucks reports that “Our success depends substantially on the value of our brands and failure to preserve their value could have a negative impact on our financial results ( Starbucks 10-k 2012 p.14)”.
Starbucks incurs costs in product differentiation including market research, employee training, fair trade and sustainable environmental issues. In the context of expensing versus capitalizing expenses evaluate whether the product differentiation costs causes any balance sheet quality issues. [10 points]
Using data from Interbrand.com calculate how capitalizing the brand value of Starbucks for the year 2012 would impact the balance sheet and income statement. [10 points]
From the perspective of a credit analyst interested in capturing the economics and risk of Starbucks activities, evaluate whether you would advocate capitalizing the brand assets of Starbucks. Your discussion should consider the effects on debt ratios (long term debt to shareholder equity) and the effect on profitability (return on assets and return on equity). [15 points/ 10 points for calculating the effects on the debt ratio and profitability ratios and 5 points for the evaluation based on your calculations]
Accounting issues related to management estimates in relation to Long-lived Assets
A) This section relates to the first paragraph on Long-lived Assets in Note 1.
Read through the first two sentences of Long-Lived assets and evaluate whether IFRS or US GAAP provides the best quality accounting for long-lived asset impairment. [10 points]
Evaluate the accounting policy of Starbucks for determining useful life in the presence of a lease renewal option. [10 points]

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B) This section relates to the first paragraph on Property Plant and Equipment in Note 1.
You will find the discussion under the heading ‘Useful Life for Long-Lived Tangible and Limited-life Intangible Assets ‘on pp: 602-604 in chapter 8 of the textbook useful to help you answer this section.
Evaluate management’s estimate in relation to useful life by assessing the significance of changes to estimated useful life over time. To assist your evaluation
Calculate an estimate of average useful life based on the data presented in the table below. The data in the table has been modified from Note 7 (Starbucks 10-k). [10 points]

In millions of dollars 2012 2011 2010 2009
Depreciable cost * $6,592.8 $5,990.9 $5,657.1 $5,523.5
Depreciation expense 580.6 550.0 540.8
*assuming $0 salvage value and after subtracting non-depreciable land and construction in progress

Compare the effect on net income and basic earnings per share if average FY 2012 depreciation had been calculated using the FY 2011 average. The weighted average shares for basic EPS calculation is 754.4 million dollars. [15 points/ 10 points for calculating the effect on net income and basic earnings per share and 5 points for your evaluation of the effect]
Accounting issues related to Supply chain and Inventory management issues
This section relates to ‘Inventories’ in Note 1.
The acquisition of raw materials especially high-quality coffee beans at favorable prices is a key success factor for Starbucks.
Evaluate Starbucks earnings quality in relation to accounting policy on inventory by focusing on inventory reserves in relation to both balance sheet and income statement quality issues. To assist your evaluation consider the significance of the inventory reserves. [10 points]
Accounting issues related to Operations and Revenue Recognition
This section relates to ‘Stored Value Cards’ in Note 1.
Evaluate earnings quality in relation to revenue recognition for store value cards and the customer awards program. To assist your evaluation consider the significance of deferred revenue in relation to current liability as well as management’s judgement in relation to when customers will not take advantage of card and program benefits. [10 points]
Present your information in a 5 to 6 Max. Pages essay and analysis using Microsoft Word format. Use the American Psychological Association (APA) style (6th edition) for writing your assignment.