Derivative Financial Instruments

3 Months Ended

May 04, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

As required, we adopted Accounting Standards Update (ASU) No. 2017-12—Targeted Improvements to Accounting for Hedging Activities (Topic 815), as of February 3, 2019. The new standard did not affect our consolidated net earnings, financial position, or cash flows.

Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 3 provides the fair value and classification of these instruments.

In March 2019, we entered into interest rate swaps with a total notional amount of $1,000 million. With the addition of these swaps, as of May 4, 2019, we were party to seven interest rate swaps with notional amounts totaling $2,500 million, compared with three interest rate swaps with notional amounts totaling $1,250 million as of May 5, 2018. We pay a variable rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were perfectly effective during the three months ended May 4, 2019, and May 5, 2018. The gains and losses on the interest rate swaps and underlying debt recognized in Net Interest Expense were immaterial for each period presented.

The notional amounts of our interest rate swaps approximate the carrying amount of the associated debt primarily because the cumulative hedging adjustments included in the debt carrying amount were immaterial in each period presented.