Fair Value Measurements

12 Months Ended

Feb. 01, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

ASC No. 820, “Fair Value Measurements and Disclosures,” requires fair value measurements be classified and disclosed in one of the following pricing categories:

Level 1:	Financial instruments with unadjusted, quoted prices listed on active market exchanges.
Level 2:	Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. The prices for the financial instruments are determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3:	Financial instruments that are not actively traded on a market exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques.

The following table summarizes our financial instruments:

		February 1, 2014				February 2, 2013
	Pricing Category	Cost		Fair Value		Cost		Fair Value
		(In Millions)
Cash and cash equivalents	Level 1	$	971	$	971	$	537	$	537
Long-term investments	Level 3	82		64		84		53
Debt	Level 1	2,792		2,988		$	2,492	2,702

Our long-term investments consist primarily of investments in auction rate securities (“ARS”). The fair value for our ARS were based on third-party pricing models which utilized a discounted cash flow model for each of the securities as there was no recent activity in the secondary markets in these types of securities. This model used a combination of observable inputs which were developed using publicly available market data obtained from independent sources and unobservable inputs that reflect our own estimates of the assumptions that market participants would use in pricing the investments. Observable inputs include interest rate currently being paid, maturity and credit ratings.

Unobservable inputs include expected redemption date and discount rate. We assumed a seven-year redemption period in valuing our ARS. We intend to hold our ARS until maturity or until we can liquidate them at par value. Based on our other sources of income, we do not believe we will be required to sell them before recovery of par value. In some cases, holding the security until recovery may mean until maturity, which ranges from 2037 to 2039. The discount rate was calculated using the closest match available for other insured asset backed securities. Discount rates ranged from 7.34% to 7.79%. A market failure scenario was employed as recent successful auctions of these securities were very limited. Assuming a longer redemption period and a higher discount rate would result in a lower fair market value. Similarly, assuming a shorter redemption period and a lower discount rate would result in a higher fair market value.

3. Fair Value Measurements (continued)

The following table presents a rollforward of our long-term investments:

	2013			2012
	(Dollars In Millions)
Balance at beginning of year	$	53		$	153
Sales	(1		)	(109		)
Unrealized gains	12			9
Balance at end of year	$	64		$	53

		February 1, 2014				February 2, 2013
	Pricing Category	Cost		Fair Value		Cost		Fair Value
		(In Millions)
Cash and cash equivalents	Level 1	$	971	$	971	$	537	$	537
Long-term investments	Level 3	82		64		84		53
Debt	Level 1	2,792		2,988		$	2,492	2,702