TARGET CORP | 2013 | FY | 3


Derivative Financial Instruments

Our derivative instruments primarily consist of interest rate swaps, which are used to mitigate our interest rate risk. We have counterparty credit risk resulting from our derivative instruments, primarily with large global financial institutions. We monitor this concentration of counterparty credit risk on an ongoing basis. See Note 8 for a description of the fair value measurement of our derivative instruments and their classification on the Consolidated Statements of Financial Position.
As of February 1, 2014 and February 2, 2013, one swap was designated as a fair value hedge for accounting purposes, and no ineffectiveness was recognized in 2013 or 2012.

Outstanding Interest Rate Swap Summary
February 1, 2014
 
Designated

 
De-Designated
(dollars in millions)
Pay Floating

 
Pay Floating

 
Pay Fixed

Weighted average rate:
 
 
 
 
 
Pay
three-month LIBOR

 
one-month LIBOR

 
3.8
%
Receive
1.0
%
 
5.7
%
 
one-month LIBOR

Weighted average maturity
0.5 years

 
2.5 years

 
2.5 years

Notional
$
350

 
$
500

 
$
500

Classification and Fair Value
(millions)
Assets
 
Liabilities
Classification
Feb 1,
2014

Feb 2,
2013

 
Classification
Feb 1,
2014

Feb 2,
2013

Designated:
Other current assets
$
1

$

 
N/A
$

$

 
Other noncurrent assets

3

 
N/A


De-designated:
Other current assets

4

 
Other current liabilities

2

 
Other noncurrent assets
62

82

 
Other noncurrent liabilities
39

54

Total
 
$
63

$
89

 
 
$
39

$
56



Periodic payments, valuation adjustments and amortization of gains or losses on our derivative contracts had the following impact on our Consolidated Statements of Operations:

Derivative Contracts – Effect on Results of Operations
(millions)
Type of Contract
Classification of Income/(Expense)
2013

2012

2011

Interest rate swaps
Net interest expense
$
29

$
44

$
41



The amount remaining on unamortized hedged debt valuation gains from terminated or de-designated interest rate swaps that will be amortized into earnings over the remaining lives of the underlying debt totaled $52 million, $75 million and $111 million, at the end of 2013, 2012 and 2011, respectively.

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