Abercrombie & Fitch 2009 Annual Report Download - page 80

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inter-company inventory sales to foreign subsidiaries and the related settlement of the foreign-currency-
denominated inter-company receivable. Fluctuations in exchange rates will either increase or decrease the
Company’s U.S. dollar equivalent cash flows and affect the Company’s U.S. dollar earnings. Gains or losses
on the foreign exchange forward contracts that are used to hedge these exposures are expected to partially
offset this variability. Foreign exchange forward contracts represent agreements to exchange the currency of
one country for the currency of another country at an agreed-upon settlement date. As of January 30, 2010, the
maximum length of time over which forecasted foreign denominated inter-company inventory sales were
hedged was twelve months. The sale of the inventory to the Company’s customers will result in the
reclassification of related derivative gains and losses that are reported in Accumulated Other Comprehensive
Loss. Substantially all of the remaining unrealized gains or losses related to foreign denominated inter-
company inventory sales that have occurred as of January 30, 2010 will be recognized in costs of goods sold
over the following two months at the values at the date the inventory was sold to the respective subsidiary.
The Company nets derivative assets and liabilities on the Consolidated Balance Sheet to the extent that
master netting arrangements meet the specific accounting requirements set forth by U.S. generally accepted
accounting principles.
As of January 30, 2010, the Company had the following outstanding foreign exchange forward contracts
that were entered into to hedge forecasted foreign denominated inter-company inventory sales and the
resulting settlement of the foreign denominated inter-company accounts receivable:
Notional Amount(1)
Canada ................................................... $24,641
Europe.................................................... $45,703
(1) Amounts are reported in thousands and in U.S. Dollars. The notional amount of derivatives related to
Europe are denominated primarily in Sterling Pound.
The location and amounts of derivative fair values on the Consolidated Balance Sheets as of January 30,
2010 and January 31, 2009 were as follows:
Balance Sheet
Location
January 30,
2010
January 31,
2009
Balance Sheet
Location
January 30,
2010
January 31,
2009
Asset Derivatives Liability Derivatives
(In thousands)
Derivatives Designated as
Hedging Instruments:
Foreign Exchange Forward
Contracts . . . . . . . . . . . . Other Current Assets $1,348 $— Accrued Expenses $— $—
79
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)