Fair Value Measurements

12 Months Ended

Feb. 03, 2024

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 during fiscal 2023 or 2022.

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 3, 2024		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	1	$	—	$	1	$	—

Derivative financial instruments	7		—		7		—
Deferred compensation plan assets	31		31		—		—
Other assets	4		—		—		4
Total	$	43	$	31	$	8	$	4
Liabilities:
Derivative financial instruments	$	8	$	—	$	8	$	—


			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	$	—

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 in time deposits.

Derivative financial instruments primarily include foreign exchange forward contracts. See Note 9 of Notes to 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 within other long-term assets on the Consolidated Balance Sheets.

See Note 13 of Notes to Consolidated Financial Statements for information regarding employee benefit plans.

Nonfinancial Assets

Long-lived assets, which for us primarily consist of store assets and operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The estimated fair value of the long-lived assets is based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. For operating lease assets, the Company determines the estimated fair value of the assets by comparing discounted contractual rent payments to estimated market rental rates using available valuation techniques. These fair value measurements qualify as level 3 measurements in the fair value hierarchy.

See Note 1 of Notes to Consolidated Financial Statements for further information regarding the impairment of long-lived assets.

We recorded the following long-lived asset impairment charges in operating expenses on the Consolidated Statements of Operations:


	Fiscal Year
($ in millions)	2023		2022		2021



Operating lease assets (1)	$	4	$	33	$	8



Store assets (2)	3		18		1


Total impairment charges of long-lived assets	$	7	$	51	$	9

__________

(1)The impairment charge reduced the then carrying amount of the applicable operating lease assets of $51 million, $248 million, and $24 million to their fair value of $47 million, $215 million, and $16 million during fiscal 2023, 2022, and 2021, respectively.

(2)The impairment charge reduced the then carrying amount of the applicable store assets of $4 million, $21 million, and $1 million to their fair value of $1 million, $3 million, and zero during fiscal 2023, 2022, and 2021, respectively.