Derivative Instruments

3 Months Ended

May 05, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

We manage our economic and transaction exposure to certain market-based risks through the use of foreign currency derivative instruments. Our objective in holding derivatives is to reduce the volatility of net earnings and cash flows associated with changes in foreign currency exchange rates. We do not hold or issue derivative financial instruments for trading or speculative purposes.

We record all foreign currency derivative instruments on our Condensed Consolidated Balance Sheets at fair value and evaluate hedge effectiveness prospectively and retrospectively when electing to apply hedge accounting treatment. We formally document all hedging relationships at inception for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions. In addition, we have derivatives which are not designated as hedging instruments. We have no derivatives that have credit risk-related contingent features, and we mitigate our credit risk by engaging with major financial institutions as our counterparties.

Cash Flow Hedges

We enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on certain revenue streams denominated in non-functional currencies. The contracts generally have terms of up to two years. We report the effective portion of the gain or loss on a cash flow hedge as a component of other comprehensive income, and it is subsequently reclassified into net earnings in the period in which the hedged transaction affects net earnings or the forecast transaction is no longer probable of occurring. We report the ineffective portion, if any, of the gain or loss in net earnings. We did not have any cash flow hedges outstanding in the first quarter of fiscal 2013.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedging instruments include foreign exchange forward contracts used to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies and on certain forecast inventory purchases denominated in non-functional currencies. The contracts generally have terms of up to six months. These derivative instruments are not designated in hedging relationships and, therefore, we record gains and losses on these contracts directly in net earnings.

Summary of Derivative Balances

The following table presents the gross fair values for derivative instruments and the corresponding classification at May 5, 2012, March 3, 2012, and April 30, 2011:

	May 5, 2012				March 3, 2012					April 30, 2011
Contract Type	Assets		Liabilities		Assets		Liabilities			Assets		Liabilities
										(recast)		(recast)
Cash flow hedges (foreign exchange forward contracts)	$	—	$	—	$	—	$	—		$	7	$	—
No hedge designation (foreign exchange forward contracts)	—		—		1		(2		)	4		(2		)
Total	$	—	$	—	$	1	$	(2	)	$	11	$	(2	)

The following tables present the effects of derivative instruments on other comprehensive income (“OCI”) and on our Condensed Consolidated Statements of Earnings and Comprehensive Income for the three months ended May 5, 2012 and April 30, 2011: 

	Three Months Ended
	May 5, 2012
Contract Type	Pre-tax Gain (Loss) Recognized in OCI(1)		(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)(2)
Cash flow hedges (foreign exchange forward contracts)	$	—	$	(1	)

	Three Months Ended
	April 30, 2011
Contract Type	Pre-tax Gain Recognized in OCI(1)		Gain Reclassified from Accumulated OCI to Earnings (Effective Portion)(2)
	(recast)		(recast)
Cash flow hedges (foreign exchange forward contracts)	$	8	$	2

⁽¹⁾  Reflects the amount recognized in OCI prior to the reclassification of 50% to noncontrolling interests for the cash flow and net investment hedges, respectively.

⁽²⁾  Gain reclassified from accumulated OCI is included within selling, general and administrative expenses (“SG&A”) in our Condensed Consolidated Statements of Earnings and Comprehensive Income.

The following table presents the effects of derivatives not designated as hedging instruments on our Condensed Consolidated Statements of Earnings and Comprehensive Income for the three months ended May 5, 2012 and April 30, 2011: 

	(Loss) Recognized within SG&A
	Three Months Ended			Three Months Ended
Contract Type	May 5, 2012			April 30, 2011
				(recast)
No hedge designation (foreign exchange forward contracts)	$	(3	)	$	(8	)

The following table presents the notional amounts of our foreign currency exchange contracts at May 5, 2012, March 3, 2012, and April 30, 2011: 

	Notional Amount
Contract Type	May 5, 2012		March 3, 2012		April 30, 2011
					(recast)
Derivatives designated as cash flow hedging instruments	$	—	$	—	$	293
Derivatives not designated as hedging instruments	240		238		115
Total	$	240	$	238	$	408