TJ Maxx 2009 Annual Report Download - page 71

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 30, 2010 and January 31, 2009, in-transit inventory included in merchandise inventories was $396.8 million
and $329.9 million, respectively. Comparable amounts were reflected in accounts payable at those dates.
Common Stock and Equity: Equity transactions consist primarily of the repurchase of our common stock under
our stock repurchase programs and the amortization of expense and issuance of common stock under our stock incentive
plan. In fiscal 2010, we also issued shares upon conversion of convertible notes called for redemption, discussed in
NoteD.Underourstockrepurchaseprogramswerepurchaseourcommonstockontheopenmarket.Theparvalueof
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 in any of the years presented. All shares
repurchased have been retired.
Shares issued under TJX’s stock incentive plan are issued from authorized but unissued shares, and proceeds received
are recorded by increasing common stock for the par value of the shares with the excess over par added to APIC. Income
tax benefits upon the expensing of options result in the creation of a deferred tax asset, while income tax benefits due to
the exercise of stock options reduce deferred tax assets to the extent that an asset for the related grant has been created.
Any tax benefits greater than the deferred tax assets created atthetimeofexpensingtheoptionsarecreditedtoAPIC;any
deficiencies in the tax benefits are debited to APIC to the extent a pool for such deficiencies exists. In the absence of a pool
any deficiencies are realized in the related periods’ statements of income through the provision for income taxes. Any
excess income tax benefits are included in cash flows from financing activities in the statements of cash flows. The par
value of restricted stock awards is also added to common stock when the stock is issued, generally at grant date. The fair
value of the restricted stock awards in excess of par value is added to APIC as the awards are amortized into earnings over
the related vesting periods. Upon the call of our convertible notes most holders of the notes chose to convert into TJX
common stock. When converted the face value of the convertible notes less unamortized debt discount was relieved,
common stock was credited with the par value of the shares issued and the excess of the carrying value of the convertible
notesoverparwasaddedtoAPIC.
Share-Based Compensation: TJX accounts for share based compensation in accordance with U.S. GAAP whereby
it estimates the fair value of each option grant on the date of grant using the Black-Scholes option pricing model. See
Note H for a detailed discussion of share-based compensation.
Interest: TJX’s interest expense (income) is presented as a net amount. The following is a summary of net interest:
Dollars in thousands
January 30,
2010
January 31,
2009
January 26,
2008
Fiscal Year Ended
Interest expense $49,278 $ 38,123 $ 39,926
Capitalized interest (758) (1,647) (799)
Interest (income) (9,011) (22,185) (40,725)
Net interest expense (income) $39,509 $ 14,291 $ (1,598)
We capitalize interest during the active construction period of major capital projects. Capitalized interest is added to
the cost of the related assets.
Depreciation and Amortization: For financial reporting purposes, TJX provides for depreciation and amortization
of property by the use of the straight-line method over the estimated useful lives of the assets. Buildings are depreciated
over 33 years. Leasehold costs and improvements are generally amortized over their useful life or the committed lease
term (typically 10 years), whichever is shorter. Furniture, fixtures and equipment are depreciated over 3 to 10 years.
Depreciation and amortization expense for property was $435.8 million for fiscal 2010, $398.0 million for fiscal 2009
F-8