- Starbucks has reportedly agreed to provide the SEC further information about how it recognises revenue after questions over its accounting practices.
- Shares of the coffee-chain slid as much as 5.2% on the news.
- The slide comes shortly after shares declined when Starbucks said earnings wouldn’t grow as much in 2020 as it had previously forecast.
- Watch Starbucks trade live on Markets Insider.
Shares of Starbucks fell as much as 5.2% on the news. The coffee chain has agreed to provide the SEC more information about how it recognises revenue, according to the WSJ.
Starbucks is one of many US companies that the SEC has asked about revenue-recognition practices since 2018, when new accounting guidelines came into effect that change how different companies record revenue from sales and services. At least 208 companies – a 56% increase year over year -got letters from the SEC in 2018, the WSJ reported.
In routine letters sent between May and August, the SEC questioned how Starbucks recognises revenue in quarterly filings that ended March 31. The SEC asked a number of questions about how Starbucks counts revenue from services, and also asked the company to explain how it recorded the $US7 billion payment from Nestle SA in 2018 for the exclusive right to sell Starbucks products.
In addition, a change in how Starbucks accounts for gift cards made it harder for the SEC to tell how much revenue the company received from the Nestle deal, the WSJ reported.
The report comes just a week after Starbucks stock slid the most in 7 months after the company said in an investor presentation that its earnings won’t grow as much in 2020 as it previously thought. The new estimate of earnings-per-share growth of 8% to 10% fell short of Starbucks’ previous forecast of at least 13% growth for 2020.
Shares of Starbucks are up roughly 41% year to date.
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