The Gap 2011 Annual Report Download - page 63

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.
Recent Accounting Pronouncements
In May 2011, the FASB issued an accounting standards update to expand disclosure requirements for fair value
measurements. This guidance requires entities to disclose the categorization by level of the fair value hierarchy for
items that are not measured at fair value in the statement of financial position but for which the fair value is
required to be disclosed. This accounting standards update is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2011. We will adopt the provisions of this accounting standards update in
the first quarter of fiscal 2012.
In June 2011, the FASB issued an accounting standards update to revise the manner in which entities present
comprehensive income in their financial statements. This guidance requires entities to present each component of
net income along with total net income, each component of OCI along with a total for OCI, and a total amount for
comprehensive income, either in a single continuous statement of comprehensive income or in two separate but
consecutive statements. This accounting standards update is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2011. We will adopt the provisions of this accounting standards update in
the first quarter of fiscal 2012.
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 28, 2012 January 29, 2011
Cash(1)............................................................................. $ 876 $ 619
Bankcertificatesofdepositandtimedeposits .......................................... 685 529
Moneymarketfunds ................................................................ 224 338
Domestic commercial paper .......................................................... 100 75
Cashequivalents .................................................................... 1,009 942
Cashandcashequivalents ........................................................... $1,885 $1,561
Bankcertificatesofdepositandtimedeposits .......................................... $ — $ 100
Short-terminvestments.............................................................. $ — $ 100
(1) Cash includes $59 million and $61 million of amounts in transit from banks for customer credit card and debit card transactions as of
January 28, 2012 and January 29, 2011, respectively.
49