Walmart 2010 Annual Report Download - page 37

Indefinite-lived other acquired intangible assets are included in other
assets and deferred charges on the accompanying Consolidated Balance
Sheets. These assets are evaluated for impairment based on their fair values
using valuation techniques which are updated annually based on the most
recent variables and assumptions. There were no impairment charges
related to indefinite-lived intangible assets recorded during the fiscal
years ended January 31, 2010, 2009 and 2008.
Goodwill is evaluated for impairment by determining the fair value of
the related reporting unit. Fair value is measured based on discounted
cash flow method and relative market-based approaches. The analyses
require significant management judgment to evaluate the capacity of
an acquired business to perform within projections. The company has
never recorded impairment charges related to goodwill.
The following table reflects goodwill activity for fiscal years 2010 and 2009:
(Amounts in millions) International Sam’s Club Total
February 1, 2008 $ 15,574 $ 305 $ 15,879
Currency translation (2,020) — (2,020)
Acquisitions 1,500 — 1,500
Other (99) — (99)
January 31, 2009 $14,955 $305 $15,260
Currency translation 970 — 970
Other (104) — (104)
January 31, 2010 $15,821 $305 $16,126
During fiscal 2010, the International segment’s goodwill balance increased
$970 million related to currency exchange fluctuations. Other goodwill
activity of $104 million includes adjustments made in finalizing the
allocation of the purchase price for Distribución y Servicio (“D&S”).
During fiscal 2009, the International segment’s goodwill balance
decreased $619 million, primarily from the strengthening of the U.S.
dollar against most major currencies, partially offset by goodwill recorded
in connection with the acquisition of a majority interest in D&S and
the purchase of the remaining minority shares of The Seiyu Ltd. These
acquisitions and disposal are discussed in further detail in Note 9.
Leases
The company estimates the expected term of a lease by assuming the
exercise of renewal options where an economic penalty exists that would
preclude the abandonment of the lease at the end of the initial non-
cancelable term and the exercise of such renewal is at the sole discretion
of the company. This expected term is used in the determination of
whether a store lease is a capital or operating lease and in the calculation
of straight-line rent expense. Additionally, the useful life of leasehold
improvements is limited by the expected lease term or the economic life
of the asset, whichever is shorter. If significant expenditures are made for
leasehold improvements late in the expected term of a lease and renewal
is reasonably assumed, the useful life of the leasehold improvement is
limited to the end of the renewal period or economic life of the asset,
whichever is shorter.
Rent abatements and escalations are considered in the calculation of
minimum lease payments in the company’s capital lease tests and in
determining straight-line rent expense for operating leases.
Currency Translation
The assets and liabilities of all international subsidiaries are translated
from the respective local currency to the U.S. dollar using exchange
rates at the balance sheet date. The income statements of international
subsidiaries are translated from the respective local currency to the U.S.
dollar using average exchange rates for the period. Related translation
adjustments are recorded as a component of accumulated other com-
prehensive income (loss).
Revenue Recognition
The company recognizes sales revenue net of sales taxes and estimated
sales returns at the time it sells merchandise to the customer. Customer
purchases of shopping cards are not recognized as revenue until the
card is redeemed and the customer purchases merchandise by using
the shopping card. The company also recognizes revenue from service
transactions at the time the service is performed. Generally, revenue
from services is classified as a component of net sales on our consolidated
statements of income.
Sam’s Club Membership Fee Revenue Recognition
The company recognizes Sam’s Club membership fee revenue both in
the United States and internationally over the term of the membership,
which is 12 months. The following table details deferred revenue,
membership fees received from members and the amount of revenue
recognized in earnings for each of the fiscal years 2010, 2009 and 2008.
Deferred
Membership
(Amounts in millions) Fee Revenue
Balance at February 1, 2007 $ 535
Membership fees received 1,054
Membership fee revenue recognized (1,038)
Balance at January 31, 2008 $ 551
Membership fees received 1,044
Membership fee revenue recognized (1,054)
Balance at January 31, 2009 $ 541
Membership fees received 1,048
Membership fee revenue recognized (1,057)
Balance at January 31, 2010 $ 532
Sam’s Club membership fee revenue is included in membership and
other income in the revenues section of the accompanying Consolidated
Statements of Income. The deferred membership fee is included in
accrued liabilities on the accompanying Consolidated Balance Sheets.
Cost of Sales
Cost of sales includes actual product cost, the cost of transportation to
the company’s warehouses, stores and clubs from suppliers, the cost of
transportation from the company’s warehouses to the stores and clubs
and the cost of warehousing for our Sam’s Club segment.
Notes to Consolidated Financial Statements
Walmart 2010 Annual Report 35