Home Depot 2011 Annual Report Download - page 55

Download and view the complete annual report

Please find page 55 of the 2011 Home Depot annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 68

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68

49
11. FAIR VALUE MEASUREMENTS
The fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between
unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the
liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities
recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair
value. These tiers include:
•
•
•
Level 1
Level 2
Level 3
–
–
–
Observable inputs that reflect quoted prices in active markets
Inputs other than quoted prices in active markets that are either directly or indirectly observable
Unobservable inputs in which little or no market data exists, therefore requiring the Company to
develop its own assumptions
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The assets and liabilities of the Company that are measured at fair value on a recurring basis as of January 29, 2012 and
January 30, 2011 were as follows (amounts in millions):
Derivative agreements - assets
Derivative agreements - liabilities
Total
Fair Value at January 29, 2012 Using
Level 1
$—
—
$—
Level 2
$91
(27)
$64
Level 3
$—
—
$—
Fair Value at January 30, 2011 Using
Level 1
$—
—
$—
Level 2
$47
(40)
$7
Level 3
$—
—
$—
The Company uses derivative financial instruments from time to time in the management of its interest rate exposure on
long-term debt and its exposure on foreign currency fluctuations. The fair value of the Company’s derivative financial
instruments was measured using level 2 inputs. The Company’s derivative agreements are discussed further in Note 4.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The assets and liabilities of the Company that were measured at fair value on a nonrecurring basis during fiscal 2011, 2010
and 2009 were as follows (amounts in millions):
Lease obligation costs, net
Total for fiscal 2011
Lease obligation costs, net
Guarantee of HD Supply loan
Total for fiscal 2010
HD Supply investment
Lease obligation costs, net
Total for fiscal 2009
Fair Value Measured
During Fiscal 2011
Level 3
$(144)
Fair Value Measured
During Fiscal 2010
Level 3
$(158)
$(67)
Fair Value Measured
During Fiscal 2009
Level 3
$—
$(191)
Gains (Losses)
$(15)
$(15)
Gains (Losses)
$(9)
(51)
$(60)
Gains (Losses)
$(163)
(84)
$(247)
Lease obligation costs included in the Company’s Rationalization Charges were measured on a nonrecurring basis using fair
value measurements with unobservable inputs (level 3), as further discussed in Note 2. The guarantee of the HD Supply loan
was measured on a nonrecurring basis using fair value measurements with unobservable inputs (level 3), as further discussed
in Note 3. Additionally, the Company impaired the value of its investment in HD Supply using fair value measurements with
unobservable inputs (level 3), as further discussed in Note 3.