Fair Value Measurements

There were no purchases, sales, issuances, or settlements related to recurring level 3 measurements during the thirteen and thirty-nine weeks ended October 31, 2015 or November 1, 2014. There were no transfers of financial assets or liabilities into or out of level 1 and level 2 during the thirteen and thirty-nine weeks ended October 31, 2015 or November 1, 2014.

Financial Assets and Liabilities

Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents are as follows:



			Fair Value Measurements at Reporting Date Using
($ in millions)	October 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	174	$	62	$	112	$	—
Derivative financial instruments	84		—		84		—
Deferred compensation plan assets	41		41		—		—
Total	$	299	$	103	$	196	$	—
Liabilities:
Derivative financial instruments	$	8	$	—	$	8	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	January 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	429	$	88	$	341	$	—
Derivative financial instruments	157		—		157		—
Deferred compensation plan assets	40		40		—		—
Total	$	626	$	128	$	498	$	—
Liabilities:
Derivative financial instruments	$	1	$	—	$	1	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	November 1, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	241	$	29	$	212	$	—
Derivative financial instruments	98		—		98		—
Deferred compensation plan assets	40		40		—		—
Total	$	379	$	69	$	310	$	—
Liabilities:
Derivative financial instruments	$	2	$	—	$	2	$	—

We have highly liquid investments classified as cash equivalents, which are placed primarily in time deposits and money market funds. These investments are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity. We value these investments at their original purchase prices plus interest that has accrued at the stated rate.

Derivative financial instruments primarily include foreign exchange forward contracts. The principal currencies hedged against changes in the U.S. dollar are British pounds, Canadian dollars, Euro, and Japanese yen. The fair value of the Company’s derivative financial instruments is determined using pricing models based on current market rates. Derivative financial instruments in an asset position are recorded in other current assets or other long-term assets in the Condensed Consolidated Balance Sheets. Derivative financial instruments in a liability position are recorded in accrued expenses and other current liabilities or lease incentives and other long-term liabilities in the Condensed Consolidated Balance Sheets.

We maintain the Gap Inc. Deferred Compensation Plan (“DCP”), which allows eligible employees to defer compensation up to a maximum amount. Plan investments are recorded at market value and are designated for the DCP. The fair value of the Company’s DCP assets is determined based on quoted market prices, and the assets are recorded in other long-term assets in the Condensed Consolidated Balance Sheets.

Nonfinancial Assets

We review the carrying amount of goodwill and other indefinite-lived intangible assets for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.

There were no impairment charges recorded for goodwill for the thirteen and thirty-nine weeks ended October 31, 2015.

We review the carrying amount of indefinite-lived intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In June 2015, the Company announced a series of strategic actions to position Gap brand for improved business performance in the future, including its plan to close about 175 Gap brand specialty stores in North America and a limited number of European stores over the next few years. In addition, the Company now expects to close a limited number of stores in Asia. As a result of the strategic actions, in the third quarter of fiscal 2015, we recorded an impairment charge of $5 million related to an indefinite-lived intangible asset and $2 million related to long-lived assets. We also recorded an impairment charge of $4 million for long-lived assets that were unrelated to the Gap brand strategic actions.

The impairment charges were recorded in operating expenses in the Condensed Consolidated Statement of Income and reduced the then carrying amount of the applicable indefinite-lived intangible asset of $6 million to its fair value of $1 million and the applicable long-lived assets of $6 million to their fair value of zero during the thirteen weeks ended October 31, 2015.

We recorded a charge for the impairment of long-lived assets of $43 million during the thirty-nine weeks ended October 31, 2015, which reduced the then carrying amount of the applicable long-lived assets of $49 million to their fair value of $6 million.

The fair value of the long-lived assets was determined using level 3 inputs and based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores is primarily at the store level.

There were no material impairment charges recorded for goodwill, other indefinite-lived intangible assets, or other long-lived assets for the thirteen and thirty-nine weeks ended November 1, 2014.