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Microsoft Excel LibreOffice Calc

Target Corp. (TGT)


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Goodwill totaled $633 million and $630 million at February 2, 2019 and February 3, 2018, respectively. In December 2017, Target acquired Shipt, Inc., an online same-day delivery service platform, for approximately $550 million. Target identified intangible assets of $40 million, primarily related to the tradename, customer relationships, and shopper lists, net tangible assets of $10 million, and goodwill of $500 million. The goodwill recorded primarily represents the value of significantly accelerating Target’s ability to provide same-day delivery services to the guests.

No impairments were recorded in 2018, 2017, or 2016 as a result of the annual goodwill impairment tests performed.

Intangible assets, net of accumulated amortization, totaled $66 million and $79 million as of February 2, 2019, and February 3, 2018, respectively, primarily related to trademarks and customer relationships. Target uses both accelerated and straight-line methods to amortize definite-lived intangible assets over 4 to 15 years. The weighted average life of intangible assets was 8 years at February 2, 2019. Amortization expense was $14 million, $14 million, and $13 million in 2018, 2017, and 2016, respectively, and is estimated to be less than $15 million annually through 2023.

Source: 10-K (filing date: 2019-03-13).


Goodwill and Intangible Assets Disclosure

Target Corp., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
Intangible assets, net of accumulated amortization hidden hidden hidden hidden hidden hidden
Goodwill hidden hidden hidden hidden hidden hidden
Goodwill and intangible assets hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13), 10-K (filing date: 2014-03-14).

Item Description The company
Intangible assets, net of accumulated amortization Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Target Corp.’s intangible assets, net of accumulated amortization increased from 2017 to 2018 but then declined significantly from 2018 to 2019.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Target Corp.’s goodwill increased from 2017 to 2018 and from 2018 to 2019.
Goodwill and intangible assets Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Target Corp.’s goodwill and intangible assets increased from 2017 to 2018 but then slightly declined from 2018 to 2019.

Analyst Adjustments: Removal of Goodwill

Target Corp., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Shareholders’ Investment
Shareholders’ investment (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Shareholders’ investment (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Net Earnings (loss)
Net earnings (loss) (as reported) hidden hidden hidden hidden hidden hidden
Add: Goodwill impairment loss hidden hidden hidden hidden hidden hidden
Net earnings (loss) (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13), 10-K (filing date: 2014-03-14).


Target Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Goodwill (Summary)

Target Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden hidden
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13), 10-K (filing date: 2014-03-14).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Target Corp.’s adjusted net profit margin improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Target Corp.’s adjusted total asset turnover improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Target Corp.’s adjusted financial leverage increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Target Corp.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Target Corp.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Target Corp., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net earnings (loss) hidden hidden hidden hidden hidden hidden
Sales hidden hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted net earnings (loss) hidden hidden hidden hidden hidden hidden
Sales hidden hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13), 10-K (filing date: 2014-03-14).

2019 Calculations

1 Net profit margin = 100 × Net earnings (loss) ÷ Sales
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net earnings (loss) ÷ Sales
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Target Corp.’s adjusted net profit margin improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
As Reported
Selected Financial Data (USD $ in millions)
Sales hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Sales hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13), 10-K (filing date: 2014-03-14).

2019 Calculations

1 Total asset turnover = Sales ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Target Corp.’s adjusted total asset turnover improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
As Reported
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden hidden hidden
Shareholders’ investment hidden hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted total assets hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ investment hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13), 10-K (filing date: 2014-03-14).

2019 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ investment
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ investment
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Target Corp.’s adjusted financial leverage increased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net earnings (loss) hidden hidden hidden hidden hidden hidden
Shareholders’ investment hidden hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted net earnings (loss) hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ investment hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13), 10-K (filing date: 2014-03-14).

2019 Calculations

1 ROE = 100 × Net earnings (loss) ÷ Shareholders’ investment
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net earnings (loss) ÷ Adjusted shareholders’ investment
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Target Corp.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015 Feb 1, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net earnings (loss) hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted net earnings (loss) hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13), 10-K (filing date: 2014-03-14).

2019 Calculations

1 ROA = 100 × Net earnings (loss) ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net earnings (loss) ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Target Corp.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.