Fair Value Measurements

9 Months Ended

Nov. 03, 2013

FAIR VALUE MEASUREMENTS

The fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:



•	Level 1 –	Observable inputs that reflect quoted prices in active markets
•	Level 2 –	Inputs other than quoted prices in active markets that are either directly or indirectly observable
•	Level 3 –	Unobservable inputs for which little or no market data exists, therefore requiring the Company to develop its own assumptions

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The assets and liabilities of the Company that are measured at fair value on a recurring basis as of November 3, 2013 and February 3, 2013 were as follows (amounts in millions):



	Fair Value at November 3, 2013 Using							Fair Value at February 3, 2013 Using
	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Derivative agreements - assets	$	—	$	47		$	—	$	—	$	64		$	—
Derivative agreements - liabilities	—		(18		)	—		—		(15		)	—
Total	$	—	$	29		$	—	$	—	$	49		$	—

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 fair value of the Company’s derivative financial instruments was measured using level 2 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Liabilities for lease obligation costs related to certain store closings and the exit of certain businesses in fiscal 2009 and 2008 were measured on a nonrecurring basis using fair value measurements with unobservable inputs (level 3). Charges related to these liabilities in the first nine months of fiscal 2013 and 2012 were not material.

Long-lived assets were analyzed for impairment on a nonrecurring basis using fair value measurements with unobservable inputs (level 3). Impairment charges related to long-lived assets in the first nine months of fiscal 2013 and 2012 were not material.

During the third quarter of fiscal 2013, 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 through unobservable inputs (level 3). The Company recorded no impairment charges related to Goodwill in the first nine months of fiscal 2013.

Upon announcement in the third quarter of fiscal 2012 of its intention to close seven stores in China, the Company completed an assessment of the recoverability of Goodwill for its China reporting unit. The fair value of the China reporting unit was estimated using the present value of expected future discounted cash flows through unobservable inputs (level 3). As a result of this analysis, the Company recorded a $97 million impairment charge to Goodwill in the third quarter of fiscal 2012. See Note 4 for further discussion of the China store closings.

The aggregate fair value of the Company’s senior notes, based on quoted market prices, was $16.6 billion and $12.2 billion at November 3, 2013 and February 3, 2013, respectively, compared to a carrying value of $15.5 billion and $10.3 billion at November 3, 2013 and February 3, 2013, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details