Fair Value Measurements

3 Months Ended

Apr. 29, 2023

The Company measures certain financial assets and liabilities at fair value on a recurring basis. 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 for the 13 weeks ended April 29, 2023 or April 30, 2022.

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)	April 29, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	2	$	—	$	2	$	—

Derivative financial instruments	19		—		19		—
Deferred compensation plan assets	33		33		—		—
Other assets	4		—		—		4
Total	$	58	$	33	$	21	$	4
Liabilities:
Derivative financial instruments	$	4	$	—	$	4	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	January 28, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	15	$	—	$	15	$	—

Derivative financial instruments	11		—		11		—
Deferred compensation plan assets	34		34		—		—
Other assets	4		—		—		4
Total	$	64	$	34	$	26	$	4
Liabilities:
Derivative financial instruments	$	20	$	—	$	20	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	April 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	16	$	—	$	16	$	—

Derivative financial instruments	44		—		44		—
Deferred compensation plan assets	40		40		—		—
Other assets	4		—		—		4
Total	$	104	$	40	$	60	$	4
Liabilities:
Derivative financial instruments	$	1	$	—	$	1	$	—

We have highly liquid fixed and variable income investments classified as cash equivalents. We value these investments at their original purchase prices plus interest that has accrued at the stated rate. Our cash equivalents are placed primarily in time deposits.

Derivative financial instruments primarily include foreign exchange forward contracts. See Note 7 of Notes to Condensed Consolidated Financial Statements for information regarding currencies hedged against the U.S. dollar.

We maintain the Gap, Inc. Deferred Compensation Plan (“DCP”), which allows eligible employees to defer base compensation and bonus up to a maximum percentage, and non-employee directors to defer receipt of a portion of their Board fees. 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 Condensed Consolidated Balance Sheets.

Nonfinancial Assets

We review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of the long-lived assets is 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 at the store level.

There were no material impairment charges recorded for long-lived assets during the 13 weeks ended April 29, 2023 or April 30, 2022.

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 or other indefinite-lived intangible assets for the 13 weeks ended April 29, 2023 or April 30, 2022.