Target 2008 Annual Report Download - page 50

Organization Target Corporation (the Corporation or Target) operates two reportable segments: Retail and
Credit Card. Our Retail Segment includes all of our merchandising operations, including the operation of our
large-format general merchandise and food discount stores in the United States and our fully integrated online
business, Target.com. Our Credit Card Segment offers credit to qualified guests through our branded
proprietary credit cards, the Target Visa and the Target Card (collectively, REDcards). Our Credit Card
Segment strengthens the bond with our guests, drives incremental sales and contributes to our results of
operations.
Consolidation The consolidated financial statements include the balances of the Corporation and its
subsidiaries after elimination of intercompany balances and transactions. All material subsidiaries are wholly
owned. We consolidate variable interest entities where it has been determined that the Corporation is the
primary beneficiary of those entities’ operations. The variable interest entity consolidated is a bankruptcy-
remote subsidiary through which we sell certain accounts receivable as a method of providing funding for our
accounts receivable.
Use of estimates The preparation of our consolidated financial statements in conformity with U.S. generally
accepted accounting principles (GAAP) requires management to make estimates and assumptions affecting
reported amounts in the consolidated financial statements and accompanying notes. Actual results may differ
significantly from those estimates.
Fiscal year Our fiscal year ends on the Saturday nearest January 31. Unless otherwise stated, references to
years in this report relate to fiscal years, rather than to calendar years. Fiscal year 2008 (2008) ended
January 31, 2009 and consisted of 52 weeks. Fiscal year 2007 (2007) ended February 2, 2008 and consisted
of 52 weeks. Fiscal year 2006 (2006) ended February 3, 2007 and consisted of 53 weeks.
Reclassifications Certain prior year amounts have been reclassified to conform to the current year
presentation.
Accounting policies applicable to the items discussed in the Notes to the Consolidated Financial
Statement are described in the respective notes.
Our retail stores generally record revenue at the point of sale. Sales from our online business include
shipping revenue and are recorded upon delivery to the guest. Total revenues do not include sales tax as we
consider ourselves a pass through conduit for collecting and remitting sales taxes. Generally, guests may
return merchandise within 90 days of purchase. Revenues are recognized net of expected returns, which we
estimate using historical return patterns. Commissions earned on sales generated by leased departments are
included within sales and were $19 million in 2008, $17 million in 2007, and $16 million in 2006. A leased
business is an agreement we enter into with another entity such as Starbucks or Pizza Hut where the entity’s
products and services are offered in our stores.
Revenue from gift card sales is recognized upon gift card redemption. Our gift cards do not have
expiration dates. Based on historical redemption rates, a small and relatively stable percentage of gift cards
will never be redeemed, referred to as ‘‘breakage.’’ Estimated breakage revenue is recognized over time in
proportion to actual gift card redemptions and was immaterial in 2008, 2007, and 2006.
Credit card revenues are recognized according to the contractual provisions of each credit card
agreement. When accounts are written off, uncollected finance charges and late fees are recorded as a
reduction of credit card revenues. Target retail store sales charged to our credit cards totaled $3,854 million,
$4,105 million, and $3,961 million in 2008, 2007 and 2006, respectively. We offer new account discounts and
rewards programs on our REDcard products. These discounts are redeemable only on purchases made at
Target. The discounts associated with our REDcard products are included as reductions in sales in our
Consolidated Statements of Operations and were $114 million in 2008, $110 million in 2007 and $104 million
in 2006.
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Notes to Consolidated Financial Statements
1. Summary of Accounting Policies
2. Revenues