GameStop 2011 Annual Report Download - page 92

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GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
models that consider various assumptions, including quoted forward prices, time value, volatility factors, and
contractual prices for the underlying instruments, as well as other relevant economic measures. When
appropriate, valuations are adjusted to reflect credit considerations, generally based on available market
evidence.
The following table provides the fair value of our assets and liabilities measured on a recurring basis and
recorded on our consolidated balance sheets (in millions):
January 28, 2012
Level 2
January 29, 2011
Level 2
Assets
Foreign Currency Contracts ............................... $17.0 $14.0
Company-owned life insurance ............................ 3.1 3.1
Total assets ............................................ $20.1 $17.1
Liabilities
Foreign Currency Contracts ............................... $ 2.5 $12.8
Nonqualified deferred compensation ........................ 0.8 0.9
Total liabilities ......................................... $ 3.3 $13.7
The Company uses Foreign Currency Contracts to manage currency risk primarily related to intercompany
loans denominated in non-functional currencies and certain foreign currency assets and liabilities. These Foreign
Currency Contracts are not designated as hedges and, therefore, changes in the fair values of these derivatives are
recognized in earnings, thereby offsetting the current earnings effect of the re-measurement of related
intercompany loans and foreign currency assets and liabilities.
Activity related to the trading of derivative instruments and the offsetting impact of related intercompany
loans and foreign currency assets and liabilities recognized in selling, general and administrative expense is as
follows (in millions):
52 Weeks
Ended
January 28,
2012
52 Weeks
Ended
January 29,
2011
52 Weeks
Ended
January 30,
2010
Gains (losses) on the changes in fair value of derivative
instruments ...................................... $13.5 $(7.1) $ 8.7
Gains (losses) on the re-measurement of related intercompany
loans and foreign currency assets and liabilities ......... (14.1) 9.6 (4.8)
Total ............................................. $ (0.6) $ 2.5 $ 3.9
We do not use derivative financial instruments for trading or speculative purposes. We are exposed to
counterparty credit risk on all of our derivative financial instruments and cash equivalent investments. The
Company manages counterparty risk according to the guidelines and controls established under comprehensive
risk management and investment policies. We continuously monitor our counterparty credit risk and utilize a
number of different counterparties to minimize our exposure to potential defaults. We do not require collateral
under derivative or investment agreements.
F-18