GAP Inc
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Access the most recent GAP Inc Form 10-K or Annual Report. (Please follow the below link)
Analyze and examine the company's financial statements and derivative footnote. Based on your analysis, create a 2- to 3-page report in a Microsoft Word document, that includes answer to the following questions:
- How is the information related to the company's derivatives presented?
- What types of derivatives does the company uses?
- Why the company uses derivative instruments?
- What is the amount of income or loss recognized in the income statement related to derivatives?
- Does the company have any derivative contracts that do not meet hedge accounting criteria? If so, what are they?
Support your responses with appropriate reasoning and examples.
Cite any sources in APA format.
http://investors.gapinc.com/phoenix.zhtml?c=111302&p=irol-sec&seccat01.1_rs=11&seccat01.1_rc=10&x=28&y=19
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Solution Summary
This solution explains GAP Inc derivatives. The sources used are also included in the solution.
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In accordance with BrainMass standards this is not a hand in ready assignment but only guidance.
Step 1
Information related to the company's derivatives is presented in Note 8 to the Financial Statements of Gap Inc. Within the financial statements, the information related to the company's derivatives is included in the "other current assets", "other long-term assets", "accrued expenses and other current liabilities", and "Lease incentives and other long-term liabilities". These items are found in the balance sheet of The GAP Inc. For example, other current assets of Gap Inc 2013 balance sheet are $864 million. Also, derivatives in cash flow hedging relationship is recognized in the Income statement as comprehensive income, reclassified into cost of goods sold and occupancy expenses, and reclassified into operating expenses. For example, the income statement shows other comprehensive income net of tax. Relating to it the change in the fair value of derivative financial instruments is $28 million (2012). Derivatives in net investment hedging relationships are recognized in "other comprehensive income".
Step 2
The derivatives used by Gap Inc. are foreign exchange forward contracts. These derivatives are used to hedge against changes in the US dollar exchange rate with British pounds, Canadian dollars, Euro, and Japanese yen. For example if Gap inc. ...
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