8-KOther EventsExhibits & Filings

TARGET CORP 8-K Report, Corporate Update (May 11, 2018)

Filed May 11, 2018For Securities:TGT

Summary

Target Corporation (TGT) filed an 8-K on May 11, 2018, to disclose the adoption of new accounting standards effective February 4, 2018. These changes impact revenue recognition (ASC 606), leases (ASC 842), and pensions (ASC 715). While the adoption of new revenue recognition and pension standards did not materially affect net earnings or cash flows, the lease standard requires the recognition of significant new assets and liabilities on the balance sheet. Specifically, Target will now report approximately $1.3 billion in net lease assets and $1.4 billion in lease liabilities, with the difference impacting retained earnings. Investors should note that Target will also change its financial reporting presentation. The company will no longer provide segment EBIT and segment rate analysis in its quarterly earnings releases and SEC filings. Instead, analysis will focus on consolidated operating income. This change, along with the accounting standard updates, aims to provide a clearer presentation of Target's financial performance and position. Detailed financial information reflecting these new standards is available in Exhibit 99 of the filing.

Key Highlights

  • 1Target adopted new accounting standards for revenue recognition (ASC 606), leases (ASC 842), and pensions (ASC 715) effective February 4, 2018.
  • 2Adoption of ASC 606 (Revenue Recognition) did not materially affect consolidated net earnings, financial position, or cash flows. It primarily reclassified credit card profit sharing income to 'Other Revenue' and made minor adjustments to promotional gift card revenue recognition.
  • 3Adoption of ASC 842 (Leases) requires recording significant balance sheet items: approximately $1.3 billion in net lease assets and $1.4 billion in lease liabilities, with the difference impacting retained earnings.
  • 4The lease standard adoption had no material impact on consolidated net earnings but did result in the recognition of new assets and liabilities.
  • 5ASC 715 (Pensions) adoption involved retrospective reclassification of certain pension costs from SG&A to 'Other Income and Expense'.
  • 6Target will cease reporting segment EBIT and segment rate analysis, shifting to a consolidated operating income analysis in its financial reports.
  • 7Exhibit 99 provides detailed financial information adjusted for these new accounting standards.

Frequently Asked Questions

Target is adopting new accounting standards for revenue recognition (ASC 606), leases (ASC 842), and pensions (ASC 715). These changes affect how revenue is reported, how leases are presented on the balance sheet, and how pension costs are classified.

The most significant impact is on the balance sheet, where Target will record approximately $1.3 billion in net lease assets and $1.4 billion in lease liabilities for leases longer than 12 months. This change does not materially affect net earnings or cash flows but increases reported assets and liabilities.

Yes, Target will no longer present segment EBIT and segment rate analysis. Instead, the company will focus its analysis of results of operations on a consolidated basis, including consolidated operating income.

For revenue recognition and pensions, the adoption did not materially affect net earnings or cash flows. For leases, while significant assets and liabilities are now recognized, the standard itself did not materially affect consolidated net earnings and had no impact on cash flows.