Walmart 2007 Annual Report Download - page 50

Wal-Mart 2007 Annual Report 48
Net Investment Instruments
At January 31, 2007, the Company is party to cross-currency interest
rate swaps that hedge its net investment in the United Kingdom. At
January 31, 2006, the Company was party to cross-currency interest
rate swaps that hedge its net investments in the United Kingdom and
Japan. The agreements are contracts to exchange  xed-rate payments
in one currency for  xed-rate payments in another currency.
The Company has outstanding approximately £3.0 billion and
£2.0 billion of debt that is designated as a hedge of the Company’s
net investment in the United Kingdom as of January 31, 2007 and
2006, respectively. The Company also has outstanding approximately
¥142.1 billion and ¥87.1 billion of debt that is designated as a hedge
of the Company’s net investment in Japan at January 31, 2007 and
2006, respectively. All changes in the fair value of these instruments
are recorded in accumulated other comprehensive income, o set-
ting the foreign currency translation adjustment that is also recorded
in accumulated other comprehensive income.
Cash Flow Instruments
The Company was party to a cross-currency interest rate swap to
hedge the foreign currency risk of certain foreign-denominated
debt. The swap was designated as a cash flow hedge of foreign
currency exchange risk. The agreement was a contract to exchange
fixed-rate payments in one currency for fixed-rate payments in
another currency. Changes in the foreign currency spot exchange
rate resulted in reclassification of amounts from accumulated
other comprehensive income to earnings to offset transaction
gains or losses on foreign-denominated debt. The instruments
matured in fiscal 2007.
Notes to Consolidated Financial Statements
Hedging instruments with an unrealized gain are recorded on the
Consolidated Balance Sheets in other current assets or other assets
and deferred charges, based on maturity date. Those instruments
with an unrealized loss are recorded in accrued liabilities or deferred
income taxes and other, based on maturity date.
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.
Fair value 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.
Fair Value of Financial Instruments
Instrument Notional Amount Fair Value
Fiscal Year Ended January 31, (in millions) 2007 2006 2007 2006
Derivative  nancial instruments designated for hedging:
Receive  xed-rate, pay  oating rate interest rate swaps designated as fair value hedges $ 5,195 $ 6,945 $ (1) $ 133
Receive  xed-rate, pay  xed-rate cross-currency interest rate swaps designated
as net investment hedges (Cross-currency notional amount: GBP 795 at
1/31/2007 and 1/31/2006) 1,250 1,250 (181) (107)
Receive  xed-rate, pay  xed-rate cross-currency interest rate swap designated
as a cash  ow hedge (Cross-currency notional amount: CAD 0 and CAD 503
at 1/31/2007 and 1/31/2006, respectively) – 325 – (120)
Receive  xed-rate, pay  xed-rate cross-currency interest rate swap designated
as a net investment hedge (Cross-currency notional amount: ¥0 and ¥52,056
at 1/31/2007 and 1/31/2006, respectively) – 432 – (17)
Total $ 6,445 $ 8,952 $ (182) $ (111)
Non-derivative  nancial instruments:
Long-term debt $32,650 $31,024 $32,521 $31,580