Pottery Barn 2014 Annual Report Download - page 71

The fair values of our derivative financial instruments are presented below. All fair values were measured using
Level 2 inputs as defined by the fair value hierarchy described in Note N.
In thousands Balance sheet location Feb. 1, 2015 Feb. 2, 2014
Derivatives designated as hedging instruments:
Cash flow hedge foreign currency forward contracts Other current assets $ 1,015 $ 485
Cash flow hedge foreign currency forward contracts Other current liabilities (9) 0
Total, net $ 1,006 $ 485
Derivatives not designated as hedging instruments:
Foreign currency forward contracts Other current assets $ 427 $ 222
Foreign currency forward contracts Other current liabilities 0 (40)
Total, net $ 427 $ 182
We record all derivative assets and liabilities on a gross basis. They do not meet the balance sheet netting criteria
as discussed in ASC 210, Balance Sheet, because we do not have master netting agreements established with our
derivative counterparties that would allow for net settlement.
Amounts recorded within accumulated other comprehensive income (“AOCI”) associated with our derivative
instruments, pre-tax, were as follows:
In thousands
Fiscal 2014
(52 Weeks)
Fiscal 2013
(52 Weeks)
AOCI beginning balance amount of gain (loss) $ 741 $ 0
Amounts recognized in OCI before reclassifications 1,153 870
Amounts reclassified from OCI into cost of goods sold (573) (129)
AOCI ending balance amount of gain (loss) $ 1,321 $ 741
Note N: Fair Value Measurements
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
We determine the fair value of financial and non-financial assets and liabilities using the fair value hierarchy
established by ASC 820, Fair Value Measurement, which defines three levels of inputs that may be used to
measure fair value, as follows:
• Level 1: inputs which include quoted prices in active markets for identical assets or liabilities;
• Level 2: inputs which include observable inputs other than Level 1 inputs, such as quoted prices in active
markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the asset or liability; and
• Level 3: inputs which include unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the underlying asset or liability.
The fair values of our cash and cash equivalents are based on Level 1 inputs, which include quoted prices in
active markets for identical assets.
Foreign Currency Derivatives and Hedging Instruments
We use the income approach to value our derivatives using observable Level 2 market data at the measurement
date and standard valuation techniques to convert future amounts to a single present value amount, assuming that
participants are motivated but not compelled to transact. Level 2 inputs are limited to quoted prices that are
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Form 10-K