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Target Corp. (TGT)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property and equipment, including assets acquired under finance leases, 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 certain at the date the leasehold improvements are acquired. Depreciation expense for 2018, 2017, and 2016 was $2,460 million, $2,462 million, and $2,305 million, respectively, including depreciation expense included in Cost of Sales. 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 |
Target reviews long-lived assets for impairment when events or changes in circumstances—such as a decision to relocate or close a store or distribution center, make significant software changes or discontinue projects—indicate that the asset’s carrying value may not be recoverable. Target recognized impairment losses of $92 million, $91 million, and $43 million during 2018, 2017, and 2016, respectively. The impairment losses primarily resulted from planned or completed store closures, and for 2017, supply chain changes. For asset groups classified as held for sale, the carrying value is compared with 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 are recorded in SG&A Expenses on the Consolidated Statements of Operations.
Source: 10-K (filing date: 2019-03-13).
Property, Plant and Equipment Disclosure
Target Corp., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
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| Property and equipment, gross | |
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| Accumulated depreciation | |
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| Property and equipment, net | |
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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 |
|---|---|---|
| Property and equipment, gross | Amount before accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures. | Target Corp.’s property and equipment, gross increased from 2017 to 2018 and from 2018 to 2019. |
| Property and equipment, net | Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures. | Target Corp.’s property and equipment, net increased from 2017 to 2018 and from 2018 to 2019. |
Property, Plant and Equipment Ratios (Summary)
Target Corp., Property, Plant and Equipment Ratios
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 |
|---|---|---|
| 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 2017 to 2018 but then slightly improved from 2018 to 2019. |
| 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 declined from 2017 to 2018 but then slightly increased from 2018 to 2019. |
| 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 improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level. |
| Estimated remaining life | Target Corp.’s estimated remaining life of depreciable property, plant and equipment declined from 2017 to 2018 but then slightly increased from 2018 to 2019. |
Average Age
| Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | Jan 30, 2016 | Jan 31, 2015 | Feb 1, 2014 | ||
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| Selected Financial Data (USD $ in millions) | |||||||
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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 Average age = 100 × Accumulated depreciation ÷ (Property and equipment, gross – Land)
= 100 × ÷ ( – ) =
| 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 2017 to 2018 but then slightly improved from 2018 to 2019. |
Estimated Total Useful Life
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 Estimated total useful life (years) = (Property and equipment, gross – Land) ÷ Depreciation expense
= ( – ) ÷ =
| 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 declined from 2017 to 2018 but then slightly increased from 2018 to 2019. |
Estimated Age, Time Elapsed since Purchase
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 Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation expense
= ÷ =
| 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 improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level. |
Estimated Remaining Life
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 Estimated remaining life (years) = (Property and equipment, net – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Target Corp.’s estimated remaining life of depreciable property, plant and equipment declined from 2017 to 2018 but then slightly increased from 2018 to 2019. |