Walmart 2011 Annual Report Download - page 44

42 Walmart 2011 Annual Report
8 Fair Value Measurements
The Company records and discloses certain nancial and non-nancial assets and liabilities at their fair value. The fair value of an asset is the price
at which the asset could be sold in an orderly transaction between unrelated, knowledgeable and willing parties able to engage in the transaction.
A liability’s fair value is dened as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not
the amount that would be paid to settle the liability with the creditor.
Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
These tiers include:
• Level 1 – observable inputs such as quoted prices in active markets;
• Level 2 – inputs other than quoted prices in active markets that are either directly or indirectly observable; and
• Level 3 – unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own assumptions.
The disclosure of fair value of certain nancial assets and liabilities recorded at cost is as follows:
Cash and cash equivalents: The carrying value approximates fair value due to the short maturity of these instruments.
Short-term debt: The carrying value approximates fair value due to the short maturity of these instruments.
Long-term debt: The fair value is based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements or, where
applicable, quoted market prices. The carrying value and fair value of the Company’s debt as of January 31, 2011 and 2010 is as follows:
January 31, 2011 January 31, 2010
(Amounts in millions) Carrying Value Fair Value Carrying Value Fair Value
Long-term debt, including amounts due within one year $45,347 $47,012 $37,281 $39,055
Additionally, as of January 31, 2011 and 2010, the Company held certain derivative asset and liability positions that are required to be measured at fair
value on a recurring basis. The majority of the Company’s derivative instruments relate to interest rate swaps. The fair values of these interest rate swaps
have been measured in accordance with Level 2 inputs of the fair value hierarchy, using the income approach. Related inputs include the relevant
interest rate and foreign currency forward curves. As of January 31, 2011 and 2010, the notional amounts and fair values of these interest rate swaps are
as follows (asset/(liability)):
January 31, 2011 January 31, 2010
(Amounts in millions) Notional Amount Fair Value Notional Amount Fair Value
Receive xed-rate, pay oating-rate interest rate swaps designated
as fair value hedges $4,445 $267 $4,445 $260
Receive xed-rate, pay xed-rate cross-currency interest rate swaps
designated as net investment hedges (Cross-currency notional amount:
GBP 795 at January 31,2011 and 2010) 1,250 233 1,250 189
Receive oating-rate, pay xed-rate interest rate swaps designated
as cash ow hedges 1,182 (18) 638 (20)
Receive xed-rate, pay xed-rate cross-currency interest rate swaps
designated as cash ow hedges 2,902 238 2,902 286
Total $9,779 $720 $9,235 $715
The fair values above are the estimated amounts the Company would receive or pay upon a termination of the agreements relating to such
instruments as of the reporting dates.
Notes to Consolidated Financial Statements