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Summary of Significant Accounting Policies | 12 Months Ended
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Jan. 29, 2017
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business, Consolidation and Presentation The Home Depot, Inc., together with its subsidiaries (the "Company"), is a home improvement retailer that sells a wide assortment of building materials, home improvement products and lawn and garden products and provides a number of services. The Home Depot stores, which are full-service, warehouse-style stores averaging approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area, stock approximately 30,000 to 40,000 different kinds of products that are sold to do-it-yourself customers, do-it-for-me customers and professional customers. The Company also offers a significantly broader product assortment through its websites. At the end of fiscal 2016, the Company was operating 2,278 The Home Depot stores, which included 1,977 stores in the United States, including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam ("U.S."), 182 stores in Canada and 119 stores in Mexico. The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Fiscal Year The Company’s fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31. Fiscal years ended January 29, 2017 ("fiscal 2016"), January 31, 2016 ("fiscal 2015") and February 1, 2015 ("fiscal 2014") include 52 weeks. Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing these financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). Actual results could differ from these estimates. Fair Value of Financial Instruments The carrying amounts of Cash and Cash Equivalents, Receivables, Short-Term Debt and Accounts Payable approximate fair value due to the short-term maturities of these financial instruments. The fair value of the Company’s Long-Term Debt is discussed in Note 11. Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company’s cash equivalents are carried at fair market value and consist primarily of money market funds. Accounts Receivable The Company has agreements with third-party service providers who directly extend credit to customers, manage the Company’s private label credit card program ("PLCC program") and own the related receivables. The Company evaluated the third-party entities holding the receivables under the program and concluded that they should not be consolidated by the Company. The agreement with the primary third-party service provider for the Company’s PLCC program expires in 2028, with the Company having the option, but no obligation, to purchase the receivables at the end of the agreement. The deferred interest charges incurred by the Company for its deferred financing programs offered to its customers are included in Cost of Sales. The interchange fees charged to the Company for the customers’ use of the cards and any profit sharing with the third-party service providers are included in Selling, General and Administrative expenses ("SG&A"). The sum of these three components is referred to by the Company as "the cost of credit" of the PLCC program. In addition, certain subsidiaries of the Company, including Interline Brands, Inc. ("Interline"), extend credit directly to customers in the ordinary course of business. The receivables due from customers were $216 million and $253 million as of January 29, 2017 and January 31, 2016, respectively. The Company’s valuation reserve related to accounts receivable was not material to the Consolidated Financial Statements of the Company as of the end of fiscal 2016 or 2015. Merchandise Inventories The majority of the Company’s Merchandise Inventories are stated at the lower of cost (first-in, first-out) or market, as determined by the retail inventory method. As the inventory retail value is adjusted regularly to reflect market conditions, the inventory valued using the retail method approximates the lower of cost or market. Certain subsidiaries, including retail operations in Canada and Mexico, distribution centers and Interline, record Merchandise Inventories at the lower of cost or market, as determined by a cost method. These Merchandise Inventories represent approximately 30% of the total Merchandise Inventories balance. The Company evaluates the inventory valued using a cost method at the end of each quarter to ensure that it is carried at the lower of cost or market. The valuation allowance for Merchandise Inventories valued under a cost method was not material to the Consolidated Financial Statements of the Company as of the end of fiscal 2016 or 2015. Independent physical inventory counts or cycle counts are taken on a regular basis in each store and distribution center to ensure that amounts reflected in the accompanying Consolidated Financial Statements for Merchandise Inventories are properly stated. During the period between physical inventory counts in stores, the Company accrues for estimated losses related to shrink on a store-by-store basis based on recent shrink results and current trends in the business. Shrink (or in the case of excess inventory, "swell") is the difference between the recorded amount of inventory and the physical inventory. Shrink may occur due to theft, loss, inaccurate records for the receipt of inventory or deterioration of goods, among other things. Income Taxes Income taxes are accounted for under the asset and liability method. The Company provides for federal, state and foreign income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company and its eligible subsidiaries file a consolidated U.S. federal income tax return. Non-U.S. subsidiaries and certain U.S. subsidiaries, which are consolidated for financial reporting purposes, are not eligible to be included in the Company’s consolidated U.S. federal income tax return. Separate provisions for income taxes have been determined for these entities. The Company intends to reinvest substantially all of the unremitted earnings of its non-U.S. subsidiaries and postpone their remittance indefinitely. Accordingly, no provision for U.S. income taxes on these earnings was recorded in the accompanying Consolidated Statements of Earnings. Depreciation and Amortization The Company’s Buildings, Furniture, Fixtures and Equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold Improvements are amortized using the straight-line method over the original term of the lease or the useful life of the improvement, whichever is shorter. The Company’s Property and Equipment is depreciated using the following estimated useful lives:
| Life
Buildings | 5 – 45 years
Furniture, Fixtures and Equipment | 2 – 20 years
Leasehold Improvements | 5 – 45 years
Capitalized Software Costs The Company capitalizes certain costs related to the acquisition and development of software and amortizes these costs using the straight-line method over the estimated useful life of the software, which is three to six years. Certain development costs not meeting the criteria for capitalization are expensed as incurred. Revenues The Company recognizes revenue, net of estimated returns and sales tax, at the time the customer takes possession of merchandise or receives services. The liability for sales returns is estimated based on historical return levels. When the Company receives payment from customers before the customer has taken possession of the merchandise or the service has been performed, the amount received is recorded as Deferred Revenue in the accompanying Consolidated Balance Sheets until the sale or service is complete. The Company also records Deferred Revenue for the sale of gift cards and recognizes this revenue upon the redemption of gift cards in Net Sales. Gift card breakage income is recognized based upon historical redemption patterns and represents the balance of gift cards for which the Company believes the likelihood of redemption by the customer is remote. During fiscal 2016, 2015 and 2014, the Company recognized $34 million, $27 million and $32 million, respectively, of gift card breakage income. This income is included in the accompanying Consolidated Statements of Earnings as a reduction in SG&A. Services Revenue Net Sales include services revenue generated through a variety of installation, home maintenance and professional service programs. In these programs, the customer selects and purchases material for a project, and the Company provides or arranges professional installation. These programs are offered through the Company’s stores and in-home sales programs. Under certain programs, when the Company provides or arranges the installation of a project and the subcontractor provides material as part of the installation, both the material and labor are included in services revenue. The Company recognizes this revenue when the service for the customer is complete. All payments received prior to the completion of services are recorded in Deferred Revenue in the accompanying Consolidated Balance Sheets. Services revenue was $4.0 billion, $4.0 billion and $3.8 billion for fiscal 2016, 2015 and 2014, respectively. Self-Insurance The Company is self-insured for certain losses related to general liability (including product liability), workers’ compensation, employee group medical and automobile claims. The expected ultimate cost for claims incurred as of the balance sheet date is not discounted and is recognized as a liability. The expected ultimate cost of claims is estimated based upon analysis of historical data and actuarial estimates. The Company maintains network security and privacy liability insurance coverage to limit the Company’s exposure to losses such as those that may be caused by a significant compromise or breach of the Company’s data security. This coverage is discussed further in Note 13. Prepaid Advertising Television and radio advertising production costs, along with media placement costs, are expensed when the advertisement first appears. Amounts included in Other Current Assets in the accompanying Consolidated Balance Sheets relating to prepayments of production costs for print and broadcast advertising as well as sponsorship promotions were not material at the end of fiscal 2016 and 2015. Vendor Allowances Vendor allowances primarily consist of volume rebates that are earned as a result of attaining certain purchase levels and advertising co-op allowances for the promotion of vendors’ products that are typically based on guaranteed minimum amounts with additional amounts being earned for attaining certain purchase levels. These vendor allowances are accrued as earned, with those allowances received as a result of attaining certain purchase levels accrued over the incentive period based on estimates of purchases. Volume rebates and certain advertising co-op allowances earned are initially recorded as a reduction in Merchandise Inventories and a subsequent reduction in Cost of Sales when the related product is sold. Certain advertising co-op allowances that are reimbursements of specific, incremental and identifiable costs incurred to promote vendors’ products are recorded as an offset against advertising expense. In fiscal 2016, 2015 and 2014, gross advertising expense was $955 million, $868 million and $884 million, respectively, and is included in SG&A. Specific, incremental and identifiable advertising co-op allowances were $166 million, $129 million and $125 million for fiscal 2016, 2015 and 2014, respectively, and are recorded as an offset to advertising expense in SG&A. Cost of Sales Cost of Sales includes the actual cost of merchandise sold and services performed, the cost of transportation of merchandise from vendors to the Company’s stores, locations or customers, shipping and handling costs from the Company’s stores, locations or distribution centers to customers, the operating cost of the Company’s sourcing and distribution network, online fulfillment center costs and the cost of deferred interest programs offered through the Company’s private label credit card programs. Impairment of Long-Lived Assets The Company evaluates its long-lived assets each quarter for indicators of potential impairment. Indicators of impairment include current period losses combined with a history of losses, management’s decision to relocate or close a store or other location before the end of its previously estimated useful life or when changes in other circumstances indicate the carrying amount of an asset may not be recoverable. The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual store level. The assets of a store with indicators of impairment are evaluated by comparing its undiscounted cash flows with its carrying value. The estimate of cash flows includes management’s assumptions of cash inflows and outflows directly resulting from the use of those assets in operations, including gross margin on Net Sales, payroll and related items, occupancy costs, insurance allocations and other costs to operate a store. If the carrying value is greater than the undiscounted cash flows, an impairment loss is recognized for the difference between the carrying value and the estimated fair market value. Impairment losses are recorded as a component of SG&A in the accompanying Consolidated Statements of Earnings. When a leased location closes, the Company also recognizes in SG&A the net present value of future lease obligations less estimated sublease income. The Company recorded impairments and lease obligation costs on closings and relocations in the ordinary course of business, which were not material to the Consolidated Financial Statements in fiscal 2016, 2015 or 2014. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the fair value of net assets acquired. The Company does not amortize goodwill but does assess the recoverability of goodwill in the third quarter of each fiscal year, or more often if indicators warrant, by determining whether the fair value of each reporting unit supports its carrying value. Each year the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to complete quantitative impairment assessments, with a quantitative assessment completed at least once every three years. The Company completed a quantitative assessment in fiscal 2016. In fiscal 2016, the Company completed its annual assessment of the recoverability of goodwill for its U.S., Canada and Mexico reporting units. The fair values of these reporting units were estimated using the present value of expected future discounted cash flows, and the fair value exceeded the carrying value for each respective reporting unit. There were no impairment charges related to goodwill for fiscal 2016, 2015 or 2014. The Company amortizes the cost of other intangible assets over their estimated useful lives, which range up to 12 years, unless such lives are deemed indefinite. Intangible assets with indefinite lives are tested in the third quarter of each fiscal year for impairment, or more often if indicators warrant. There were no impairment charges related to other intangible assets for fiscal 2016, 2015 or 2014. Stock-Based Compensation The per share weighted average fair value of stock options granted during fiscal 2016, 2015 and 2014 was $20.26, $18.54 and $14.13, respectively. The fair value of these options was determined at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
| Fiscal Year Ended
| January 29, 2017 |  | January 31, 2016 |  | February 1, 2015
Risk-free interest rate | 1.4 | % |  | 1.4 | % |  | 1.7 | %
Assumed volatility | 20.7 | % |  | 20.8 | % |  | 22.7 | %
Assumed dividend yield | 2.1 | % |  | 2.0 | % |  | 2.3 | %
Assumed lives of options | 5 years |  |  | 5 years |  |  | 5 years |
Derivatives The Company uses derivative financial instruments from time to time in the management of its interest rate exposure on long-term debt and its exposure on foreign currency fluctuations. The Company accounts for its derivative financial instruments in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Subtopic 815-10, "Derivatives and Hedging". The fair value of the Company’s derivative financial instruments is discussed in Note 11. Comprehensive Income Comprehensive Income includes Net Earnings adjusted for certain gains and losses that are excluded from Net Earnings under U.S. GAAP. Adjustments to Net Earnings and Accumulated Other Comprehensive Loss consist primarily of foreign currency translation adjustments. Foreign Currency Translation Assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current rate of exchange on the last day of the reporting period. Revenues and expenses are generally translated using average exchange rates for the period, and equity transactions are translated using the actual rate on the day of the transaction. Segment Information The Company operates within a single reportable segment primarily within North America. Net Sales inside the U.S. were $86.6 billion, $80.5 billion and $74.7 billion for fiscal 2016, 2015 and 2014, respectively. Net Sales outside the U.S. were $8.0 billion, $8.0 billion and $8.5 billion for fiscal 2016, 2015 and 2014, respectively. Long-lived assets, which consist of net property and equipment, inside the U.S. totaled $19.5 billion and $19.9 billion as of January 29, 2017 and January 31, 2016, respectively. Long-lived assets outside the U.S. totaled $2.4 billion and $2.3 billion as of January 29, 2017 and January 31, 2016, respectively. The following table presents the Net Sales of each major product category (and related services) for each of the last three fiscal years (dollar amounts in millions):
Product Category | Fiscal Year Ended
January 29, 2017 |  | January 31, 2016 |  | February 1, 2015
| Net Sales |  | % of Net Sales |  | Net Sales |  | % of Net Sales |  | Net Sales |  | % of Net Sales
Indoor Garden | $ | 9,204 |  |  | 9.7 | % |  | $ | 8,227 |  |  | 9.3 | % |  | $ | 7,486 |  |  | 9.0 | %
Paint | 7,666 |  |  | 8.1 |  |  | 7,497 |  |  | 8.5 |  |  | 7,342 |  |  | 8.8 |
Appliances | 7,362 |  |  | 7.8 |  |  | 6,539 |  |  | 7.4 |  |  | 5,718 |  |  | 6.9 |
Kitchen and Bath | 7,184 |  |  | 7.6 |  |  | 6,909 |  |  | 7.8 |  |  | 6,639 |  |  | 8.0 |
Plumbing | 6,985 |  |  | 7.4 |  |  | 6,364 |  |  | 7.2 |  |  | 5,755 |  |  | 6.9 |
Lumber | 6,828 |  |  | 7.2 |  |  | 6,284 |  |  | 7.1 |  |  | 6,054 |  |  | 7.3 |
Outdoor Garden | 6,789 |  |  | 7.2 |  |  | 6,505 |  |  | 7.3 |  |  | 6,319 |  |  | 7.6 |
Building Materials | 6,774 |  |  | 7.2 |  |  | 6,416 |  |  | 7.2 |  |  | 6,068 |  |  | 7.3 |
Tools | 6,668 |  |  | 7.0 |  |  | 6,060 |  |  | 6.8 |  |  | 5,388 |  |  | 6.5 |
Flooring | 6,477 |  |  | 6.8 |  |  | 6,215 |  |  | 7.0 |  |  | 6,011 |  |  | 7.2 |
Electrical | 6,090 |  |  | 6.4 |  |  | 5,837 |  |  | 6.6 |  |  | 5,656 |  |  | 6.8 |
Hardware | 5,629 |  |  | 6.0 |  |  | 5,296 |  |  | 6.0 |  |  | 4,975 |  |  | 6.0 |
Millwork | 5,139 |  |  | 5.4 |  |  | 4,937 |  |  | 5.6 |  |  | 4,707 |  |  | 5.7 |
Décor | 2,906 |  |  | 3.1 |  |  | 2,730 |  |  | 3.1 |  |  | 2,554 |  |  | 3.1 |
Lighting | 2,894 |  |  | 3.1 |  |  | 2,703 |  |  | 3.1 |  |  | 2,504 |  |  | 3.0 |
Total | $ | 94,595 |  |  | 100.0 | % |  | $ | 88,519 |  |  | 100.0 | % |  | $ | 83,176 |  |  | 100.0 | %
————— Note: Certain percentages may not sum to totals due to rounding. Recent Accounting Pronouncements In January 2017, the FASB issued Accounting Standards Update ("ASU") No. 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment", which simplifies how an entity is required to test goodwill for impairment. The amendments in ASU No. 2017-04 require that goodwill impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit and the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments in ASU No. 2017-04 should be applied on a prospective basis and is effective for annual or any interim goodwill impairment tests in annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the effect that ASU No. 2017-04 will have on its Consolidated Financial Statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory", which requires an entity to recognize the income tax consequences of an intercompany transfer of assets other than inventory when the transfer occurs. An entity will continue to recognize the income tax consequences of an intercompany transfer of inventory when the inventory is sold to a third party. ASU No. 2016-16 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods, using a modified retrospective approach, and early adoption is permitted. The Company is evaluating the effect that ASU No. 2016-16 will have on its Consolidated Financial Statements and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", which makes several modifications to the accounting for employee share-based payment transactions, including the requirement to recognize the income tax effects of awards that vest or settle as income tax expense. The amendments in ASU No. 2016-09 also clarify the presentation of certain components of share-based awards in the statement of cash flows. ASU No. 2016-09 is effective for annual reporting periods beginning after December 15, 2016. The Company plans to adopt ASU No. 2016-09 in the first quarter of fiscal 2017, and does not believe it will have a material impact on its Consolidated Financial Statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", which requires an entity that is a lessee to recognize the assets and liabilities arising from leases on the balance sheet. The amendments in ASU No. 2016-02 also require disclosures about the amount, timing and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, using a modified retrospective approach, and early adoption is permitted. The Company is evaluating and planning for the adoption and implementation of ASU No. 2016-02. The Company believes that ASU No. 2016-02 will have a material impact on its financial position, as a result of the requirement to recognize right-of-use assets and lease liabilities on the Company’s Consolidated Balance Sheets. The impact to the Company’s results of operations is being evaluated, and the Company does not believe there will be a material impact to its cash flows upon adoption of ASU No. 2016-02. In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In addition, ASU No. 2014-09 requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 supersedes most existing U.S. GAAP revenue recognition principles, and it permits the use of either the retrospective or cumulative effect transition method. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. The Company is evaluating the effect that ASU No. 2014-09 will have on its Consolidated Financial Statements and related disclosures, as well as the expected method of adoption. Based on the Company’s preliminary assessment, the Company has determined that the adoption of ASU No. 2014-09 could impact the timing of revenue recognition through its services, gift card and various incentive programs. ASU No. 2014-09 will impact the Company’s method of recognizing gift card breakage income, which is currently recognized based upon historical redemption patterns. ASU No. 2014-09 requires gift card breakage income to be recognized in proportion to the pattern of rights exercised by the customer when the Company expects to be entitled to breakage. The Company is also evaluating the principal versus agent considerations as it relates to certain arrangements with third parties that could impact the presentation of gross or net revenue reporting. Other areas which could be impacted may be identified as the Company continues its evaluation of ASU No. 2014-09. The Company plans to adopt ASU No. 2014-09 on January 29, 2018 and is evaluating the available transition methods. Reclassifications Certain amounts in prior fiscal years have been reclassified to conform with the presentation adopted in the current fiscal year. See Note 2 to the Consolidated Financial Statements included in this report.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=64851502&loc=d3e6003-108592 + Details
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