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Rules of Financial Reporting

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Starbucks and GAAP Compliance
Name
Institutional Affiliation
Date

Starbucks and GAAP Compliance
Control Procedures
The rules used in financial reporting are contained in the generally accepted accounting principles that are often referred as (GAAP). These rules are made to regulate the information that a company releases (Morrow, 2009). The information will inform interested parties of the previous and anticipated performances of a company. This will help investors decide whether to involve their resources in activities of a company (Morrow, 2009). Without these rules, companies would be free to selectively determine what they want to report (Lohrey, 2018). This would lead to partial reporting of values that are positive and therefore misleading investors. For all private and public traded companies in the United States, the GAAP must be applied in writing a financial statement such as balance sheets and cash flows (Richards, 2018). Similarly, Starbucks has an obligation to include these measurements in their reports.
GAAP are meant to show units of measurement and disclosure. Units of measurements are mainly those that show the particular time when the statements were made. They show the timeframe within which the results implied were obtained (Lohrey, 2018). Disclosure units are those that state the specific numbers of the performance such as the numerical financial results. GAAP concerns itself with four activities reporting which include;
An indication of the economic activity for the company
The time when these measurements were achieved
A disclosure of the prevailing conditions during the time when the results were achieved
The summarized financial statements
Segment Information
Segment information is important for a business that is operating in a wide geographical position and providing many different products.

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As an international chain of restaurants, Starbucks operates in these two realities. Different geographical regions imply different operating expenditure and therefore varied rates of profit creation. Different products such as beverages versus foods have different preparation prices that result in different operating costs. The accommodation segment also operates quite differently from the dining sectors. These areas are reported differently. This can help a company determine which segments are performing optimally and those that are failing. This way, a company can decide on what to optimize and what to minimize. Operation segments for foods and beverages. It also distinguishes eat-in and packaged foods and beverages.
Estimates
Estimates are usually produced for fractions of the entire reporting period. For example, for a company that reports its finances yearly, quarterly estimates can be done to determine the performance of a company at a particular time. This is especially for the benefit of investors who may want to know how particular events such as political activities influence business.
Investments and Fair Value
Fair value is the equal amount that the business is worth at a particular time. It is especially represented by the cost of a company’s stock. In the stock exchange, investors freely bet on the value they are willing to pay for an investment as a measure of its potential performance.
Leases
Leases are buildings that a company has hired additionally to the rented premises for businesses. These buildings need to be declared alongside with their intended use. For Starbucks, its leases are in the form of the buildings used for its restaurants. In the home country and where possible, the company purchases its own buildings. However, in foreign economies, the hotels are held in leased buildings for a particular period of time. Most of the warehouses are leased.

References
Lohrey, J. (2018). Overview of GAAP Rules for Financial Statements. Smallbusiness.chron.com. Retrieved 19 January 2018, from http://smallbusiness.chron.com/overview-GAAP-rules-financial-statements-76848.html
Morrow, S. (2009). General Accepted Accounting Principles or GAAP: What does it mean?. legalzoom.com. Retrieved 19 January 2018, from https://www.legalzoom.com/articles/general-accepted-accounting-principles-or-gaap-what-does-it-mean
Richards, L. (2018). The Rules Followed by Accountants When Preparing Financial Statements. Smallbusiness.chron.com. Retrieved 19 January 2018, from http://smallbusiness.chron.com/rules-followed-accountants-preparing-financial-statements-17631.html

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