Sears 2013 Annual Report Download - page 83

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
83
Financial Guarantees
We issue various types of guarantees in the normal course of business. We had the following guarantees
outstanding at February 1, 2014:
millions Bank
Issued SRAC
Issued Other Total
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 683 $ 16 $ — $ 699
Commercial letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . 13 105 — 118
Secondary lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . — — 55 55
The secondary lease obligations related to certain store leases of previously divested Sears businesses. We
remain secondarily liable if the primary obligor defaults.
NOTE 5—FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
We determine fair value of financial assets and liabilities based on the following fair value hierarchy, which
prioritizes the inputs to valuation techniques used to measure fair value into three levels:
Level 1 inputs – unadjusted quoted prices in active markets for identical assets or liabilities that we have the
ability to access. An active market for the asset or liability is one in which transactions for the asset or liability
occur with sufficient frequency and volume to provide ongoing pricing information.
Level 2 inputs – inputs other than quoted market prices included in Level 1 that are observable, either directly
or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar
assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that
are not active and inputs other than quoted market prices that are observable for the asset or liability, such as
interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and
default rates.
Level 3 inputs – unobservable inputs for the asset or liability.