The Gap 2010 Annual Report Download - page 54

Comprehensive Income
Comprehensive income is comprised of net income and other gains and losses affecting equity that are excluded
from net income. The components of OCI consist of foreign currency translation gains and losses, net of tax,
changes in the fair value of derivative financial instruments, net of tax, and reclassification adjustments for
realized gains and losses on derivative financial instruments, net of tax.
Income Taxes
Deferred income taxes are recorded for temporary differences between the tax basis of assets and liabilities and their
reported amounts in the Consolidated Financial Statements. A valuation allowance is established against deferred
tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Our income tax expense includes changes in our estimated liability for exposures associated with our various tax
filing positions. At any point in time, many tax years are subject to or in the process of being audited by various
taxing authorities. To the extent our estimates of settlements change or the final tax outcome of these matters is
different from the amounts recorded, such differences will impact the income tax provision in the period in which
such determinations are made.
The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties related to
unrecognized tax benefits in operating expenses in the Consolidated Statements of Income. See Note 10 of Notes
to Consolidated Financial Statements.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board issued an accounting standards update to amend and
clarify existing guidance related to fair value measurements and disclosures. This guidance adds new
requirements for disclosures related to transfers into and out of level 1 and level 2 and requires separate disclosure
of purchases, sales, issuances, and settlements related to level 3 measurements. It also clarifies guidance around
disaggregation and disclosures of inputs and valuation techniques used to measure fair value. We adopted the
provisions of this accounting standards update effective January 31, 2010, except for the requirement to disclose
purchases, sales, issuances, and settlements related to level 3 measurements, which we will adopt in the first
quarter of fiscal 2011.
Note 2. Additional Financial Statement Information
Cash and Cash Equivalents and Short-Term Investments
Cash and cash equivalents and short-term investments consist of the following:
($ in millions) January 29, 2011 January 30, 2010
Cash ............................................................................... $ 957 $1,279
Domestic commercial paper .......................................................... 75 590
Bankcertificatesofdepositandtimedeposits .......................................... 529 479
Cash equivalents (original maturities of 91 days or less) .................................. 604 1,069
Cashandcashequivalents ........................................................... $1,561 $2,348
U.S. treasury bills .................................................................... $— $ 50
Bankcertificatesofdepositandtimedeposits .......................................... 100 175
Short-term investments (original maturities of greater than 91 days) ..................... $ 100 $ 225
We did not record any impairment charges on our cash equivalents and short-term investments in fiscal 2010,
2009, or 2008.
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