Target 2015 Annual Report Download - page 44

Notes to Consolidated Financial Statements
1. Summary of Accounting Policies
Organization€€€€We are a general merchandise retailer selling products to our guests through our stores and digital
channels.
As more fully described in Note 7, in January 2015, we announced our exit from the Canadian market and filed for
protection (the Filing) under the Companies' Creditors Arrangement Act (CCAA) with the Ontario Superior Court of
Justice in Toronto (the Court). Our prefiling financial results in Canada and subsequent expenses directly attributable
to the Canada exit are included in our financial statements and classified within discontinued operations. Discontinued
operations refers only to our discontinued Canadian operations. Subsequent to the Filing, we operate as a single
segment that includes all of our continuing operations, which are designed to enable guests to purchase products
seamlessly in stores, online, or through mobile devices.
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. As of January 15, 2015, we deconsolidated substantially all of our Canadian operations following the Filing.
See Note 7 for more information.
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 2015 ended January€30, 2016, and consisted
of 52€weeks. Fiscal 2014 ended January€31, 2015, and consisted of 52€weeks. Fiscal 2013 ended February€1, 2014,
and consisted of 52€weeks. Fiscal 2016 will end January 28, 2017, and will consist of 52€weeks.
Accounting policies€€€€Our accounting policies are disclosed in the applicable Notes to the Consolidated Financial
Statements. Certain prior-year amounts have been reclassified to conform to current year presentation.
2. Revenues
Our retail stores generally record revenue at the point of sale. Digital channel sales 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 national brand merchandise within 90 days of
purchase and owned and exclusive brands within one year 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 $37 million, $32 million, and $29 million in 2015,
2014, and 2013, 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 $1,067 million, $943 million, and $833 million in 2015, 2014, and 2013, respectively.
39