DSW 2012 Annual Report Download - page 69

F- 29
13. FAIR VALUE MEASUREMENTS
Financial Assets and Liabilities- The following table presents financial assets and liabilities at fair value as of the periods
presented:
February 2, 2013 January 28, 2012
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
(in thousands)
Assets:
Cash and equivalents(a) $ 81,097 $ 81,097 — — $ 79,003 $ 79,003 — —
Short-term investments(b) 232,052 — 232,052 — 296,697 — 296,697 $ —
Long-term investments(c) 96,843 — 96,843 — 53,858 — 52,707 $ 1,151
$409,992 $ 81,097 $328,895 — $429,558 $ 79,003 $349,404 $ 1,151
Liabilities:
Warrant liability(d) — — — — $ 29,303 — $ 29,303 —
— — — — $ 29,303 — $ 29,303 —
(a) Cash and equivalents primarily represent cash deposits and investments in money market funds held with financial
institutions, as well as credit card receivables that generally settle within three days. The carrying amount approximates
fair value because of the relatively short average maturity of the instruments.
(b) Short-term and long-term investments include available-for-sale and held-to maturity investments, which are valued
using a market-based approach using level 2 inputs such as prices of similar assets in active markets. Held-to-maturity
investments are held at amortized cost and are reviewed for impairment using level 2 inputs.
(c) The long-term investment - related party was sold for its book value in the fourth quarter of fiscal 2012. Prior to its sale,
the investments was evaluated for other-than-temporary impairment on an annual basis or when a triggering event
occurred using a discounted cash flow valuation model using level 3 inputs such as the financial condition of the entity.
(d) The underlying assumptions for fair value measurement of the warrant liability is detailed in Note 12. Prior to exercise,
the Company classified its warrant liability within level 2 as the valuation inputs were based on observable market data.
The following table presents the activity related to level 3 fair value measurements for long-term investments for the periods
presented:
Fiscal years ended
February 2, 2013 January 28, 2012
(in thousands)
Carrying value at the beginning of the period $ 1,151 $ 952
Activity related to equity investment – related party (1,151) 199
Carrying value at the end of the period $ — $ 1,151
Non-Financial Assets and Liabilities- DSW periodically evaluates the carrying amount of its long-lived assets, primarily
property and equipment, and finite lived intangible assets when events and circumstances warrant such a review to ascertain if
any assets have been impaired. The carrying amount of a long-lived asset or asset group is considered impaired when the
carrying value of the asset or asset group exceeds the expected future cash flows from the asset or asset group. The reviews are
conducted at the lowest identifiable level, which includes a store. The impairment loss recognized is the excess of the carrying
value of the asset or asset group over its fair value, based on a discounted cash flow analysis using a discount rate determined
by management. Should an impairment loss be realized, it will generally be included in cost of sales.
In fiscal 2011, DSW recognized an impairment loss of $1.6 million on assets used in a leased office building assumed in the
Merger. Based on the projected future cash flows under the lease, DSW determined that the carrying value exceeded the
expected future cash flows from the asset group and recorded a full impairment after determining fair value. The impairment of
the related lease is discussed in Note 15. There were no asset impairment charges in fiscal 2012 or 2010.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS