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DERIVATIVE FINANCIAL INSTRUMENTS | 12 Months Ended
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Jan. 29, 2022
DERIVATIVE FINANCIAL INSTRUMENTS |
DERIVATIVE FINANCIAL INSTRUMENTS |
6. | DERIVATIVE FINANCIAL INSTRUMENTS
​ GAAP requires that derivatives be carried at fair value on the balance sheet and provides for hedge accounting when certain conditions are met. The Company’s derivative financial instruments are recognized on the balance sheet at fair value. Changes in the fair value of derivative instruments designated as “cash flow” hedges, to the extent the hedges are highly effective, are recorded in other comprehensive income, net of tax effects. Ineffective portions of cash flow hedges, if any, are recognized in current period earnings. Other comprehensive income or loss is reclassified into current period earnings when the hedged transaction affects earnings. Changes in the fair value of derivative instruments designated as “fair value” hedges, along with corresponding changes in the fair values of the hedged assets or liabilities, are recorded in current period earnings. Ineffective portions of fair value hedges, if any, are recognized in current period earnings. ​ The Company assesses, both at the inception of the hedge and on an ongoing basis, whether derivatives used as hedging instruments are highly effective in offsetting the changes in the fair value or cash flow of the hedged items. If it is determined that a derivative is not highly effective as a hedge or ceases to be highly effective, the Company discontinues hedge accounting prospectively. ​ Interest Rate Risk Management ​ The Company is exposed to market risk from fluctuations in interest rates. The Company manages its exposure to interest rate fluctuations through the use of a commercial paper program, interest rate swaps (fair value hedges) and forward-starting interest rate swaps (cash flow hedges). The Company’s current program relative to interest rate protection contemplates hedging the exposure to changes in the fair value of fixed-rate debt attributable to changes in interest rates. To do this, the Company uses the following guidelines: (i) use average daily outstanding borrowings to determine annual debt amounts subject to interest rate exposure, (ii) limit the average annual amount subject to interest rate reset and the amount of floating rate debt to a combined total amount that represents 25% of the carrying value of the Company’s debt portfolio or less, (iii) include no leveraged products, and (iv) hedge without regard to profit motive or sensitivity to current mark-to-market status. ​ The Company reviews compliance with these guidelines annually with the Financial Policy Committee of the Board of Directors. These guidelines may change as the Company’s needs dictate. ​ Fair Value Interest Rate Swaps ​ The Company did not have any outstanding interest rate derivatives classified as fair value hedges as of January 29, 2022 and January 30, 2021. ​ Cash Flow Forward-Starting Interest Rate Swaps ​ The Company did not have any outstanding forward-starting interest rate swap agreements as of January 29, 2022 and January 30, 2021. ​ During 2020, the Company terminated nine forward-starting interest rate swaps with maturity dates of January 2021 with an aggregate notional amount totaling $450. These forward-starting interest rate swap agreements were hedging the variability in future benchmark interest payments attributable to changing interest rates on the forecasted issuance of fixed-rate debt issued during the fourth quarter of 2020. Since these forward-starting interest rate swap agreements were classified as cash flow hedges, the unamortized loss of $41, $31 net of tax, has been deferred in AOCI and will be amortized to earnings as the interest payments are made. In addition, the Company terminated and discontinued hedge accounting for one forward-starting interest rate swap with a maturity date of January 2021 with an aggregate notional amount totaling $50. The gain of $7 from the termination of this forward starting interest rate swap was record in interest income in the fourth quarter of 2020. ​ The following table summarizes the effect of the Company’s derivative instruments designated as cash flow hedges for 2021, 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year-To-Date | ​ | ​ |
​ | ​ | Amount of Gain/(Loss) in | ​ | Amount of Gain/(Loss) | ​ | ​ |
​ | ​ | AOCI on Derivative | ​ | Reclassified from AOCI into | ​ | Location of Gain/(Loss) |
Derivatives in Cash Flow Hedging | ​ | (Effective Portion) | ​ | Income (Effective Portion) | ​ | Reclassified into Income |
Relationships |  | 2021 | ​ | 2020 |  | 2019 |  | 2021 | ​ | 2020 |  | 2019 |  | (Effective Portion) |
Forward-Starting Interest Rate Swaps, net of tax* | ​ | $ | (47) | ​ | $ | (54) | ​ | $ | (42) | ​ | $ | (7) | ​ | $ | (2) | ​ | $ | (4) |  | Interest expense | ​
​
* | The amounts of Gain/(Loss) in AOCI on derivatives include unamortized proceeds and payments from forward-starting interest rate swaps once classified as cash flow hedges that were terminated prior to the end of 2020.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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