Leasee in Starbucks

Financial Reporting Paper: Leases- General& Lessee

This is a research paper about leasing area in Starbucks Corporation. It will focus on lessee accounting rather than lessor accounting. The purpose of this paper is to summarize disclosure requirements in lessee accounting and analyze the relative disclosures financial statement of Starbucks Corporation by using the sources from FASB Accounting Standards Codification. Afterwards, there is a concluding section that discusses how well the firm has met its disclosure requirements from several different aspects.

Equipment-leasing market is an indispensable part of the global market. It is very important to understand the disclosures requirements regarding to leases. A lease is an agreement between a lessor and a lessee, transfers the right to the lessee of using specific property that is owned by the lessor (ASC 840-10-20). According to FASB, the lessee should demonstrate certain information about leases that were created during the year of its financial statement or footnotes. The information includes:

A. A description of the nature and timing of the lease (ASC 840-50-1)

B. The rental payments that should be paid off the succeeding years (ASC 840-10-50-2)

C. Certain options, some specific clauses, renewal terms, restrictions under lease agreements (ASC 840-10-50-2)

D. Guarantees that regard to the lease agreements (ASC 840-10-50-3)

According to 2012 annual report of Starbucks Corporation, the leases disclosure is recorded in the notes after the table "Statement of Equity". The disclosure information of leases was allocated in two notes. In note one, company summarized some significant accounting policies, including leases. It demonstrated the nature of its leases belong to operating leases. This disclosure clarified the different ways that Starbucks Corporation should record tenant improvement allowances, rent holidays, lease premiums, scheduled rent escalation clauses, contingent rent provisions, and ceasing operations under operating leases. In note ten, Starbucks Corporation calculated the total rental expense approximately $714.6 million in 2010, $749.9million in 2011, and $803.7 million in 2012 respectively. Also, this note disclosed the related operating leases that Starbucks Corporation had subleased and the sublease income that they had collected. $10 million, $13.7 million, and $10.9 million, that were recognized respectively in 2010, 2011, and 2012. Furthermore, Starbucks listed the annual rental payments should be paid in the future fiscal year in chronological order.

Based on the disclosure requirements that are provided by the FASB, it is obvious that the Starbucks Corporation's disclosures meet the requirements that the FASB requires. First,