Walmart 2010 Annual Report Download - page 42

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Fair Value Instruments
The company is party to receive fixed-rate, pay floating-rate interest rate
swaps to hedge the fair value of fixed-rate debt. Under certain swap
agreements, the company pays floating-rate interest and receives fixed-
rate interest payments periodically over the life of the instruments. The
notional amounts are used to measure interest to be paid or received and
do not represent the exposure due to credit loss. The company’s interest
rate swaps that receive fixed-interest rate payments and pay floating-
interest rate payments are designated as fair value hedges. As the specific
terms and notional amounts of the derivative instruments match those of
the instruments being hedged, the derivative instruments were assumed
to be perfectly effective hedges and all changes in fair value of the hedges
were recorded in long-term debt and accumulated other comprehensive
loss on the accompanying Consolidated Balance Sheets with no net
impact on the income statement. These fair value instruments will
mature on various dates ranging from February 2011 to May 2014.
Net Investment Instruments
At January 31, 2010 and 2009, the company is party to cross-currency
interest rate swaps that hedge its net investment in the United Kingdom.
The agreements are contracts to exchange fixed-rate payments in one
currency for fixed-rate payments in another currency. All changes in the
fair value of these instruments are recorded in accumulated other com-
prehensive loss, offsetting the currency translation adjustment that is also
recorded in accumulated other comprehensive loss. These instruments
will mature on dates ranging from 2029 to March 2034.
The company has approximately £3.0 billion of outstanding debt that
is designated as a hedge of the company’s net investment in the United
Kingdom as of January 31, 2010 and 2009. The company also has out-
standing approximately ¥437.4 billion of debt that is designated as a
hedge of the company’s net investment in Japan at January 31, 2010
and 2009. Any translation of non-U.S.-denominated debt is recorded
in accumulated other comprehensive loss, offsetting the currency
translation adjustment that is also recorded in accumulated other
comprehensive loss. These instruments will mature on dates ranging
from January 2011 to January 2039.
Cash Flow Instruments
The company is party to receive floating-rate, pay fixed-rate interest rate
swaps to hedge the interest rate risk of certain non-U.S.-denominated
debt. The swaps are designated as cash flow hedges of interest expense
risk. Changes in the non-U.S. benchmark interest rate result in reclassifi-
cation of amounts from accumulated other comprehensive loss to earnings
to offset the floating-rate interest expense. These cash flow instruments
will mature on dates ranging from August 2013 to August 2014.
The company is also party to receive fixed-rate, pay fixed-rate
cross-currency interest rate swaps to hedge the currency exposure
associated with the forecasted payments of principal and interest of
non-U.S.-denominated debt. The swaps are designated as cash flow
hedges of the currency risk related to payments on the non-U.S.-
denominated debt. Changes in the currency exchange rate result in
reclassification of amounts from accumulated other comprehensive
loss to earnings to offset the re-measurement (loss) gain on the non-
U.S.-denominated debt. These cash flow instruments will mature on
dates ranging from September 2029 to March 2034. Any ineffectiveness
with these instruments is expected to be immaterial.
Notes to Consolidated Financial Statements
40 Walmart 2010 Annual Report
Financial Statement Presentation
Hedging instruments with an unrealized gain are recorded on the Consolidated Balance Sheets in 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.
As of January 31, 2010 and 2009, our financial instruments were classified as follows in the accompanying Consolidated Balance Sheets:
January 31, 2010 January 31, 2009
Net Net
Fair Value Investment Cash Flow Fair Value Investment Cash Flow
(Amounts in millions) Instruments Hedge Instruments Instruments Hedge Instruments
Balance Sheet Classification:
Other assets and deferred charges $260 $189 $286 $321 $526 $ —
Total assets $260 $189 $286 $321 $526 $ —
Long-term debt $260 $ — $ — $321 $ — $ —
Deferred income taxes and other — — 20 — — 17
Total liabilities $260 $ — $ 20 $321 $ — $ 17