Walmart 2009 Annual Report Download - page 36

34 Wal-Mart 2009 Annual Report
Notes to Consolidated Financial Statements
1 Summary of Signi cant Accounting Policies
General
Wal-Mart Stores, Inc. (“Wal-Mart,” the “Company” or “we”) operates
retail stores in various formats around the world and is committed
to saving people money so they can live better. We earn the trust of
our customers every day by providing a broad assortment of quality
merchandise and services at every day low prices (“EDLP”) while
fostering a culture that rewards and embraces mutual respect, integ-
rity and diversity. EDLP is our pricing philosophy under which we
price items at a low price every day so that our customers trust that
our prices will not change under frequent promotional activity.
Our  scal year ends on January 31.
Consolidation
The Consolidated Financial Statements include the accounts of
Wal-Mart Stores, Inc. and its subsidiaries. Signi cant intercompany
transactions have been eliminated in consolidation. Investments in
which the Company has a 20% to 50% voting interest and where
the Company exercises signi cant in uence over the investee are
accounted for using the equity method.
The Company’s operations in Argentina, Brazil, Chile, China, Costa
Rica, El Salvador, Guatemala, Honduras, India, Japan, Mexico, Nicara-
gua and the United Kingdom are consolidated using a December 31
 scal year-end, generally due to statutory reporting requirements.
There were no signi cant intervening events in January 2009 which
materially a ected the  nancial statements. The Company’s opera-
tions in Canada and Puerto Rico are consolidated using a January 31
 s c a l y e a r - e n d .
The Company consolidates the accounts of certain variable interest
entities where it has been determined that Wal-Mart is the primary
bene ciary of those entities’ operations. The assets, liabilities and
results of operations of these entities are not material to the Company.
Cash and Cash Equivalents
The Company considers investments with a maturity of three months
or less when purchased to be cash equivalents. The majority of pay-
ments due from banks for third-party credit card, debit card and
electronic bene t transactions (“EBT”) process within 24-48 hours,
except for transactions occurring on a Friday, which are generally
processed the following Monday. All credit card, debit card and EBT
transactions that process in less than seven days are classi ed as
cash and cash equivalents. Amounts due from banks for these trans-
actions classi ed as cash totaled $2.0 billion and $826 million at Janu-
ary 31, 2009 and 2008, respectively. In addition, cash and cash
equivalents includes restricted cash related to cash collateral holdings
from various counterparties as required by certain derivative and
trust agreements of $577 million at January 31, 2009.
Receivables
Accounts receivable consist primarily of receivables from insurance
companies resulting from our pharmacy sales, receivables from sup-
pliers for marketing or incentive programs, receivables from real estate
transactions and receivables from property insurance claims. Addi-
tionally, amounts due from banks for customer credit card, debit card
and EBT transactions that take in excess of seven days to process are
classi ed as accounts receivable.
Inventories
The Company values inventories at the lower of cost or market as
determined primarily by the retail method of accounting, using the
last-in,  rst-out (“LIFO”) method for substantially all of the Walmart
U.S. segment’s merchandise inventories. Sam’s Club merchandise and
merchandise in our distribution warehouses are valued based on the
weighted average cost using the LIFO method. Inventories of foreign
operations are primarily valued by the retail method of accounting,
using the  rst-in,  rst-out (“FIFO”) method. At January 31, 2009 and
2008, our inventories valued at LIFO approximate those inventories
as if they were valued at FIFO.
Financial Instruments
The Company uses derivative  nancial instruments for purposes
other than trading to manage its exposure to interest and foreign
exchange rates, as well as to maintain an appropriate mix of  xed
and  oating-rate debt. Contract terms of a hedge instrument closely
mirror those of the hedged item, providing a high degree of risk
reduction and correlation. Contracts that are e ective at meeting
the risk reduction and correlation criteria are recorded using hedge
accounting. If a derivative instrument is a hedge, depending on the
nature of the hedge, changes in the fair value of the instrument will
either be o set against the change in fair value of the hedged assets,
liabilities or  rm commitments through earnings or be recognized
in other comprehensive income until the hedged item is recognized
in earnings. The ine ective portion of an instrument’s change in fair
value will be immediately recognized in earnings. Instruments that
do not meet the criteria for hedge accounting, or contracts for which
the Company has not elected hedge accounting, are valued at fair
value with unrealized gains or losses reported in earnings during the
period of change.
Capitalized Interest
Interest costs capitalized on construction projects were $88 million,
$150 million and $182 million in  scal 2009, 2008 and 2007, respectively.
Long-Lived Assets
Long-lived assets are stated at cost. Management reviews long-lived
assets for indicators of impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recover-
able. The evaluation is performed at the lowest level of identi able
cash  ows, which is at the individual store level or in certain circum-
stances a market group of stores. Undiscounted cash  ows expected
to be generated by the related assets are estimated over the asset’s
useful life based on updated projections. If the evaluation indicates
that the carrying amount of the asset may not be recoverable, any
potential impairment is measured based upon the fair value of the
related asset or asset group as determined by an appropriate market
appraisal or other valuation technique.
Goodwill and Other Acquired Intangible Assets
Goodwill represents the excess of purchase price over fair value of net
assets acquired, and is allocated to the appropriate reporting unit when
acquired. Other acquired intangible assets are stated at the fair value
acquired as determined by a valuation technique commensurate with
the intended use of the related asset. Goodwill and inde nite-lived
other acquired intangible assets are not amortized; rather they are
evaluated for impairment annually or whenever events or changes
in circumstances indicate that the value of the asset may be impaired.