(Impact of intangible asset accounting on comparability) Starbucks and Dunkin’ Brands are competing companies, but they account for intangible assets differently. Starbucks is a company that has grown over time from its founding.

It has made some acquisitions, and recorded some goodwill on the businesses it acquired, but the goodwill associated with the Starbucks name has not been recorded. Dunkin’ Brands purchased the businesses of Dunkin’ Donuts and of Baskin-Robbins (a chain of ice cream stores) in 2006. Some summarized information from the 2013 balance sheets of the two companies follows (in millions):

A. Compare the intangible assets of the two companies as a fraction of total assets.
B. Explain why Dunkin’ likely shows a much higher balance for intangible assets than does Starbucks. Is it because its brand names are economically more valuable than the Starbucks name?
C. How would the difference in the recognition of the intangible assets affect the comparison of the following ratios? (Which company is likely to look better?) For this question, ignore any amortization that might be taken on the intangible assets.

a. Asset turnover

b. Return on assets

c. Debt to assets ratio

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Dunkin' Starbucks Goodwill 892 856 Other intangible assets 1,452 274 Total assets 3,235 10,753