Abercrombie & Fitch 2011 Annual Report Download - page 84

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ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The lowest level of significant input determines the placement of the entire fair value measurement in
the hierarchy. The three levels of the hierarchy and the distribution of the Company’s assets and liabilities,
measured at fair value, within it were as follows:
Assets and Liabilities at Fair Value as of January 28, 2012
Level 1 Level 2 Level 3 Total
(in thousands)
ASSETS:
Money market funds(1) ................. $209,041 $ — $ — $209,041
ARS — available-for-sale — student loan
backed ........................... — — 84,650 84,650
ARS — available-for-sale — municipal
authority bonds .................... — — 14,858 14,858
Derivative financial instruments ......... — 10,770 — 10,770
Total assets measured at fair value ......... $209,041 $10,770 $99,508 $319,319
LIABILITIES:
Derivative financial instruments ......... — 1,458 — 1,458
Total liabilities measured at fair value ...... $ — $ 1,458 $ — $ 1,458
(1) Includes $209.0 million of money market funds included in Cash and Equivalents. Amounts held in the
Rabbi trust were immaterial.
The level 2 assets and liabilities consist of derivative financial instruments, primarily forward foreign
exchange contracts. The fair value of forward foreign exchange contracts is determined by using quoted
market prices of the same or similar instruments, adjusted for counterparty risk.
The level 3 assets include available-for-sale investments in insured student loan backed ARS and
insured municipal authority bond ARS.
The Company measures the fair value of its ARS primarily using a discounted cash flow model, as
well as a comparison to similar securities in the market. Certain significant inputs into the model are
unobservable in the market including the periodic coupon rate, market rate of return and expected term.
As of January 28, 2012, approximately 46% of the Company’s ARS were “AAA” rated,
approximately 16% were “AA” rated, and approximately 38% were “A-” rated, in each case as rated by
one or more of the major credit rating agencies.
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