Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale debt securities. The Company categorizes financial assets and liabilities recorded at fair value based upon a three-level hierarchy that considers the related valuation techniques.

There were no material purchases, sales, issuances, or settlements related to recurring level 3 measurements during fiscal 2018 or 2017. There were no transfers of financial assets or liabilities into or out of level 1, level 2, and level 3 during fiscal 2018 or 2017.

Financial Assets and Liabilities

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



			Fair Value Measurements at Reporting Date Using
($ in millions)	February 2, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	373	$	26	$	347	$	—
Short-term investments	288		125		163		—
Derivative financial instruments	20		—		20		—
Deferred compensation plan assets	48		48		—		—
Other assets	2		—		—		2
Total	$	731	$	199	$	530	$	2
Liabilities:
Derivative financial instruments	$	11	$	—	$	11	$	—



			Fair Value Measurements at Reporting Date Using
($ in millions)	February 3, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	527	$	37	$	490	$	—
Derivative financial instruments	14		—		14		—
Deferred compensation plan assets	47		47		—		—
Total	$	588	$	84	$	504	$	—
Liabilities:
Derivative financial instruments	$	43	$	—	$	43	$	—

We have highly liquid investments classified as cash equivalents, which are placed primarily in time deposits, money market funds, and commercial paper. With the exception of our available-for-sale investments noted below, we value these investments at their original purchase prices plus interest that has accrued at the stated rate.

Our available-for-sale securities are comprised of investments in debt securities. These securities are recorded at fair value using market prices. As of February 2, 2019, the Company held $288 million of available-for-sale debt securities with maturity dates greater than three months and less than two years within short-term investments on the Consolidated Balance Sheet. In addition, as of February 2, 2019, the Company held $16 million of available-for-sale debt securities with maturities of less than three months at the time of purchase within cash and cash equivalents on the Consolidated Balance Sheet. Unrealized gains or losses on available-for-sale debt securities included in accumulated other comprehensive income were immaterial for the fiscal year ended February 2, 2019.

The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. The Company did not consider any of its securities to be other-than-temporarily impaired and, accordingly, did not recognize any impairment loss for the fiscal year ended February 2, 2019.

Derivative financial instruments primarily include foreign exchange forward contracts. The currencies hedged against changes in the U.S. dollar are Canadian dollars, Japanese yen, British pounds, Euro, Chinese yuan, Mexican pesos, and Taiwan dollars. 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 on 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 on the Consolidated Balance Sheets.

We maintain the Gap, Inc., Deferred Compensation Plan (“DCP”), which allows eligible employees and non-employee directors to defer base compensation up to a maximum percentage. Plan investments are directed by participants and are recorded at market value and 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 on the Consolidated Balance Sheets.

Nonfinancial Assets

We recorded a charge for the impairment of long-lived assets of $14 million, $28 million, and $107 million in fiscal 2018, 2017, and 2016, respectively, related to store assets which is recorded in operating expenses on the Consolidated Statements of Income. The impairment charge reduced the then carrying amount of the applicable long-lived assets of $15 million, $30 million, and $125 million to their fair value of $1 million, $2 million, and $18 million during fiscal 2018, 2017, and 2016, 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.

During fiscal 2016, the Company announced measures that resulted in the closure of its fleet of 53 Old Navy stores in Japan and select Banana Republic stores, primarily internationally. In fiscal 2016, we recorded a charge for the impairment of long-lived assets of $54 million related to the announced store closures, and an additional $53 million for long-lived assets that were unrelated to the announced measures.

There were no impairment charges recorded for other indefinite-lived intangible assets for fiscal 2018, 2017, or 2016.

There were no impairment charges recorded for goodwill for fiscal 2018 or 2017. In fiscal 2016, we recorded an impairment charge of $71 million for goodwill related to Intermix. The fair value of the Intermix reporting unit was determined using level 3 inputs and valuation techniques discussed in Note 3 of Notes to Consolidated Financial Statements.