Abercrombie & Fitch 2013 Annual Report Download - page 45

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45
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Investment Securities
The Company maintains its cash equivalents in financial instruments, primarily money market funds and United States
treasury bills, with original maturities of three months or less.
The irrevocable rabbi trust (the “Rabbi Trust”) is intended to be used as a source of funds to match respective funding
obligations to participants in the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan I, the
Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan II and the Chief Executive Officer
Supplemental Executive Retirement Plan. As of February 2, 2013, total assets held in the Rabbi Trust were $87.6 million and
related to trust-owned life insurance policies with a cash surrender value of $87.6 million and an immaterial amount of assets
held in money market funds. The trust-owned life insurance policies are recorded at cash surrender value, in Other Assets on
the Consolidated Balance Sheets and are restricted as to their use as noted above. The change in cash surrender value of the
trust-owned life insurance policies held in the Rabbi Trust resulted in realized gains of $2.4 million and $2.5 million for Fiscal
2012 and Fiscal 2011, respectively.
Interest Rate Risks
As of February 2, 2013, the Company had no borrowings outstanding under the Amended and Restated Credit Agreement
or the Term Loan Agreement.
Foreign Exchange Rate Risk
A&F’s international subsidiaries generally operate with functional currencies other than the U.S. Dollar. The Company’s
Consolidated Financial Statements are presented in U.S. Dollars. Therefore, the Company must translate revenues, expenses,
assets and liabilities from functional currencies into U.S. Dollars at exchange rates in effect during or at the end of the reporting
period. The fluctuation in the value of the U.S. Dollar against other currencies affects the reported amounts of revenues,
expenses, assets and liabilities. The potential impact of currency fluctuation increases as international expansion increases.
A&F and its subsidiaries have exposure to changes in currency exchange rates associated with foreign currency
transactions and forecasted foreign currency transactions, including the sale of inventory between subsidiaries and foreign
denominated assets and liabilities. Such transactions are denominated primarily in U.S. Dollars, British Pounds, Canadian
Dollars, Chinese Yuan, Danish Kroner, Euros, Hong Kong Dollars, Japanese Yen, Polish Zloty, South Korean Won, Singapore
Dollars, Swedish Kroner and Swiss Francs. The Company has established a program that primarily utilizes foreign currency
forward contracts to partially offset the risks associated with the effects of certain foreign currency transactions and forecasted
transactions. Under this program, increases or decreases in foreign currency exposures are partially offset by gains or losses on
forward contracts, to mitigate the impact of foreign currency gains or losses. The Company does not use forward contracts to
engage in currency speculation. All outstanding foreign currency forward contracts are recorded at fair value at the end of each
fiscal period.
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