Fair Value Measurements

9 Months Ended

Nov. 03, 2018

Fair Value, Assets, Liabilities and Stockholders' Equity Measured on Recurring Basis [Abstract]

The authoritative guidance included in ASC 820, Fair Value Measurement, establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:


•	Level 1 – Quoted market prices in active markets for identical assets or liabilities.


•	Level 2 – Observable inputs other than quoted market prices included in Level 1, such as quoted prices of similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


•	Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following table provides a summary of assets and liabilities measured in the consolidated financial statements at fair value on a recurring basis as of November 3, 2018, February 3, 2018 and October 28, 2017:



	Level 1		Level 2		Level 3		Total
	(in millions)
As of November 3, 2018
Assets:
Cash and Cash Equivalents	$	348	$	—	$	—	$	348
Marketable Equity Securities	9		—		—		9
Foreign Currency Cash Flow Hedges	—		3		—		3
As of February 3, 2018
Assets:
Cash and Cash Equivalents	$	1,515	$	—	$	—	$	1,515
Marketable Equity Securities	17		—		—		17
Liabilities:
Foreign Currency Cash Flow Hedges	—		9		—		9
As of October 28, 2017
Assets:
Cash and Cash Equivalents	$	735	$	—	$	—	$	735
Marketable Equity Securities	6		—		—		6
Interest Rate Fair Value Hedges	—		1		—		1
Foreign Currency Cash Flow Hedges	—		15		—		15
Liabilities:
Foreign Currency Cash Flow Hedges	—		4		—		4

The Company's Level 1 fair value measurements use unadjusted quoted prices in active markets for identical assets. The Company's marketable equity securities are classified as Level 1 fair value measurements as they are traded with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.

In January 2016, the FASB issued ASC 321, Investments - Equity Securities. The standard requires the recognition of changes in the fair value of the Company's marketable equity securities in net income as compared to historical treatment in accumulated other comprehensive income. The Company adopted the standard in the first quarter of 2018. The Company recognized unrealized losses of $2 million for the third quarter of 2018, and $8 million for year-to-date 2018, related to its marketable equity securities in Other Income in the 2018 Consolidated Statements of Income (Loss).

The Company’s Level 2 fair value measurements use market approach valuation techniques. The primary inputs to these techniques include benchmark interest rates and foreign currency exchange rates, as applicable to the underlying instruments.

The following table provides a summary of the principal value and estimated fair value of outstanding publicly traded debt as of November 3, 2018, February 3, 2018 and October 28, 2017:



	November 3, 2018		February 3, 2018		October 28, 2017
	(in millions)
Principal Value	$	5,722	$	5,750	$	5,750
Fair Value (a)	5,301		5,943		6,033

_______________


(a)	The estimated fair value of the Company’s publicly traded debt is based on reported transaction prices which are considered Level 2 inputs in accordance with ASC 820. The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Management believes that the carrying values of accounts receivable, accounts payable, accrued expenses and current debt approximate fair value because of their short maturity.

- 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.

+ References + Details