Fair Value Measurements

9 Months Ended

Nov. 02, 2013

The following table provides a summary of the carrying value and estimated fair value of long-term debt as of November 2, 2013, February 2, 2013 and October 27, 2012:



	November 2, 2013		February 2, 2013		October 27, 2012
	(in millions)
Carrying Value	$	4,978	$	4,477	$	4,535
Estimated Fair Value (a)	5,398		5,023		5,073

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(a)	The estimated fair value of the Company’s publicly traded debt is based on reported transaction prices which are considered Level 2 inputs in accordance with ASC Topic 820, Fair Value Measurements and Disclosure. The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

The authoritative guidance included in ASC Topic 820, establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:


•	Level 1 – Quoted market prices in active markets for identical assets or liabilities.


•	Level 2 – Observable inputs other than quoted market prices included in Level 1, such as quoted prices of similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


•	Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following table provides a summary of assets and liabilities measured in the consolidated financial statements at fair value on a recurring basis as of November 2, 2013, February 2, 2013 and October 27, 2012:



	Level 1		Level 2		Level 3		Total
	(in millions)
As of November 2, 2013
Assets:
Cash and Cash Equivalents	$	425	$	—	$	—	$	425
Interest Rate Designated Fair Value Hedges	—		5		—		5
Liabilities:
Cross-currency Cash Flow Hedges	—		40		—		40
Lease Guarantees	—		—		2		2
As of February 2, 2013
Assets:
Cash and Cash Equivalents	$	773	$	—	$	—	$	773
Liabilities:
Cross-currency Cash Flow Hedges	—		59		—		59
Lease Guarantees	—		—		2		2
As of October 27, 2012
Assets:
Cash and Cash Equivalents	$	547	$	—	$	—	$	547
Liabilities:
Cross-currency Cash Flow Hedges	—		59		—		59
Lease Guarantees	—		—		3		3

The Company’s Level 2 fair value measurements are measured using market approach valuation techniques. The primary inputs to these techniques include benchmark interest rates and foreign currency exchange rates, as applicable to the underlying instruments.

The Company’s Level 3 fair value measurements are measured using income approach valuation techniques. The primary inputs to these techniques include the guaranteed lease payments, discount rates, as well as the Company’s assessment of the risk of default on guaranteed leases.

Management believes that the carrying values of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturity.

The following table provides a reconciliation of the Company’s lease guarantees measured at fair value on a recurring basis using unobservable inputs (Level 3) for the third quarter and year-to-date 2013 and 2012:



	Third Quarter				Year-to-Date
	2013		2012		2013		2012
	(in millions)
Beginning Balance	$	2	$	3	$	2	$	4
Change in Estimated Fair Value Reported in Earnings	—		—		—		(1		)
Ending Balance	$	2	$	3	$	2	$	3

The Company’s lease guarantees include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of certain businesses. The fair value of these lease guarantees is impacted by economic conditions, probability of rent obligation payments, period of obligation as well as the discount rate utilized. For additional information, see Note 12, “Commitments and Contingencies.”

- 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.

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