for uncollectible finance charges and other credit fees. We estimate future write-offs based on delinquencies, risk scores, aging trends, industry risk trends and our historical experience. The allowance for doubtful accounts was $419 million or 6.8 percent of year-end receivables at January 31, 2004, compared to $399 million or 6.7 percent of year-end receivables at February 1, 2003. Management believes that the allowance for doubtful accounts is adequate to cover anticipated losses in our credit card accounts receivable under current conditions; however, significant deterioration in any of the factors mentioned above or in general economic conditions could materially change these expectations. Our accounts receivable and related allowance are described in the Notes to Consolidated Financial Statements on page 31. Pension and postretirement health care accounting We fund and maintain three qualified defined benefit pension plans and maintain certain related non-qualified plans as well. Our pension costs are determined based on actuarial calculations using key assumptions including our expected long-term rate of return on qualified plan assets, discount rate and our estimate of future compensation increases. We also maintain a postretirement health care plan for certain retired employees. Postretirement health care costs are calculated based on actuarial calculations using key assumptions including a discount rate and health care cost trend rates. Our pension and postretirement health care benefits are further described in the Notes to Consolidated Financial Statements on pages 36-37. Insurance/self-insurance We retain a portion of the risk related to certain general liability, workersGLYPH<213> compensation, property loss and employee medical and dental claims. Liabilities associated with these losses are calculated for claims filed, and claims incurred but not yet reported, at our estimate of their ultimate cost, based upon analysis of historical data and actuarial estimates. General liability and workersGLYPH<213> compensation liabilities are recorded at our estimate of their net present value; other liabilities are not discounted. Our expected loss accruals are based on estimates, and while we believe the amounts accrued are adequate, the ultimate loss may differ from the amounts provided. We maintain stop-loss coverage to limit the exposure related to certain risks. Income taxes We pay income taxes based on the tax statutes, regulations and case law of the various jurisdictions in which we operate. Our effective income tax rate was 37.8 percent, 38.2 percent and 38.0 percent in 2003, 2002 and 2001, respectively. The income tax provision includes estimates for certain unresolved matters in dispute with state and federal tax authorities. Management believes the resolution of such disputes will not have a material impact on our financial statements. Our effective income tax rate in 2004 is expected to be approximately 37.8 percent. Our income taxes are further described in the Notes to Consolidated Financial Statements on page 34. 21 Allowance for doubtful accounts When receivables are recorded, an allowance for doubtful accounts in an amount equal to anticipated future write-offs is recognized. The allowance includes provisions Inventory and cost of sales We account for substantially all of our inventory and the related cost of sales under the retail inventory method using the LIFO basis. Under the retail inventory method, inventory is stated at cost, which is determined by applying a cost- to-retail ratio to each similar merchandise groupingGLYPH<213>s ending retail value. Since this inventory value is adjusted regularly to reflect market conditions, our inventory methodology reflects the lower of cost or market. We also reduce inventory for estimated losses related to shortage, based upon historical losses verified by prior physical inventory counts. Inventory also includes a LIFO provision that is calculated based on inventory levels, markup rates and internally generated retail price indices. Inventory is at risk of obsolescence if economic conditions change, such as shifting consumer demand, changing consumer credit markets, or increased competition, even though substantially all of our inventory sells  in less than six months. Our vendor income and inventory are described in the Notes to Consolidated Financial Statements on pages 30 and 31, respectively. The following items in our consolidated financial statements require significant estimation or judgment: Our analysis of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses during the reporting period and the related disclosures of contingent assets and liabilities. In the Notes to Consolidated Financial Statements, we describe our significant accounting policies used in the preparation of the consolidated financial statements. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. Critical Accounting Estimates Fourth Quarter Pre-tax Segment Profit  and Percent Change from Prior Year (millions) 2003 2002 2001 Target $1,380 18.5% $1,165 8.0% $1,078 20.9% MervynGLYPH<213>s 74 (0.3) 75 (42.9) 131 20.8 Marshall FieldGLYPH<213>s 59 15.6 51 (18.9) 63 (20.2) Total $1,513 17.3% $1,291 1.4% $1,272 17.9% LIFO provision 27 12 (8) Interest expense (130) (154) (135) Other (72) (36) (68) Earnings  before taxes $1,338 $1,113 $1,061