Target 2007 Annual Report Download - page 57

If the company were to prevail on all unrecognized tax benefits recorded, approximately $245 million of
the $442 million reserve would benefit the effective tax rate. In addition, the impact of penalties and interest
would also benefit the effective tax rate. Interest and penalties associated with unrecognized tax benefits are
recorded within income tax expense. During the years ended February 2, 2008, February 3, 2007 and
January 28, 2006, we recognized approximately $37 million, $37 million and $32 million, respectively, in
interest and penalties. We had accrued approximately $129 million and $105 million for the payment of
interest and penalties at February 2, 2008 and February 3, 2007, respectively.
Included in the balance at February 2, 2008 are $72 million of liabilities for tax positions for which the
ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the
shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of
cash to the taxing authority to an earlier period.
It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our
unrecognized tax positions will increase or decrease during the next 12 months; however, we do not expect
the change to have a significant effect on our results of operations or our financial position.
23. Other Noncurrent Liabilities
Other Noncurrent Liabilities February 2, February 3,
(millions) 2008 2007
Income tax liability $ 571 $—
Deferred compensation 486 645
Workers’ compensation and general liability 475 418
Other 343 284
Total $1,875 $1,347
We retain a substantial portion of the risk related to certain general liability and workers’ compensation
claims. Liabilities associated with these losses include estimates of both claims filed and losses incurred but
not yet reported. We estimate our ultimate cost based on analysis of historical data and actuarial estimates.
General liability and workers’ compensation liabilities are recorded at our estimate of their net present value.
24. Share Repurchase
In November 2007, our Board of Directors approved a new share repurchase program totaling $10 billion
that replaced a prior program. Share repurchases for the last three years, repurchased primarily through open
market transactions, were as follows:
Share Repurchases Total Number of Average Price
(millions, except per share data) Shares Purchased Paid per Share Total Investment
2005 23.1 $51.88 $1,197
2006 19.5 50.16 977
2007 – Under the prior program 19.7 60.72 1,197
2007 – Under the 2007 program 26.5 54.64 1,445
Total 88.8 $54.29 $4,816
Of the shares reacquired in 2007, a portion was delivered upon settlement of prepaid forward contracts.
The prepaid forward contracts settled in 2007 had a total cash investment of $165 million and an aggregate
market value of $215 million at their respective settlement dates. The prepaid forward contracts settled in 2006
had a total cash investment of $76 million and an aggregate market value of $88 million at their respective
settlement dates. The prepaid forward contracts settled in 2005 had a total cash investment of $65 million and
an aggregate market value of $79 million at their respective settlement dates. These contracts are among the
investment vehicles used to reduce our economic exposure related to our nonqualified deferred
compensation plans. The details of our long positions in prepaid forward contracts have been provided in
Note 26.
During the fourth quarter of 2007, we purchased and sold call options on 30 million shares of our
common stock at a net cost of $331 million, or an average of $11.04 per share. The cost of any shares
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PART II