Derivative Instruments

9 Months Ended

Oct. 31, 2020

Derivative Instruments [Abstract]

Derivative Instruments

7. Derivative Instruments

We manage our economic and transaction exposure to certain risks by using foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations. We also use interest rate swaps to mitigate the effect of interest rate fluctuations on our 2021 Notes and 2028 Notes. In addition, we use foreign currency forward contracts not designated as hedging instruments to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies.

During the second quarter of fiscal 2021, we entered into Treasury Rate Lock ("T-Lock") contracts to hedge the base interest rate variability on a portion of our then-expected refinancing of our maturing 2021 Notes. The T-Lock contracts were cash settled during the third quarter of fiscal 2021 upon issuance of our 2030 Notes. The fair value of the T-lock contracts upon settlement was released from Accumulated other comprehensive income on our Condensed Consolidated Balance Sheets and will be recorded in Interest expense on our Condensed Consolidated Statements of Earnings as interest is accrued over the life of the 2030 Notes.

Our derivative instruments designated as net investment hedges, interest rate swaps and cash flow hedges are recorded on our Condensed Consolidated Balance Sheets at fair value. See Note 3, Fair Value Measurements, for gross fair values of our outstanding derivative instruments and corresponding fair value classifications.

Notional amounts of our derivative instruments were as follows ($ in millions):

Contract Type	October 31, 2020		February 1, 2020		November 2, 2019
Derivatives designated as net investment hedges	$	68	$	129	$	30
Derivatives designated as interest rate swaps		1,150		1,150		1,150
No hedge designation (foreign exchange contracts)		81		31		62
Total	$	1,299	$	1,310	$	1,242

Effects of our derivatives on our Condensed Consolidated Statements of Earnings were as follows ($ in millions):

		Gain (Loss) Recognized
		Three Months Ended				Nine Months Ended
	Statement of Earnings Location	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019
Interest rate swap contracts	Interest expense	$	(32)	$	(8)	$	13	$	45
Adjustments to carrying value of long-term debt	Interest expense		32		8		(13)		(45)
Total		$	-	$	-	$	-	$	-