Banana Republic 2005 Annual Report Download - page 45

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G A P I N C . F I N A N C I A L S 2 0 0 5
gap inc. 2005 annual report 43
Restricted Cash
Restricted cash primarily represents cash that serves as collateral and other cash that is restricted from withdrawal for use. As of January 28, 2006,
restricted cash represents the restriction of $55 million, all of which serves as collateral for our insurance obligations. As of January 29, 2005, re-
stricted cash represented the restriction of $1.0 billion, of which $900 million served as collateral for our committed bank lines that backed our letter
of credit agreements to finance our inventory purchases, and the remainder was primarily restricted for our insurance obligations. The $900 million
of restricted cash that collateralized the prior letter of credit agreements was fully released in May 2005. See Note B.
Hedging Instruments
We apply Statement of Financial Accounting Standards No. (“SFAS”) 133, “Accounting for Derivative Instruments and Hedging Activities,” as
amended, which establishes the accounting and reporting standards for derivative instruments and hedging activities. We recognize all derivative
instruments as either other current assets or accrued expenses and other current liabilities in our Consolidated Balance Sheets and measure those
instruments at fair value.
Merchandise Inventory
Inventory is valued using the cost method, which values inventory at the lower of the actual cost or market. Cost is determined using the first-in,
first-out (“FIFO”) method. Market is determined based on the estimated net realizable value, which generally is the merchandise selling price. We
review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of
sizes) and use markdowns to clear merchandise. We estimate and accrue shortage for the period between the last physical count and the balance
sheet date. Our shortage estimate can be affected by changes in merchandise mix and changes in actual shortage trends.
Cost Accrued Amortized Fair Marketable Short-term
January 28, 2006 ($ in millions) Basis Interest Cost Value Securities Investments
Original maturity less than 91 days:
Money market investments $ 239 $ - $ 239 $ 239 $ 239 $ -
Interest bearing accounts 175 - 175 175 175 -
Commercial paper 711 2 713 713 711 -
Certificates of deposit 50 - 50 50 50 -
Agency discount notes 443 2 445 445 443 -
Original maturity greater than 91 days:
Certificates of deposit 130 3 133 133 - 133
Agency discount notes 731 10 741 741 - 741
Agency bonds 77 1 78 78 - 78
$ 2,556 $ 18 $ 2,574 $ 2,574 $ 1,618 $ 952
Cost Accrued Amortized Fair Marketable Short-term
January 29, 2005 ($ in millions) Basis Interest Cost Value Securities Investments
Original maturity less than 91 days:
Money market investments $ 1,102 $ - $ 1,102 $ 1,102 $ 1,102 $ -
Commercial paper 326 - 326 326 326 -
Certificates of deposit 65 - 65 65 65 -
Agency discount notes 423 - 423 423 423 -
Original maturity greater than 91 days:
Certificates of deposit 35 - 35 35 - 35
Agency discount notes 779 3 782 782 - 782
$ 2,730 $ 3 $ 2,733 $ 2,733 $ 1,916 $ 817