Best Buy 2011 Annual Report Download - page 97

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$ in millions, except per share amounts or as otherwise noted
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Money Market Funds. Our money market fund investments that are traded on an active market were measured at fair
value using quoted market prices, and therefore were classified as Level 1. Our money market fund investments not
trading on a regular basis or in an active market, and for which we have been unable to obtain pricing information on
an ongoing basis, were measured using inputs other than quoted prices that are observable for the investment, and
therefore were classified as Level 2.
U.S. Treasury Bills. Our U.S. Treasury notes were classified as Level 1 as they trade with sufficient frequency and
volume to enable us to obtain pricing information on an ongoing basis.
Foreign Currency Derivative Instruments. Comprised primarily of foreign currency forward contracts and foreign
currency swap contracts, our foreign currency derivative instruments were measured at fair value using readily
observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates. Our foreign
currency derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts
with various bank counterparties that are not traded in an active market.
Auction Rate Securities. Our investments in ARS were classified as Level 3 as quoted prices were unavailable due to
events described in Note 3, Investments. Due to limited market information, we utilized a discounted cash flow (‘‘DCF’’)
model to derive an estimate of fair value. The assumptions used in preparing the DCF model included estimates with
respect to the amount and timing of future interest and principal payments, forward projections of the interest rate
benchmarks, the probability of full repayment of the principal considering the credit quality and guarantees in place,
and the rate of return required by investors to own such securities given the current liquidity risk associated with ARS.
Marketable Equity Securities. Our marketable equity securities were measured at fair value using quoted market prices.
They were classified as Level 1 as they trade in an active market for which closing stock prices are readily available.
Deferred Compensation. Our deferred compensation liabilities and the assets that fund our deferred compensation
consist of investments in mutual funds. These investments were classified as Level 1 as the shares of these mutual funds
trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets,
goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our
consolidated balance sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event
of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value
and the difference is recorded within operating income in our consolidated statements of earnings.
With the exception of the fixed asset and tradename impairments associated with our fiscal 2011 restructuring described in
Note 5, Restructuring Charges, we had no significant remeasurements of such assets or liabilities to fair value during fiscal
2011 and 2010. The following table summarizes the fair value remeasurments recorded for fiscal 2011:
Remaining Net
Impairments Carrying Value
Property and equipment $147 $51
Tradename 10 3
Total $157 $54
All of the fair value remeasurments included in the table above were based on significant unobservable inputs (Level 3).
Fixed asset fair values were derived using a DCF model to estimate the present value of net cash flows that the asset or
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