Revenue Recognition Accounting Policy
Target's retail stores generally record revenue at the point of sale. Sales from Target's online business include shipping revenue and are recorded upon delivery to the guest. Total revenues do not include sales tax as Target considers 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 Target estimates using historical return patterns as a percentage of sales. Commissions earned on sales generated by leased departments are included within sales and were $22 million in 2011, $20 million in 2010 and $18 million in 2009. Revenue from gift card sales is recognized upon gift card redemption. Target's 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 2011, 2010 and 2009.
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 credit cards totaled $4,686 million, $3,455 million and $3,328 million in 2011, 2010 and 2009, respectively.
In October 2010, guests began to 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. The discounts associated with loyalty programs are included as reductions in sales in Target's Consolidated Statements of Operations and were $340 million in 2011, $162 million in 2010 and $94 million in 2009.
Source: Target Corp., Annual Report
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