Fair Value Measurements

3 Months Ended

May 01, 2020

Fair Value Measurements - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows:


•	Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities


•	Level 2 - inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly


•	Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of May 1, 2020, May 3, 2019, and January 31, 2020. The fair values of these instruments approximated amortized costs.



		Fair Value Measurements at
(In millions)	Measurement Level	May 1, 2020		May 3, 2019		January 31, 2020
Assets:
Short-term investments:
Available-for-sale debt securities
U.S. Treasury securities	Level 1	$	133	$	—	$	13
Money market funds	Level 1	33		156		105
Corporate debt securities	Level 2	28		12		23
Agency securities	Level 2	7		22		19
Total short-term investments		$	201	$	190	$	160
Long-term investments:
Available-for-sale debt securities
U.S. Treasury securities	Level 1	$	214	$	26	$	280
Corporate debt securities	Level 2	56		181		62
Agency securities	Level 2	30		28		30
Total long-term investments		$	300	$	235	$	372

Liabilities:
Other current liabilities:
Derivative instruments
Forward interest rate swaps	Level 2	$	15	$	—	$	11
Total other current liabilities		$	15	$	—	$	11
Other liabilities:
Derivative instruments
Forward interest rate swaps	Level 2	$	17	$	—	$	—
Total other liabilities		$	17	$	—	$	—

There were no transfers between Levels 1, 2, or 3 during any of the periods presented.

When available, quoted prices were used to determine fair value. When quoted prices in active markets were available, investments were classified within Level 1 of the fair value hierarchy. When quoted prices in active markets were not available, fair values were determined using pricing models, and the inputs to those pricing models were based on observable market inputs. The inputs to the pricing models were typically benchmark yields, reported trades, broker-dealer quotes, issuer spreads, and benchmark securities, among others.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

During the three months ended May 1, 2020, and May 3, 2019, the Company had no significant measurements of assets and liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

Fair Value of Financial Instruments

The Company’s financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable, accrued liabilities, and long-term debt and are reflected in the financial statements at cost. With the exception of long-term debt, cost approximates fair value for these items due to their short-term nature. The fair values of the Company’s unsecured notes were estimated using quoted market prices. The fair values of the Company’s mortgage notes were estimated using discounted cash flow analyses, based on the future cash outflows associated with these arrangements and discounted using the applicable incremental borrowing rate.

Carrying amounts and the related estimated fair value of the Company’s long-term debt, excluding finance lease obligations, are as follows:



	May 1, 2020				May 3, 2019				January 31, 2020
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Unsecured notes (Level 1)	$	20,106	$	23,209	$	17,090	$	17,261	$	16,648	$	18,808
Mortgage notes (Level 2)	5		5		6		6		5		6
Long-term debt (excluding finance lease obligations)	$	20,111	$	23,214	$	17,096	$	17,267	$	16,653	$	18,814

- 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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