Walmart 2002 Annual Report Download - page 35

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33
other comprehensive income that is expected to be reclassified into earnings within the next 12 months will not be significant. Changes
in the foreign currency spot exchange rate result in reclassification of amounts from other comprehensive income to earnings to offset
transaction gains or loss on foreign denominated debt. The fair value of this hedge is included in the balance sheet in the line titled “Other
assets and deferred charges.”
Instruments Not Designated for Hedging
The Company enters into forward currency exchange contracts in the regular course of business to manage its exposure against foreign
currency fluctuations on cross-border purchases of inventory. These contracts are generally for durations of six months or less. Although these
instruments are economic hedges, the Company did not designate these contracts as hedges as required in order to obtain hedge accounting.
As a result, the Company marks the contracts to market through earnings. The fair value of these contracts is included in the balance sheet
in the line titled “Prepaid expenses and other.”
Fair value of financial instruments
Instrument Notional Amount Fair Value
(amounts in millions) 1/31/2002 1/31/2001 1/31/2002 1/31/2001
Derivative financial instruments designated for hedging:
Receive fixed rate, pay floating rate interest rate swaps
designated as fair value hedges $ 3,792 $ 500 $ 172 $ 28
Receive fixed rate, pay fixed rate cross-currency
interest rate swaps designated as net investment hedges
(Foreign exchange notional amount: GBP 795 and 2,165 at
1/31/2002 and 2001, respectively) 1,250 4,750 192 659
Receive fixed rate, pay fixed rate cross-currency
interest rate swaps designated as net investment hedges
(Foreign exchange notional amount: DEM 3,320 at 1/31/2001). – 1,910 – 366
Receive fixed rate, pay fixed rate cross-currency
interest rate swaps designated as net investment hedges
(Foreign exchange notional amount: CAD 1,841 at 1/31/2001). – 1,250 – 57
Receive fixed rate, pay fixed rate cross-currency
interest rate swaps designated as cash flow hedge
(Foreign exchange notional amount: CAD 503 at 1/31/2002). 325 – 8 –
$ 5,367 $ 8,410 $ 372 $ 1,110
Derivative financial instruments not designated for hedging:
Foreign currency exchange forward contracts (various currencies) $ 117 $ 292 $ – $ 6
Basis swap 500 500 1 –
$ 617 $ 792 $ 1 $ 6
Non-derivative financial instruments:
Long-term debt $ 17,944 $ 16,735 $ 18,919 $ 17,266
Cash and cash equivalents: The carrying amount approximates fair value due to the short maturity of these instruments.
Long-term debt: Fair value is based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements.
Interest rate instruments and net investment instruments: The fair values are estimated amounts the Company would receive or pay to terminate
the agreements as of the reporting dates.
Foreign currency contracts: The fair value of foreign currency contracts are estimated by obtaining quotes from external sources.