TJ Maxx 2004 Annual Report Download - page 45

conditions are met. These arrangements do have some impact on Bob’s inventory valuation but such amounts are immaterial to our
consolidated results.
Retirement obligations: Retirement costs are accrued over the service life of an employee and represent in the aggregate
obligations that will ultimately be settled far in the future and are therefore subject to estimates. We are required to make assumptions
regarding variables, such as the discount rate for valuing pension obligations and the long-term rate of return assumed to be earned
on pension assets, both of which impact the net periodic pension cost for the period. The discount rate, which we determine
annually based on market interest rates, has dropped over the past several years and our actual returns on pension assets for the several
years prior to fiscal 2004 were considerably less than our expected returns. These two factors can have a considerable impact on the
annual cost of retirement benefits and in recent years have had an unfavorable effect on the funded status of our qualified pension
plan. We have made contributions of $100.5 million, which exceeded the minimum required, over the last three years to largely
restore the funded status of our plan.
Casualty insurance: The nature of our casualty insurance program for certain fiscal periods, primarily fiscal 2005, 2004 and
2003, carries a deductible that exposes TJX to losses for casualty claims in excess of our estimated annual cost of such losses. The
accrual for our estimated losses requires us, with the aid of an actuarial service and based upon claims experience of TJX and other
factors, to make significant estimates and assumptions. Actual results could differ from these estimates. A large portion of these losses
are funded during the policy year, offsetting our estimated loss accruals. The Company has a net accrual of $26.4 million for the
unfunded portion of its casualty losses as of January 29, 2005.
Accounting for taxes: Like many large corporations, we are regularly under audit by the United States federal, state, local or
foreign tax authorities in the areas of income taxes and the remittance of sales and use taxes. In evaluating the potential exposure
associated with the various tax filing positions, we accrue charges for possible exposures. Based on the annual evaluations of tax
positions, we believe we have appropriately filed our tax returns and accrued for possible exposures. To the extent we were to prevail
in matters for which accruals have been established or be required to pay amounts in excess of reserves, our effective tax rate in a
given financial period might be materially impacted. The Internal Revenue Service is currently examining the fiscal years ended
January 2000 through January 2003 and we also have various state and foreign tax examinations in process.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards
(‘‘SFAS’’) No. 123R, ‘‘Share-Based Payment’’ (SFAS No. 123R) which requires that the cost of all employee stock options, as well
as other equity-based compensation arrangements, be reflected in the financial statements based on the estimated fair value of the
awards on the grant date (with limited exceptions). That cost will be recognized over the period during which an employee is
required to provide service in exchange for the award or the requisite service period (usually the vesting period). This Statement is
effective for public entities as of the beginning of the first interim or annual reporting period that begins after June 15, 2005 (our
third quarter of fiscal 2006). We disclose the pro forma impact of expensing stock options in accordance with SFAS No. 123 as
originally issued in our notes to the consolidated financial statements and we are still assessing the impact that SFAS No. 123R will
have on our financial statements.
In November 2004, the FASB issued SFAS No. 151, ‘‘Inventory Costs,’’ which clarifies the accounting for abnormal amounts
of idle facility expense, freight, handling costs, and wasted material (spoilage) by requiring these items to be recognized as current-
period charges. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005, with earlier
application permitted. We do not believe the adoption of this Statement will have a material impact on our financial statements.
In December 2004, the FASB issued SFAS No. 153, ‘‘Exchanges of Nonmonetary Assets,’’ an amendment of APB Opinion
No. 29. This Statement addresses the measurement of exchanges of nonmonetary assets. It eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB 29 and replaces it with an exception for
exchanges that do not have commercial substance. This Statement is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. We do not believe the adoption of this Statement will have any material impact on our financial statements.
On January 12, 2004, the FASB released Staff Position No. SFAS 106-1, ‘‘Accounting and Disclosure Requirements Related
to the Medicare Prescription Drug, Improvement and Modernization Act of 2003’’ which addresses the accounting and disclosure
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