Abercrombie & Fitch 2014 Annual Report Download - page 57

ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
57
5. FAIR VALUE
Fair value is 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 inputs used to measure fair value are prioritized based on a three-level hierarchy. The
three levels of inputs to measure fair value are as follows:
• Level 1 — inputs are unadjusted quoted prices for identical assets or liabilities that are available in active markets that the
Company can access at the measurement date.
• Level 2 — inputs are other than quoted market prices included within Level 1 that are observable for assets or liabilities,
directly or indirectly.
• Level 3 — inputs to the valuation methodology are unobservable.
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 within it of the Company’s assets and liabilities, measured at fair value on a recurring
basis, were as follows:
Assets and Liabilities at Fair Value as of January 31, 2015
(in thousands) Level 1 Level 2 Level 3 Total
ASSETS:
Money market funds $ 122,047 $ — $ — $ 122,047
Derivative financial instruments — 10,293 — 10,293
Total assets measured at fair value $ 122,047 $ 10,293 $ — $ 132,340
LIABILITIES:
Derivative financial instruments ————
Total liabilities measured at fair value $ — $ — $ — $ —
Assets and Liabilities at Fair Value as of February 1, 2014
(in thousands) Level 1 Level 2 Level 3 Total
ASSETS:
Money market funds $ 148,024 $ — $ — $ 148,024
Derivative financial instruments — 969 — 969
Total assets measured at fair value $ 148,024 $ 969 $ — $ 148,993
LIABILITIES:
Derivative financial instruments — 2,555 — 2,555
Total liabilities measured at fair value $ — $ 2,555 $ — $ 2,555
The level 2 assets and liabilities consist of derivative financial instruments, primarily forward foreign exchange contracts. The fair
value of forward foreign currency exchange contracts is determined by using quoted market prices of the same or similar instruments,
adjusted for counterparty risk.
Disclosures of Fair Value of Other Assets and Liabilities:
The Company's borrowings under the 2014 Credit Facilities and the 2011 and 2012 Credit Agreements are carried at historical
cost in the accompanying Consolidated Balance Sheets. For disclosure purposes, the Company estimates the fair value of borrowings
outstanding using discounted cash flow analysis based on market rates obtained from independent third parties for similar types
of debt. The inputs used to value the borrowings outstanding are considered to be Level 2 instruments.
The carrying amount of gross borrowings outstanding under the Term Loan Facility was $299.3 million and the fair value of such
borrowings was $295.1 million as of January 31, 2015. The carrying amount of borrowings outstanding under the 2012 Term Loan
Agreement approximated fair value and was $135.0 million as of February 1, 2014. No borrowings were outstanding under the
ABL Facility and the 2011 Credit Agreement as of January 31, 2015 and February 1, 2014, respectively. See Note 12,
"BORROWINGS," for further discussion of the Credit Facilities.