Target Corp. (TGT)
Analysis of Inventory
Accounting Policy on Inventory
The vast majority of Target’s 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. Inventory cost includes the amount Target pays to the suppliers to acquire inventory, freight costs incurred to deliver product to the distribution centers and stores, and import costs, reduced by vendor income and cash discounts. 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.
Source: 10-K (filing date: 2019-03-13).
Target Corp., balance sheet: inventory
US$ in millions
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).
|Inventory||Amount after valuation and LIFO reserves of inventory expected to be sold, or consumed within one year or operating cycle, if longer.||Target Corp.’s inventory increased from 2017 to 2018 and from 2018 to 2019.|