Best Buy 2013 Annual Report Download - page 93

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93
The Notes are unsecured and unsubordinated obligations and rank equally with all of our other unsecured and unsubordinated
debt. The Notes contain covenants that, among other things, limit our ability to incur debt secured by liens or to enter into sale
and lease-back transactions.
Other
The fair value of long-term debt approximated $1,652 million and $1,756 million at February 2, 2013, and March 3, 2012,
respectively, based primarily on the ask prices quoted from external sources, compared to carrying values of $1,700 million and
$1,728 million, respectively. If our long-term debt was recorded at fair value, it would be classified as Level 1.
At February 2, 2013, the future maturities of long-term debt, including capitalized leases, consisted of the following ($ in
millions):
Fiscal Year
2014 $ 547
2015 45
2016 35
2017 370
2018 15
Thereafter 688
Total long-term debt $ 1,700
9. Derivative Instruments
We manage our economic and transaction exposure to certain market-based risks through the use of foreign currency derivative
instruments. Our objective in holding derivatives is to reduce the volatility of net earnings and cash flows associated with
changes in foreign currency exchange rates. We do not hold or issue derivative financial instruments for trading or speculative
purposes.
We record all foreign currency derivative instruments on our Consolidated Balance Sheets at fair value and evaluate hedge
effectiveness prospectively and retrospectively when electing to apply hedge accounting treatment. We formally document all
hedging relationships at inception for all derivative hedges and the underlying hedged items, as well as the risk management
objectives and strategies for undertaking the hedge transactions. In addition, we have derivatives which are not designated as
hedging instruments. We have no derivatives that have credit risk-related contingent features, and we mitigate our credit risk by
engaging with major financial institutions as our counterparties.
Cash Flow Hedges
We previously entered into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on
certain revenue streams denominated in non-functional currencies. We reported the effective portion of the gain or loss on a
cash flow hedge as a component of other comprehensive income and subsequently reclassified the gain or loss into net earnings
in the period in which the hedged transaction affected net earnings or the forecasted transaction was no longer probable of
occurring. We reported the ineffective portion, if any, of the gain or loss in net earnings. As the revenue streams previously
hedged no longer occurred beginning in fiscal 2013 (11-month), we did not have any cash flow hedges outstanding.
Derivatives Not Designated as Hedging Instruments
Derivatives not designated as hedging instruments include foreign exchange forward contracts used to manage the impact of
fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-
functional currencies and on certain forecasted inventory purchases denominated in non-functional currencies. The contracts
generally have terms of up to six months. These derivative instruments are not designated in hedging relationships and,
therefore, we record gains and losses on these contracts directly in net earnings.
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