Target Corp. is planning to make adjustments to its future filings with the SEC following recommended revisions from the regulatory body.
In the second quarter of 2017, Target said it intends to start reclassifying supply chain-related depreciation and amortization expense to cost of sales for all periods to allow gross margin to be reflected as a GAAP measure, according to a July 10 SEC filing.
Depreciation and amortization will continue to be presented separately within its consolidated statements of operations, which will include all depreciation and amortization expense exclusive of the supply chain-related amounts classified in cost of sales. The company said it will parenthetically disclose the amount of depreciation and amortization expense in the cost of sales to avoid confusion.
The change is expected to reclassify approximately $270 million from depreciation and amortization to cost of sales, which the retailer said will result in equal and offsetting declines in both gross margin rate and depreciation and amortization rate of approximately 0.4% for financial year 2016.
Moreover, Target will no longer present segment EBITDA or EBITDA margin rate within management's discussion and analysis of financial condition and results of operations due to changes in the depreciation and amortization expense classification.
In a June 8 filing, Target also said it will remove the gross profit subtotal in its consolidated statements of operations and relabel the cost of sales description as "Cost of Sales (exclusive of depreciation and amortization)" in future filings.
The company said it will also disclose, under the liquidity and capital resources section, cash and short-term investments held outside the U.S. for which there may be tax implications if repatriated to the country, unless the cash amounts are insignificant.