Business Case Study - STARBUCKS: VENTI LEASES Group #5 Prepared for: Professor Ramesh Saxena ACCT 4000 RLA Humber College

Business Case Study – STARBUCKS: VENTI
LEASES
Group #5
Prepared for:
Professor Ramesh Saxena
ACCT 4000 RLA
Humber college
Prepared by:
Mohit Gadwal(N01332620)
Urvil Pravinbhai Patel (N01332646)
Aliza Tharani(N01349821)
Matthew Johnson(N01268714)
Denvis Tabod (N01250378)

TABLE OF CONTENT
EXECUTIVE SUMMARY 3
INTRODUCTION: 4
PROBLEM STATEMENT 4
ANALYSIS OF ISSUES 4
ALTERNATIVES 8
ALTERNATIVES COMPARED 9
RECOMMENDATION 11
APPENDIX 12

EXECUTIVE SUMMARY
The case tells us about the new accounting standards related to leases proposed by IASB and
FASB together and how these new standards will affect Starbucks. Starbucks has also shown
their concern related to the new accounting standards and how these standards can affect their
financial statements. Their major concerns were related to Lease term, Expense recognition
pattern, Contingent rentals. This report provides what journal entries are required if Starbucks
decides to accept the new standards proposed by IASB and FASB. This report also provides
different alternatives and shows the pros and cons of each alternative. After analyzing all the
pros and cons of each alternative we have provided the recommendation.

INTRODUCTION:
The first Starbucks store was opened in Seattle on March 30, 1971 by three partners named Jerry
Baldwin, Gordon Bowker and Zev Siegl. The main product of Starbucks was selling fresh
roasted coffee beans. In 1982, an entrepreneur called Howard Schultz was hired as the director of
retail operation and marketing. After a trip to Italy in 1983, Howard Schultz, urged the Starbucks
owners to adopt their Italian coffee taste, however, they rejected the offer. He thus started his
own business called II Giornale which was his vision for Starbucks. Later in 1987, Starbucks
was then sold to II Giornale which was owned by Schultz which he later named as Starbucks.
Starbucks had 11,000 locations in the USA and 1000 locations in canada. Starbucks now has
32,646 stores worldwide.
PROBLEM STATEMENT
The Vice president and controller of starbuck have concerns about the new accounting standards
proposed by IASB and FASB in regards to lease accounting and how it will affect the companies
financial statements.
ANALYSIS OF ISSUES
Type of Business: The case focuses on a coffee retailing company (Starbucks) which belongs in
the food production industry. Starbucks is noted for their sale of high quality fresh roasted whole
coffee beans in locations where friends can meet for conversations away from their homes and
place of work.
Environment: Starbucks operates in leased identical locations which serves as a third place from
home and work where friends could meet for conservations and enjoy their high quality
products, great service and relax. Their identical environments are community friendly.
Originally, Starbucks operated only as Italian coffee bars in Italy, until the coffee experience in
those bars captured Schultz who adopted the idea in America and then it spread all over the