(TGT) Target Corporation 10-K Analysis: Accounts Receivable

Hey Everyone!

I'm an undergraduate Finance major. I've been practicing my valuation skills with real companies to understand better how it's really applied to the market. I'm proud to say that I improved a lot.

However, there're still times in which I have trouble understanding financial reports. This is one of these times.

I'm currently doing a DCF modeling for TGT but I'm having trouble going through the projection of their accounts receivable.

For some reason, the accounts receivable is not on the balance sheet. Under cash & cash equivalents we already have inventories. On their notes, there's the following paragraph:

"We establish a receivable for vendor income that is earned but not yet received. Based on the agreements in place, this receivable is computed by estimating when we have completed our performance and when the amount is earned. The majority of the year-end vendor income receivables are collected within the following fiscal quarter, and we do not believe there is a reasonable likelihood that the assumptions used in our estimate will change significantly. Historically, adjustments to our vendor income receivable have not been material. Vendor income receivable was $385 million and $384 million at January 28, 2017 and January 30, 2016, respectively. Vendor income is described further in Note 4 of the Financial Statements.”

Some websites present this as being TGT accounts receivable.

Can you explain to me why this is accounts receivable and how is it okay for a company not to disclose them on the 10-K?

I secured a M&A Summer Analyst position in a company but I'm applying for some more advanced Investment Banking full-time "internships" and would love to know more.

This community has always been of great help to me.

Thank you in advance.