Target 2005 Annual Report Download - page 36

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Future minimum lease payments required under noncancelable
lease agreements existing at January 28, 2006, were:
Future Minimum Lease Payments
Operating Capital
(millions) Leases Leases
2006 $137 $12
2007 132 12
2008 123 13
2009 114 13
2010 107 13
After 2010 2,484 160
Total future minimum lease payments $3,097 (a) 223
Less: Interest (b) (122)
Present value of minimum capital lease payments $101 (c)
(a) Total contractual lease payments include certain options to extend lease terms,
in the amount of $1,421 million, that are expected to be exercised because the
investment in leasehold improvements is significant and also includes $122 million
of legally binding minimum lease payments for stores that will open in 2006.
(b) Calculated using the interest rate at inception for each lease.
(c) Includes current portion of $2 million.
23. Income Taxes
We account for income taxes under the asset and liability method.
We have recognized deferred tax assets and liabilities for the
estimated future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted income tax rates in effect for
the year in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rate is recognized into income in the period that
includes the enactment date. In the Consolidated Statements of
Financial Position, the current deferred tax asset balance is the net
of all current deferred tax assets and current deferred tax liabilities.
The non-current deferred tax liability is the net of all non-current
deferred tax assets and non-current deferred tax liabilities.
To determine our quarterly provision for income taxes, we use
annual effective tax rates based on expected annual income and
statutory tax rates, adjusted for discrete tax events that occur during
the quarter.
Reconciliation of tax rates is as follows:
Tax Rate Reconciliation
2005 2004 2003
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes,
net of federal tax benefit 3.3 3.3 3.3
Dividends on ESOP stock (0.2) (0.2) (0.2)
Work opportunity tax credits (0.2) (0.2) (0.2)
Other (0.3) (0.1) (0.1)
Effective tax rate 37.6% 37.8% 37.8%
The components of the provision for income taxes were:
Income Tax Provision: Expense
(millions) 2005 2004 2003
Current
Federal $1,361 $ 908 $ 669
State/ other 213 144 107
1,574 1,052 776
Deferred
Federal (110) 83 184
State/ other (12) 11 24
(122) 94 208
Total $1,452 $1,146 $ 984
The components of the net deferred tax asset/ (liability) were:
Net Deferred Tax Asset/(Liability)
January 28, January 29,
(millions) 2006 2005
Gross deferred tax assets
Deferred and other compensation $ 399 $ 332
Self-insured benefits 217 179
Accounts receivable valuation allowance 167 147
Inventory 147
Postretirement health care obligation 39 38
Other 151 128
974 871
Gross deferred tax liabilities
Property and equipment (1,080) (1,136)
Pension (287) (268)
Deferred credit card income (103) (87)
Other (11) (9)
(1,481) (1,500)
Total $ (507) $ (629)