September 29,2010. Mr. Russell G. Golden Technical Director Financial Accounting Standards Board 401 Merritt 7 P.O. Box 5116 Norwalk, CT

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1 Starbucks Coffee Company PO Box Seattle, WA / September 29,2010 Mr. Russell G. Golden Technical Director Financial Accounting Standards Board 401 Merritt 7 P.O. Box 5116 Norwalk, CT File Reference No Dear Mr. Golden: Starbucks Corporation appreciates the opportunity to comment on the FASB' s proposed Accounting Standards Update Accounting for Financial Instruments and Revisions to the Accountingfor Derivative Instruments and Hedging Activities (the "proposed ASU"). We welcome the opportunity to provide input into the standard setting process in this important area and we support global convergence for high-quality accounting standards. Accordingly, we commend the Board on its continued efforts to work closely with the International Accounting Standards Board (IASB) and other national standard setters to develop high-quality standards that will be applied globally. However, we do not support the issuance of the proposed ASU as a final standard. The remainder of this letter provides our views on several key areas of the proposed ASU which include the classification and measurement of equity investments that are currently accounted for under the cost method and certain proposals related to the accounting for derivatives and hedges. Classification and Measurement of Equity Investments We do not agree with the underlying premise in the proposed ASU that all equity instruments not accounted for under the equity method of accounting (as proposed to be limited) should be measured at fair value, with the changes in fair value recognized in net income. We are concerned that the proposed ASU will inappropriately eliminate the current use of the cost method of accounting for certain non-marketable equity investments. Our strong preference is for the FASB and IASB to develop a converged approach for the application of the equity method and the cost method of accounting for non-marketable equity securities, outside of this proposed ASU.

2 Page 2 However, ifthe proposed changes to the equity method of accounting are made, we believe a similar approach should be followed for non-marketable equity investments currently accounted for under the cost method. That is, for non-marketable equity investments for which the investor does not exert significant control, but for which the operations of the investee are considered related to the investor's consolidated operations, we believe it would be appropriate to continue to account for these investments under the cost method. We believe this would be applicable in circumstances where the equity investee'sbusiness purpose relates to the investor's uriderlying business and the operations and related cash flows of the operating entity are paramount, rather than the fair value of the investment itself. For all other equity investments (marketable and non-marketable), we do agree that fair value is the most appropriate measurement method, with changes in fair value reported in net income. As background, Starbucks has several non-marketable equity investments in entities that develop and operate Starbucks licensed retail stores. Our overall store operations portfolio includes both company-operated stores and licensed stores. For our licensed store operations, we have varying levels of equity ownership in the operations of our licensed store partners. In some cases we have no equity ownership, in some cases an equity ownership of less than 20%, and in many cases, equity ownership of 50%. In each of these licensed store arrangements, our fundamental business operation is the licensed store operation itself and the related royalty, license fees and product sales they generate for us. These cash flows represent the underlying economics of the operations and are how management evaluates the operations. In every case, the licensed store business model is to operate profitable stores that generate ongoing cash flows for Starbucks, and not to manage. the related non-marketable equity investment as a financial instrument on a fair value basis. Further, we do not measure fair value for our non-marketable equity investments in these entities (except for any impairment analysis that may be required), do not provide incentives to either Starbucks employees or license partners on this basis, and do not seek monetizing events, including sales, of these non-marketable equity investments. We expect that users of our financial statements would find mark-to-market adjustments in income related to these investments to be non-operational, and would not consider them useful for predicting future cash flows. As a result, we believe these mark-to-market adjustments would skew the true results of our operations and would limit an investor's ability to understand the economics of the ownership arrangement.

3 Page 3 We recommend that for certain non-marketable equity investments, an approach similar to that in the proposed ASU for equity method investments be provided for cost method investments. That is, for non-marketable equity investments for which the operations of the investee are related to the investor's consolidated operations and for which the business strategy is generating cash flows from the ongoing operations of the investment rather than realizing fair value changes, continued use of the cost method of accounting should be allowed. Factors to be considered in evaluating whether the operations of the investee are considered related to the investor's consolidated operations would be the same as those related to equity method investments as discussed in paragraph 130 of the proposed ASU. Accounting for Derivatives and Hedging Bifurcation-by-risk of Nonfinancial Risk Components Under ASC 815, the risk being hedged must be for the entire hedged item in a fair value hedge or the entire asset to be acquired or sold in a hedged forecasted transaction, to receive hedge accounting treatment. As a result, many nonfinancial companies that are faced with significant exposures to market risks created through the ordinary course of business have been unable to successfully qualify for hedge accounting. The rationale provided in ASC 815 is that "changes in the price of an ingredient or component of a nonfinancial item do not have a predictable, separately measurable effect on the price of an item." We do not believe the premise for this argument is correct. In fact, for certain nonfinancial assets there are explicit pricing features that lead to predictable, separately identifiable, and measurable effects on the total price of the item. We also note that during its February 2,2010 meeting the IASB tentatively agreed to permit the bifurcation-by-risk. for financial items, with a leaning toward also permitting bifurcation-by-risk for nonfinancial items. We strongly encourage the Board to integrate the IASB' s position into the final Financial Instruments Accounting Standards Update. An example of a specific non-fmancial risk item is fluid milk. Most procurement contracts between Starbucks and its dairy suppliers explicitly reference the Base Skim Price for Class I milk (published monthly by the United States Department of Agriculture) to determine the total price paid to the supplier. This risk component is separately identifiable, measurable, and has a predicted effect on the total price of milk. Because we are unable to bifurcate that specific commodity risk component, and must instead assess and measure effectiveness against all other risk components (such as fuel costs related to store delivery), we are not able to meet the criteria for a highly effective hedge. Despite the inability to receive hedge accounting treatment, Starbucks hedges some of this risk

4 Page 4 from an economic perspective as a matter of prudent risk management. This results in changes in reported earnings that don't reflect the underlying economics due to the timing difference of earnings recognition between the cash flows of the underlying exposure and the hedging instrument. Although the Board's proposal of shifting the standard from "highly effective" to "reasonably effective" is a move in the right direction, we believe bifurcation-by-risk of nonfinancial risk components is the proper solution. Dedesignation We believe the proposed change to prohibit the voluntary dedesignation of a hedging relationship will add unnecessary complexity for financial statement preparers, does not provide materially improved financial information for users, and thus does not pass the cost-benefit trade off test. As background, Starbucks hedges certain forecasted foreign currency payments using forward agreements. Because the exact timing of cash flows is not known at the onset of the hedge, we track the transactions and dedesignate the hedging relationship once the forecasted payment becomes a payable. From that point until the settlement date, the derivative will be marked-to-market. Correspondingly, the payable will be marked to the then current spot rate. This approach would be prohibited under the proposed ASU. Instead, we would either have to enter into additional transactions to replicate this practice or undertake a more complicated accounting method outlined in through 112 (Example 18). Both choices increase complexity, administrative burden and/or transaction costs without providing a more representative view to the financial statement user of the derivatives being utilized. Elimination of the Critical Terms Match Method While the elimination of the critical terms match method might remove some concern by financial statement users that the methodology is being unintentionally misapplied, we believe the measurement of ineffectiveness in such cases would unnecessarily increase the administrative burden for financial statement preparers. Many foreign currency cash flow exposures can be hedged using the critical terms match method such that any ineffectiveness is insignificant. In these cases the quantitative measurement of ineffectiveness (as currently described) would not improve the representation of the economics or cash flows of the hedging relationship, but instead would add unnecessary complexity and administrative burden.

5 Page 5 Hedge Effectiveness Measurement for Cash Flow Hedges The proposed guidance in the ASU requires that, when accounting for cash flow hedges, ineffectiveness for "underhedges" be recognized in net income, in addition to "overhedges". If the cumulative change in fair value of the hedged item is less than the change in fair value of the hypothetical (i.e., "perfect") derivative, the resulting ineffectiveness recognized into earnings would be a result of gains or losses that will never exist. This would add artificial volatility to earnings and not fairly represent the underlying economics of the hedging relationship. Thus, we believe that no ineffectiveness should be recognized into earnings related to an underhedge situation. Again, we thank the FASB for the opportunity to comment on the proposed ASU and would be pleased to discuss our comments in greater detail if that would be helpful. Sincerely, Donna Brooks Vice President and Controller