Target Corp. (TGT)

Analysis of Property, Plant and Equipment

Difficulty level: Advanced

Property, Plant and Equipment Accounting Policy

Property and equipment is depreciated using the straight-line method over estimated useful lives or lease terms if shorter. Target amortizes leasehold improvements purchased after the beginning of the initial lease term over the shorter of the assets' useful lives or a term that includes the original lease term, plus any renewals that are reasonably assured at the date the leasehold improvements are acquired. Depreciation and capital lease amortization expense for 2013, 2012 and 2011 was $2,198 million, $2,120 million and $2,107 million, respectively. For income tax purposes, accelerated depreciation methods are generally used. Repair and maintenance costs are expensed as incurred. Facility pre-opening costs, including supplies and payroll, are expensed as incurred.

Estimated Useful Lives	Life (Years)
Buildings and improvements	8-39
Fixtures and equipment	2-15
Computer hardware and software	2-7

Long-lived assets are reviewed for impairment when events or changes in circumstances, such as a decision to relocate or close a store or make significant software changes, indicate that the asset's carrying value may not be recoverable. For asset groups classified as held for sale, the carrying value is compared to the fair value less cost to sell. Target estimates fair value by obtaining market appraisals, valuations from third party brokers or other valuation techniques. Impairments of $77 million, $37 million and $43 million in 2013, 2012 and 2011, respectively, were recorded in selling, general and administrative expenses on the Consolidated Statements of Income, primarily from completed or planned store closures and software changes.

Source: Target Corp., Annual Report

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Property, Plant and Equipment Disclosure

Target Corp., Statement of Financial Position, Property, Plant and Equipment

USD $ in millions

	Feb 1, 2014	Feb 2, 2013	Jan 28, 2012	Jan 29, 2011	Jan 30, 2010	Jan 31, 2009
Land	6,234	6,206	6,122	5,928	5,793	5,767
Buildings and improvements	30,356	28,653	26,837	23,081	22,152	20,430
Fixtures and equipment	5,583	5,362	5,141	4,939	4,743	4,270
Computer hardware and software	2,764	2,567	2,468	2,533	2,575	2,586
Construction-in-progress	843	1,176	963	567	502	1,763
Property and equipment, gross	45,780	43,964	41,531	37,048	35,765	34,816
Accumulated depreciation	(14,402)	(13,311)	(12,382)	(11,555)	(10,485)	(9,060)
Property and equipment, net	31,378	30,653	29,149	25,493	25,280	25,756

Source: Based on data from Target Corp. Annual Reports

Item	Description	The company
Land	Carrying amount as of the balance sheet date of real estate held for productive use. This excludes land held for sale.	Target Corp.'s land increased from 2012 to 2013 and from 2013 to 2014.
Buildings and improvements	Carrying amount as of the balance sheet date of long-lived, depreciable assets that include building structures held for productive use including any addition, improvement, or renovation to the structure, such as interior masonry, interior flooring, electrical, and plumbing.	Target Corp.'s buildings and improvements increased from 2012 to 2013 and from 2013 to 2014.
Fixtures and equipment	Carrying amount at the balance sheet date for long-lived, depreciable asset commonly used in offices and stores. Examples include desks, chairs, and store fixtures.	Target Corp.'s fixtures and equipment increased from 2012 to 2013 and from 2013 to 2014.
Construction-in-progress	Carrying amount at the balance sheet date of long-lived asset under construction that include construction costs to date on capital projects that have not been completed and assets being constructed that are not ready to be placed into service.	Target Corp.'s construction-in-progress increased from 2012 to 2013 but then declined significantly from 2013 to 2014.
Property and equipment, gross	Carrying amount at the balance sheet date for long-lived physical assets used in the normal conduct of business and not intended for resale. This can include land, physical structures, machinery, vehicles, furniture, computer equipment, construction in progress, and similar items. Amount does not include depreciation.	Target Corp.'s property and equipment, gross increased from 2012 to 2013 and from 2013 to 2014.
Property and equipment, net	Tangible assets that are held by an entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year; net of accumulated depreciation. Examples include land, buildings, and production equipment.	Target Corp.'s property and equipment, net increased from 2012 to 2013 and from 2013 to 2014.

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Property, Plant and Equipment Ratios (Summary)

Target Corp., Property, Plant and Equipment Ratios

	Feb 1, 2014	Feb 2, 2013	Jan 28, 2012	Jan 29, 2011	Jan 30, 2010	Jan 31, 2009
Average age	36.42%	35.25%	34.97%	37.13%	34.98%	31.19%
Estimated total useful life (years)	18	18	17	15	15	16
Estimated age, time elapsed since purchase (years)	7	6	6	6	5	5
Estimated remaining life (years)	11	12	11	9	10	11

Ratio	Description	The company
Average age	As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient.	Target Corp.'s average age of depreciable property, plant and equipment deteriorated from 2012 to 2013 and from 2013 to 2014.
Estimated total useful life	Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors.	Target Corp.'s estimated total useful life of depreciable property, plant and equipment increased from 2012 to 2013 and from 2013 to 2014.
Estimated time elapsed since purchase	The approximate age in years of a company's fixed assets. Useful for comparison purposes.	Target Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2012 to 2013 and from 2013 to 2014.
Estimated remaining life		Target Corp.'s estimated remaining life of depreciable property, plant and equipment increased from 2012 to 2013 but then slightly declined from 2013 to 2014.

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Average Age

	Feb 1, 2014	Feb 2, 2013	Jan 28, 2012	Jan 29, 2011	Jan 30, 2010	Jan 31, 2009
Selected Financial Data (USD $ in millions)
Accumulated depreciation	14,402	13,311	12,382	11,555	10,485	9,060
Property and equipment, gross	45,780	43,964	41,531	37,048	35,765	34,816
Land	6,234	6,206	6,122	5,928	5,793	5,767
Ratio
Average age¹	36.42%	35.25%	34.97%	37.13%	34.98%	31.19%

2014 Calculations

¹ Average age = 100 × Accumulated depreciation ÷ (Property and equipment, gross – Land)
= 100 × 14,402 ÷ (45,780 – 6,234) = 36.42%

Ratio	Description	The company
Average age	As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient.	Target Corp.'s average age of depreciable property, plant and equipment deteriorated from 2012 to 2013 and from 2013 to 2014.

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Estimated Total Useful Life

	Feb 1, 2014	Feb 2, 2013	Jan 28, 2012	Jan 29, 2011	Jan 30, 2010	Jan 31, 2009
Selected Financial Data (USD $ in millions)
Property and equipment, gross	45,780	43,964	41,531	37,048	35,765	34,816
Land	6,234	6,206	6,122	5,928	5,793	5,767
Depreciation and capital lease amortization expense	2,198	2,120	2,107	2,060	1,999	1,804
Ratio
Estimated total useful life (years)¹	18	18	17	15	15	16

2014 Calculations

¹ Estimated total useful life (years) = (Property and equipment, gross – Land) ÷ Depreciation and capital lease amortization expense
= (45,780 – 6,234) ÷ 2,198 = 18

Ratio	Description	The company
Estimated total useful life	Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors.	Target Corp.'s estimated total useful life of depreciable property, plant and equipment increased from 2012 to 2013 and from 2013 to 2014.

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Estimated Age, Time Elapsed Since Purchase

	Feb 1, 2014	Feb 2, 2013	Jan 28, 2012	Jan 29, 2011	Jan 30, 2010	Jan 31, 2009
Selected Financial Data (USD $ in millions)
Accumulated depreciation	14,402	13,311	12,382	11,555	10,485	9,060
Depreciation and capital lease amortization expense	2,198	2,120	2,107	2,060	1,999	1,804
Ratio
Time elapsed since purchase (years)¹	7	6	6	6	5	5

2014 Calculations

¹ Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation and capital lease amortization expense
= 14,402 ÷ 2,198 = 7

Ratio	Description	The company
Estimated time elapsed since purchase	The approximate age in years of a company's fixed assets. Useful for comparison purposes.	Target Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2012 to 2013 and from 2013 to 2014.

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Estimated Remaining Life

	Feb 1, 2014	Feb 2, 2013	Jan 28, 2012	Jan 29, 2011	Jan 30, 2010	Jan 31, 2009
Selected Financial Data (USD $ in millions)
Property and equipment, net	31,378	30,653	29,149	25,493	25,280	25,756
Land	6,234	6,206	6,122	5,928	5,793	5,767
Depreciation and capital lease amortization expense	2,198	2,120	2,107	2,060	1,999	1,804
Ratio
Estimated remaining life (years)¹	11	12	11	9	10	11

2014 Calculations

¹ Estimated remaining life (years) = (Property and equipment, net – Land) ÷ Depreciation and capital lease amortization expense
= (31,378 – 6,234) ÷ 2,198 = 11

Ratio	Description	The company
Estimated remaining life		Target Corp.'s estimated remaining life of depreciable property, plant and equipment increased from 2012 to 2013 but then slightly declined from 2013 to 2014.

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