Foot Locker 2010 Annual Report Download - page 73

19. Fair Value Measurements
The following table provides a summary of the recognized assets and liabilities that are measured at fair
value on a recurring basis:
As of January 29, 2011
(in millions) Level 1 Level 2 Level 3 Total
Assets
Auction rate security ...................... $— $5 $— $5
Forward foreign exchange contracts ............ — 2 — 2
Total Assets ............................ $— $7 $— $7
As of January 30, 2010
(in millions) Level 1 Level 2 Level 3 Total
Assets
Short-term investment ..................... $— $— $ 7 $ 7
Auction rate security ...................... — 5 — 5
Forward foreign exchange contracts ............ — 1 — 1
Total Assets ............................ $— $ 6 $ 7 $13
Liabilities
European cross currency swap ................ — 24 — 24
Total Liabilities .......................... $— $24 $— $24
The Company’s derivative financial instruments are valued using observable market-based inputs to industry
valuation models. These valuation models require a variety of inputs, including contractual terms, market prices,
yield curves, and measures of volatility obtained from various market sources.
At January 29, 2011, the Company held a preferred stock auction rate security with a face value of $7 million,
which has experienced failed auctions due to the liquidity issues experienced in the global credit and capital
markets. The security continues to earn and pay interest based on the stated terms. The Company classifies the
security as long-term available-for-sale and reports the security at fair value as a component of other assets on
the Company’s Consolidated Balance Sheets. The Company evaluates the security for other-than-temporary
impairments at each reporting period. The security is considered temporarily impaired at January 29, 2011 with a
cumulative unrealized loss of $2 million reflected in accumulated other comprehensive loss in the Company’s
Consolidated Statement of Comprehensive Loss. The Company has the intent and the ability to hold the security.
The Company’s Level 3 asset as of January 30, 2010 represented the Company’s investment in the Reserve
International Liquidity Fund, Ltd. (the ‘‘Fund’’), a money market fund. In 2008, the Company recorded an
other-than-temporary impairment charge of $3 million, incorporating the valuation at zero for the Lehman
Brothers debt securities held by the Fund. During December 2010, based on a settlement agreement with the
Fund, a payment in the amount of $9 million was received. As the net carrying amount of the investment was
$7 million at the time of the settlement, a $2 million gain was recorded in 2010 to reflect the Company’s realized
loss of $1 million in the Fund.
The following table is a reconciliation of financial assets and liabilities measured at fair value on a recurring
basis classified as Level 3:
(in millions) Level 3
Balance at January 31, 2009.......................................... $23
Redemptions received from the Fund .................................. (16)
Balance at January 30, 2010.......................................... $ 7
Redemptions received from the Fund .................................. (9)
Redemptions received in excess of carrying value .......................... 2
Balance at January 29, 2011.......................................... $—
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