v2.4.0.6
Fair Value Measurements
 6 Months Ended
Jul. 28, 2012
Fair Value Measurements  
Fair Value Measurements

3. Fair Value Measurements

 

Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

 

Fair Value Measurements - Recurring Basis

 

 

Fair Value at July 28, 2012

 

Fair Value at January 28, 2012

 

Fair Value at July 30, 2011

 

(millions)

 

Level 1

 

Level 2

 

Level 3

 

Level 1

 

Level 2

 

Level 3

 

Level 1

 

Level 2

 

Level 3 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

  $

830

 

$

—

 

$

—

 

$

194

 

$

—

 

$

—

 

$

116

 

$

—

 

$

— 

 

Other current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps(a)

 

—

 

19

 

—

 

—

 

20

 

—

 

—

 

—

 

— 

 

Prepaid forward contracts

 

72

 

—

 

—

 

69

 

—

 

—

 

74

 

—

 

— 

 

Other

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

6

 

— 

 

Other noncurrent assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps(a)

 

—

 

93

 

—

 

—

 

114

 

—

 

—

 

140

 

— 

 

Company-owned life

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

insurance investments(b)

 

—

 

386

 

—

 

—

 

371

 

—

 

—

 

366

 

— 

 

Total

 

  $

902

 

$

498

 

$

—

 

$

263

 

$

505

 

$

—

 

$

190

 

$

512

 

$

— 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps(a)

 

  $

—

 

$

7

 

$

—

 

$

—

 

$

7

 

$

—

 

$

— 

 

$

—

 

$

— 

 

Other noncurrent liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps(a)

 

—

 

62

 

—

 

—

 

69

 

—

 

—

 

68

 

— 

 

Total

 

  $

—

 

$

69

 

$

—

 

$

—

 

$

76

 

$

—

 

$

—

 

$

68

 

$

— 

 

(a) There was one interest rate swap designated as an accounting hedge in all periods presented. See Note 7 for additional information on interest rate swaps.

(b) Company-owned life insurance investments consist of equity index funds and fixed income assets. Amounts are presented net of loans that are secured by some of these policies of $667 million at July 28, 2012, $669 million at January 28, 2012 and $656 million at July 30, 2011.

 

Position

 

Valuation Technique

Short-term investments

 

Carrying value approximates fair value because maturities are less than three months.

 

 

 

Prepaid forward contracts

 

Initially valued at transaction price. Subsequently valued by reference to the market price of Target common stock.

 

 

 

Interest rate swaps

 

Valuation models are calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads). Model inputs are changed only when corroborated by market data. A credit risk adjustment is made on each swap using observable market credit spreads.

 

 

 

Company-owned life insurance investments

 

Includes investments in separate accounts that are valued based on market rates credited by the insurer.

 

The following table presents the carrying amounts and estimated fair values of financial instruments not measured at fair value in the Consolidated Statements of Financial Position. The fair value of marketable securities is determined using available market prices at the reporting date and would be classified as Level 1. The fair value of debt is generally measured using a discounted cash flow analysis based on current market interest rates for similar types of financial instruments and would be classified as Level 2.

 

Financial Instruments Not Measured at Fair Value

 

July 28, 2012

 

January 28, 2012

 

July 30, 2011

 

 

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

 

(millions)

 

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities(a)

 

$

32

 

$

32

 

$

35

 

$

35

 

$

23

 

$

23

 

Other noncurrent assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities(a)

 

6

 

6

 

6

 

6

 

—

 

—

 

Total

 

$

38

 

$

38

 

$

41

 

$

41

 

$

23

 

$

23

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt(b)

 

$

16,647

 

$

19,666

 

$

15,680

 

$

18,142

 

$

16,035

 

$

17,931

 

Total

 

$

16,647

 

$

19,666

 

$

15,680

 

$

18,142

 

$

16,035

 

$

17,931

 

(a)         Held-to-maturity investments that are held to satisfy the regulatory requirements of Target Bank and Target National Bank.

(b)         Represents the sum of nonrecourse debt collateralized by credit card receivables and unsecured debt and other borrowings, excluding unamortized swap valuation adjustments and capital lease obligations.

 

Based on various inputs and assumptions, including discussions with third parties in the context of our intended sale, we believe the gross balance of our credit card receivables approximates fair value at July 28, 2012. The carrying amounts of accounts payable and certain accrued and other current liabilities also approximate fair value at July 28, 2012.