Note 7. Fair Value Measurements
There were no purchases, sales, issuances, or settlements related to recurring level 3 measurements during fiscal 2013 or 2012. There were no transfers into or out of level 1 and level 2 during fiscal 2013 or 2012.
Financial Assets and Liabilities
Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents and short-term investments held at amortized cost are as follows:
|
| | | | | | | | | | | | | | | | |
| | | | Fair Value Measurements at Reporting Date Using |
($ in millions) | | February 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 | | $ | 519 |
| | $ | 196 |
| | $ | 323 |
| | $ | — |
|
Derivative financial instruments | | 64 |
| | — |
| | 64 |
| | — |
|
Deferred compensation plan assets | | 37 |
| | 37 |
| | — |
| | — |
|
Total | | $ | 620 |
| | $ | 233 |
| | $ | 387 |
| | $ | — |
|
Liabilities: | | | | | | | | |
Derivative financial instruments | | $ | 15 |
| | $ | — |
| | $ | 15 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | |
| | | | Fair Value Measurements at Reporting Date Using |
($ in millions) | | February 2, 2013 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | | |
Cash equivalents | | $ | 518 |
| | $ | 189 |
| | $ | 329 |
| | $ | — |
|
Short-term investments | | 50 |
| | — |
| | 50 |
| | — |
|
Derivative financial instruments | | 51 |
| | — |
| | 51 |
| | — |
|
Deferred compensation plan assets | | 27 |
| | 27 |
| | — |
| | — |
|
Total | | $ | 646 |
| | $ | 216 |
| | $ | 430 |
| | $ | — |
|
Liabilities: | | | | | | | | |
Derivative financial instruments | | $ | 14 |
| | $ | — |
| | $ | 14 |
| | $ | — |
|
We have highly liquid investments classified as cash equivalents and short-term investments, which are placed primarily in money market funds, time deposits, and commercial paper. 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 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 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 Consolidated Balance Sheets.
Nonfinancial Assets
As discussed in Note 2 of Notes to Consolidated Financial Statements, we recorded a charge for the impairment of long-lived assets of $1 million, $8 million, and $16 million in fiscal 2013, 2012, and 2011, respectively. The impairment charge reduced the then carrying amount of the applicable long-lived assets of $2 million, $11 million, and $21 million to their fair value of $1 million, $3 million, and $5 million during fiscal 2013, 2012, and 2011, respectively. The fair value of the long-lived assets was determined using level 3 inputs and the valuation techniques discussed in Note 1 of Notes to Consolidated Financial Statements.
As discussed in Note 4 of Notes to Consolidated Financial Statements, there were no impairment charges recorded for goodwill or other indefinite-lived intangible assets for fiscal 2013, 2012, or 2011.
