TJ Maxx 2006 Annual Report Download - page 70

The TJX Companies, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Accounting Policies
Basis of Presentation: The consolidated financial statements of The TJX Companies, Inc. (referred to as “TJX”,
the “Company” or “we”) include the financial statements of all of TJX’s subsidiaries, all of which are wholly owned. All
of TJX’s activities are conducted within TJX or our subsidiaries and are consolidated in these financial statements. All
intercompany transactions have been eliminated in consolidation.
Fiscal Year: TJX’s fiscal year ends on the last Saturday in January. The fiscal years ended January 27, 2007 (“fiscal
2007”), January 28, 2006 (“fiscal 2006”) and January 29, 2005 (“fiscal 2005”) each included 52 weeks.
Earnings Per Share: All earnings per share amounts discussed refer to diluted earnings per share unless
otherwise indicated.
Use of Estimates: The preparation of the financial statements, in conformity with accounting principles generally
accepted in the United States, requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent liabilities, at the date of the financial statements as well as
the reported amounts of revenues and expenses during the reporting period. TJX considers the more significant
accounting policies that involve management estimates and judgments to be those relating to inventory valuation,
retirement obligations, casualty insurance, accounting for taxes, reserves for discontinued operations and loss con-
tingencies. Actual amounts could differ from those estimates.
Revenue Recognition: TJX records revenue at the time of sale and receipt of merchandise by the customer, net of a
reserve for estimated returns. We estimate returns based upon our historical experience. We defer recognition of a
layaway sale and its related profit to the accounting period when the customer receives layaway merchandise. Proceeds
from the sale of gift cards are deferred until the customer uses the gift card to acquire merchandise. Based on historical
experience we estimate the amount of gift cards that will not be redeemed and, to the extent allowed by local law, these
amounts are amortized into income over the redemption period.
Consolidated Statements of Income Classifications: Cost of sales, including buying and occupancy costs, include the
cost of merchandise sold and gains and losses on inventory-related derivative contracts; store occupancy costs
(including real estate taxes, utility and maintenance costs, and fixed asset depreciation); the costs of operating our
distribution centers; payroll, benefits and travel costs directly associated with buying inventory; and systems costs
related to the buying and tracking of inventory.
Selling, general and administrative expenses include store payroll and benefit costs; communication costs; credit
and check expenses; advertising; administrative and field management payroll, benefits and travel costs; corporate
administrative costs and depreciation; gains and losses on non-inventory related foreign currency exchange contracts;
and other miscellaneous income and expense items.
Cash and Cash Equivalents: TJX generally considers highly liquid investments with a maturity of three months or
less at the date of purchase to be cash equivalents. Our investments are primarily high-grade commercial paper,
institutional money market funds and time deposits with major banks. The fair value of cash equivalents approximates
carrying value.
Merchandise Inventories: Inventories are stated at the lower of cost or market. TJX uses the retail method for
valuing inventories on the first-in first-out basis. We almost exclusively utilize a permanent markdown strategy and
lower the cost value of the inventory that is subject to markdown at the time the retail prices are lowered in our stores.
We accrue for inventory obligations at the time inventory is shipped rather than when received and accepted by TJX. At
January 27, 2007 and January 28, 2006, the amount of in-transit inventory included in merchandise inventories on the
balance sheet was $346.2 million and $340.6 million, respectively. A comparable amount is reflected in accounts
payable.
Common Stock and Equity: Equity transactions consist primarily of the repurchase of our common stock under
our stock repurchase program and the issuance of common stock under our stock incentive plan. Under the stock
repurchase program we repurchase our common stock on the open market. The par value of the shares repurchased is
charged to common stock with the excess of the purchase price over par first charged against any available additional
paid-in capital (“APIC”) and the balance charged to retained earnings. Due to the high volume of repurchases over the
past several years we have no remaining balance in APIC. All shares repurchased have been retired.
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