Annual report pursuant to section 13 and 15(d)

Fair Value Measurements

v2.4.0.6
Fair Value Measurements
12 Months Ended
Jan. 28, 2012
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS
12.

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-tier fair value hierarchy, categorizing the inputs used to measure fair value. The hierarchy can be described as follows: Level 1- observable inputs such as quoted prices in active markets; Level 2- inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3- unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Effective January 31, 2010, we adopted enhanced disclosure requirements for fair value measurements. We adopted the second phase of the enhanced disclosure requirements for fair value measurements effective January 30, 2011. There were no transfers into or out of Level 1 and Level 2 during the year ended January 28, 2012 or January 29, 2011.

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

 

                                 
    Fair Value Measurements at Reporting Date Using  
    Quoted Prices
in Active
Markets for
Identical
Instruments

(Level 1)
    Significant Other
Observable Inputs

(Level 2)
    Significant
Unobservable  Inputs

(Level 3)
    Total  
    (in thousands)  

At January 28, 2012 —

                               

Assets:

                               

Cash equivalents

  $ 20,017     $     $     $ 20,017  
   

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments

  $     $ 14     $     $ 14  
   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

                               

Derivative financial instruments

  $     $ 142     $     $ 142  
   

 

 

   

 

 

   

 

 

   

 

 

 

At January 29, 2011 —

                               

Assets:

                               

Cash equivalents

  $ 104,506     $     $     $ 104,506  
   

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments

  $     $ 361     $     $ 361  
   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

                               

Derivative financial instruments

  $     $ 35     $     $ 35  
   

 

 

   

 

 

   

 

 

   

 

 

 

Cash equivalents consist of money market instruments that have original maturities of three months or less. The carrying value of cash equivalents approximates fair value due to the highly liquid and short-term nature of these instruments.

Derivative financial instruments are comprised of foreign currency forward exchange contracts primarily entered into to minimize our foreign currency exposure related to forecasted purchases of certain inventories denominated in a currency different from the operating entity’s functional currency. We also evaluate Company and counterparty risk in determining fair value. Our derivative financial instruments are recorded in the consolidated balance sheets at fair value based upon observable market inputs. Derivative financial instruments in an asset position are included within other current assets in the consolidated balance sheets. Derivative financial instruments in a liability position are included within accrued expenses and other current liabilities in the consolidated balance sheets. Refer to Note 13 for further information regarding our derivative instruments.

 

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

Long-lived assets, such as property and equipment and identifiable intangibles with finite useful lives, are periodically evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the asset carrying amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset. The fair values of long-lived assets held-for-use are based on our own judgments about the assumptions that market participants would use in pricing the asset and on observable market data, when available. We classify these measurements as Level 3 within the fair value hierarchy.

Assets are grouped and evaluated for impairment at the lowest level at which cash flows are identifiable, which is generally at a store level. Fair value is determined using an income approach, which requires discounting the estimated future cash flows associated with the asset. Estimating future cash flows requires us to make assumptions and to apply judgment, including forecasting future sales, costs and useful lives of assets. Significant judgment is also involved in selecting the appropriate discount rate to be applied in determining the estimated fair value of an asset. The discount rate is commensurate with the risk that selected market participants would assign to the estimated cash flows. The selected market participants represent a group of other retailers with a store footprint similar to ours.

The following table presents the non-financial assets measured at estimated fair value on a non-recurring basis and any resulting realized losses included in earnings. Because long-lived assets are not measured at fair value on a recurring basis, certain carrying amounts and fair value measurements presented in the table may reflect values at earlier measurement dates and may no longer represent the fair values at January 28, 2012 or January 29, 2011.

 

                 

Fair Value Measurements — non-recurring basis

  January 28, 2012     January 29, 2011  
    (in thousands)  

Long-lived assets held-for use

               

Fair value measurement

  $ 421     $ 945  

Less: carrying amount

    2,463       6,799  
   

 

 

   

 

 

 

Realized loss

  $ (2,042   $ (5,854
   

 

 

   

 

 

 

The realized loss relates to impaired store assets in our retail segment and is reflected as “Asset impairment charges” in the consolidated statement of earnings. Refer to “Impairment of Long-Lived Assets” in Note 1 for additional information.

Fair Value of Financial Instruments

Our financial instruments, other than those presented in the disclosures above, consist of cash, accounts receivable, accounts payable, accrued expenses and other current liabilities. Management estimates that, as of January 28, 2012 and January 29, 2011, the carrying value of cash, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their fair value due to the highly liquid or short-term nature of these instruments.