Target 2010 Annual Report Download - page 59

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Notes to Consolidated Financial Statements
1. Summary of Accounting Policies
Organization Target Corporation (Target or the Corporation) operates two reportable segments: Retail and Credit
Card. Our Retail Segment includes all of our merchandising operations, including our fully integrated online
business. Our Credit Card Segment offers credit to qualified guests through our branded proprietary credit cards,
the Target Visa and the Target Card. Additionally, we offer a branded proprietary Target Debit Card. Collectively,
these REDcards strengthen the bond with our guests, drive incremental sales and contribute 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 2010 ended January 29, 2011, and
consisted of 52 weeks. Fiscal year 2009 ended January 30, 2010, and consisted of 52 weeks. Fiscal year 2008
ended January 31, 2009, and consisted of 52 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.
2. Revenues
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 as a percentage of sales. Commissions earned on sales generated by leased
departments are included within sales and were $20 million in 2010, $18 million in 2009 and $19 million in 2008.
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 not material in 2010, 2009 and 2008.
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 sales charged on our credit cards totaled $3,455 million, $3,328 million and $3,948 million in
2010, 2009 and 2008, respectively.
Beginning April 2010, all new qualified credit card applicants receive the Target Card, and we no longer issue
the Target Visa to credit card applicants. Existing Target Visa cardholders are not affected. Beginning October 2010,
guests receive a 5 percent discount on virtually all purchases at checkout every day when they use a REDcard at
any Target store or on Target.com. Target’s REDcards include the Target Credit Card, Target Visa Credit Card and
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PART II