Target 2013 Annual Report Download - page 45

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Notes to Consolidated Financial Statements
1. Summary of Accounting Policies
Organization Target Corporation (Target, the Corporation, or the Company) operates two reportable segments: U.S.
and Canadian. Our U.S. Segment includes all of our U.S. retail operations, including digital sales. The U.S. Segment
also includes our U.S. credit card servicing activities and certain centralized operating and corporate activities not
allocated to our Canadian Segment. In 2013, following the sale of our U.S. consumer credit card portfolio to TD Bank
Group (TD), we combined our historical U.S. Retail Segment and U.S. Credit Card Segment into one U.S. Segment.
Our Canadian Segment includes all of our Canadian retail operations, including 124 stores opened in 2013. We
currently do not have a digital sales channel in Canada.
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.
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 2013 ended February 1, 2014 and consisted
of 52 weeks. Fiscal 2012 ended February 2, 2013, and consisted of 53 weeks. Fiscal 2011 ended January 28, 2012,
and consisted of 52 weeks. Fiscal 2014 will end January 31, 2015, and will consist of 52 weeks.
Accounting policies Our accounting policies are disclosed in the applicable Notes to the Consolidated Financial
Statements.
2. Revenues
Our retail stores generally record revenue at the point of sale. Sales from our online and mobile applications include
shipping revenue and are recorded upon delivery to the guest. Total revenues do not include sales tax because we
are 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 $29 million, $25 million and $22 million in 2013, 2012 and 2011, respectively.
Revenue from gift card sales is recognized upon gift card redemption. Our gift cards do not expire. 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 any period presented.
Guests receive a 5 percent discount on virtually all purchases and receive free shipping at Target.com when they use
their REDcard. The discounts associated with loyalty programs are included as reductions in sales in our Consolidated
Statements of Operations and were $833 million, $583 million and $340 million in 2013, 2012 and 2011, respectively.