Target 2014 Annual Report Download - page 46

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Profit-Sharing Arrangement
(millions) 2014
2013 (a)
Profit-sharing included in segment SG&A $ 682 $ 653
Reduction of beneficial interest asset (b) (53) (98)
Net impact to SG&A expense $ 629 $ 555
(a) Segment SG&A
also reflected credit card revenues earned in 2013 prior to the close of the transaction.
(b) On a consolidated basis, profit-sharing income is offset by reductions of the beneficial interest asset.
The $225 million beneficial interest asset recognized at the close of the transaction effectively represents a receivable
for the present value of future profit-sharing we expect to receive on the receivables sold. Profit-sharing payments
reduced the beneficial interest asset by $73 million and $96 million during 2014 and 2013, respectively. Revaluation
adjustments increased the asset by $20 million during 2014 and reduced the asset by $2 million during 2013. As of
January 31, 2015 and February 1, 2014, a beneficial interest asset of $74 million and $127 million, respectively, remains
and is recorded within other current assets and other noncurrent assets in our Consolidated Statements of Financial
Position. Based on historical payment patterns, we estimate that the remaining beneficial interest asset will be reduced
over the next two years.
Prior to the sale, credit card revenues were recognized according to the contractual provisions of each credit card
agreement. When accounts were written off, uncollected finance charges and late fees were recorded as a reduction
of credit card revenues. Target retail sales charged on our credit cards totaled $5,807 million in 2012.
8. Fair Value Measurements
Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1
(unadjusted quoted prices in active markets); Level 2 (observable market inputs, other than quoted prices included in
Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).
Fair Value Measurements - Recurring Basis Fair Value at
(millions)
Pricing
Category
January 31,
2015
February 1,
2014
Assets
Cash and cash equivalents
Short-term investments Level 1 $ 1,520 $ 3
Other current assets
Interest rate swaps(a) Level 2 — 1
Prepaid forward contracts Level 1 38 73
Beneficial interest asset(b) Level 3 43 71
Other noncurrent assets
Interest rate swaps(a) Level 2 65 62
Company-owned life insurance investments(c) Level 2 322 305
Beneficial interest asset(b) Level 3 31 56
Liabilities
Other noncurrent liabilities
Interest rate swaps(a) Level 2 24 39
(a) See Note 19 for additional
information on interest rate swaps.
(b) Note 7 includes a rollforward of the Level 3 beneficial interest asset.
(c) Company-owned
life insurance investments consist of equity index funds and fixed income assets. Amounts are presented net of
nonrecourse loans that are secured by some of these policies. These loan amounts totaled $773 million at January 31, 2015 and $790
million at February 1, 2014.
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