Target 2015 Annual Report Download - page 51

11. Cash Equivalents
Cash equivalents include highly liquid investments with an original maturity of three months or less from the time of
purchase. These investments were $3,008 million and $1,520 million at January€30, 2016 and January€31, 2015,
respectively. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card
transactions. These receivables typically settle in less than five days and were $375 million and $379 million at
January€30, 2016 and January€31, 2015, respectively.
12. Inventory
The majority of our inventory is accounted for under the retail inventory accounting method (RIM) using the last-in,
first-out (LIFO) method. Inventory is stated at the lower of LIFO cost or market. The cost of our inventory includes the
amount we pay to our suppliers to acquire inventory, freight costs incurred in connection with the delivery of product
to our distribution centers and stores, and import costs, reduced by vendor income and cash discounts. The majority
of our distribution center operating costs, including compensation and benefits, are expensed in the period incurred.
Inventory is also reduced for estimated losses related to shrink and markdowns. The LIFO provision is calculated
based on inventory levels, markup rates, and internally measured retail price indices.
Under RIM, inventory cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the
inventory retail value. RIM is an averaging method that has been widely used in the retail industry due to its practicality.
The use of RIM will result in inventory being valued at the lower of cost or market because permanent markdowns are
taken as a reduction of the retail value of inventory.
Certain other inventory is recorded at the lower of cost or market using the cost method. The valuation allowance for
inventory valued under a cost method was not material to our Consolidated Financial Statements as of the end of
fiscal 2015 or 2014.
We routinely enter into arrangements with vendors whereby we do not purchase or pay for merchandise until the
merchandise is ultimately sold to a guest. Activity under this program is included in sales and cost of sales in the
Consolidated Statements of Operations, but the merchandise received under the program is not included in inventory
in our Consolidated Statements of Financial Position because of the virtually simultaneous purchase and sale of this
inventory. Sales made under these arrangements totaled $2,261 million, $2,040 million, and $1,833 million in 2015,
2014, and 2013, respectively.
13. Other Current Assets
Other€Current€Assets
(millions)
January 30,
2016
January 31,
2015
Income tax and other receivables $352 $426
Vendor income receivable 379 426
Prepaid expenses 214 231
Pharmacy-related receivables(a) 48 274
Pharmacy and clinic assets held for sale (b) — 510
Other 168 207
Total $1,161 $2,074
(a) We did not sell outstanding pharmacy-related receivables as part of the pharmacies and clinics transaction. See Note 6 for more
information on the pharmacies and clinics transaction.
(b) See Note 6 for additional information relating to the pharmacy and clinic assets held for sale.
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