Target 2006 Annual Report Download - page 56

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liabilities are recognized in income at 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
2006 2005 2004
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 4.0 3.3 3.3
Other (1.0) (0.7) (0.5)
Effective tax rate 38.0% 37.6% 37.8%
The components of the provision for income taxes were:
Provision for Income Taxes: Expense (Benefit)
(millions) 2006 2005 2004
Current
Federal $1,627 $1,361 $ 908
State/other 284 213 144
1,911 1,574 1,052
Deferred
Federal (174) (110) 83
State/other (27) (12) 11
(201) (122) 94
Total $1,710 $1,452 $1,146
The components of the net deferred tax asset/(liability) were:
Net Deferred Tax Asset/(Liability)
February 3, January 28,
(millions) 2007 2006
Gross deferred tax assets
Accrued and deferred compensation $ 466 $ 399
Self-insured claims 238 217
Allowance for doubtful accounts 191 167
Inventory 13 1
Postretirement health care obligation 39 39
Other 179 151
1,126 974
Gross deferred tax liabilities
Property and equipment (1,041) (1,080)
Pension (100) (287)
Deferred credit card income (119) (103)
Other (16) (11)
(1,276) (1,481)
Total $ (150) $ (507)
The change in the 2006 year end deferred tax balance includes the effect of adopting SFAS No. 158,
‘‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of
FASB Statements No. 87, 88, 106, and 132(R),’’ in addition to the annual provision for deferred income tax
expense.
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