Target 2005 Annual Report Download - page 33

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In accordance with SFAS No.144, “Accounting for the Impairment
or Disposal of Long-Lived Assets,” all long-lived assets are reviewed
when events or changes in circumstances indicate that the asset’s
carrying value may not be recoverable. No material impairments were
recorded in 2005, 2004 or 2003 as a result of the tests performed.
In March 2005, the FASB issued FASB Interpretation No. 47,
“Accounting for Conditional Asset Retirement Obligations, an
interpretation of FASB Statement No.143” (FIN 47). The primary
purpose of FIN 47 is to clarify that an entity is required to recognize a
liability for the fair value of a conditional asset retirement obligation
when incurred if the liability’s fair value can be reasonably estimated.
FIN 47 is effective no later than the end of fiscal years ending after
December 15, 2005. The adoption of this guidance did not have a
material impact on our net earnings, cash flows or financial position.
14. Other Non-Current Assets
January 28, January 29,
(millions) 2006 2005
Prepaid pension expense $ 752 $ 733
Cash value of life insurance 524 446
Goodwill and intangible assets 183 206
Other 93 126
Total $1,552 $1,511
15. Goodwill and Intangible Assets
Goodwill and intangible assets are recorded within other non-current
assets at cost less accumulated amortization. Goodwill and intangible
assets by major classes were as follows:
Leasehold
Acquisition
Goodwill Costs Other Total
Jan. 28, Jan.29, Jan. 28, Jan.29, Jan. 28, Jan.29, Jan. 28, Jan.29,
(millions) 2006 2005 2006 2005 2006 2005 2006 2005
Gross asset $ 80 $ 80 $ 182 $ 185 $ 205 $ 201 $ 467 $ 466
Accumulated
amortization (20) (20) (70) (52) (194) (188) (284) (260)
Net goodwill
and intangible
assets $ 60 $ 60 $ 112 $ 133 $ 11 $ 13 $ 183 $ 206
Amortization is computed on intangible assets with definite useful
lives using the straight-line method over estimated useful lives that
range from three to 29 years. Amortization expense for the years
2005, 2004 and 2003 was $25 million, $27 million and $30 million,
respectively. The estimated aggregate amortization expense of our
definite-lived intangible assets for each of the five succeeding fiscal
years is as follows:
(millions) 2006 2007 2008 2009 2010
Amortization expense $23 $20 $19 $19 $17
We have goodwill and certain intangible assets that are not
amortized but instead are subject to an annual impairment test.
Discounted cash flow models are used in determining fair value for
the purposes of the required annual impairment analysis. No material
impairments were recorded in 2005, 2004 and 2003 as a result of
the tests performed.
During 2004, goodwill with an approximate carrying value of
$63 million was disposed of as part of the Marshall Field’s transaction.
16. Accounts Payable
Our accounting policy is to reduce accounts payable when checks
to vendors clear the bank from which they were drawn. Outstanding
checks included in accounts payable were $645 million and
$992 million at year-end 2005 and 2004, respectively.
17. Accrued Liabilities
January 28, January 29,
(millions) 2006 2005
Wages and benefits $ 506 $ 422
Taxes payable 366 287
Gift card liability 294 214
Other 1,027 710
Total $2,193 $1,633
Taxes payable consist of real estate, employee withholdings and sales tax liabilities.
Gift card liability represents the amount of gift cards that have been issued but have
not been redeemed, net of estimated breakage.
18. Commitments and Contingencies
At January 28, 2006, our obligations included notes and debentures
of $9,771 million (further discussed in Note 19, page 32), the present
value of capital lease obligations of $101 million and total future
payments of operating leases with total contractual lease payments
of $3,097 million, including certain options for lease term extension
that are expected to be exercised in the amount of $1,421 million
and $122 million of legally binding minimum lease payments for stores
that will open in 2006 (see additional detail in Note 22, pages 33-34).
In addition, real estate obligations, including commitments for the
purchase, construction, or remodeling of real estate and facilities,
were approximately $838 million at January 28, 2006. Purchase
obligations, which include all legally binding contracts such as firm
commitments for inventory purchases, merchandise royalties,
purchases of equipment, marketing-related contracts, software
acquisition/license commitments and service contracts and were
$1,431 million at January 28, 2006. In the normal course of business
we issue purchase orders to purchase inventory, which represent
authorizations to purchase and are cancelable by their terms. We do
not consider purchase orders to be firm inventory commitments. We
also issue letters of credit in the ordinary course of business which
are not firm commitments as they are conditional on the purchase
order not being cancelled. If under certain circumstances, and at our
sole discretion, we choose to cancel a purchase order, we may be