Walmart 2012 Annual Report Download - page 39
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Property and Equipment
Property and equipment are stated at cost. Gains or losses on disposition
are recognized as earned or incurred. Costs of major improvements are
capitalized, while costs of normal repairs and maintenance are charged
to expense as incurred. The following detail of property and equipment
includes estimated useful lives which are generally used to depreciate
the assets on a straight-line basis:
Estimated As of January 31,
(Amounts in millions) Useful Lives
2012 2011
Land N/A $ 23,499 $ 24,386
Buildings and improvements 3–40 years 84,275 79,051
Fixtures and equipment 3–25 years 39,234 38,290
Transportation equipment 3–15 years 2,682 2,595
Construction in progress N/A 5,312 4,262
Property and equipment $155,002 $148,584
Accumulated depreciation (45,399) (43,486)
Property and equipment, net $109,603 $105,098
Leasehold improvements are depreciated over the shorter of the
estimated useful life of the asset or the remaining expected lease term.
Depreciation expense, including amortization of property under capital
leases, for fi scal 2012, 2011 and 2010 was $8.1 billion, $7.6 billion and
$7.2 billion, respectively. Interest costs capitalized on construction
projects were $60 million, $63 million and $85 million in fi scal 2012, 2011
and 2010, 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 recoverable. The evaluation
is performed at the lowest level of identifi able cash fl ows, which is at the
individual store or club level or, in certain circumstances, a market group
of stores. Undiscounted cash fl ows expected to be generated by the
related assets are estimated over the assets’ useful lives based on updated
projections. If the evaluation indicates that the carrying amount of the
assets 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 the purchase price over the fair value
of net assets acquired in business combinations 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 indefi nite-lived intangible assets are not amortized; rather,
they are evaluated for impairment annually during the Company’s fourth
fi scal quarter or whenever events or changes in circumstances indicate
that the value of the asset may be impaired. Defi nite-lived intangible
assets are considered long-lived assets and are amortized on a
straight-line basis over the periods that expected economic benefi ts
will be provided.
Goodwill is evaluated for impairment by fi rst performing a qualitative
assessment to determine whether a quantitative goodwill impairment
test is necessary. If the Company determines, based on the qualitative
factors, that the fair value of the reporting unit is more likely than not less
than the carrying amount, the quantitative goodwill impairment test
would be required. This quantitative test for goodwill impairment is
performed by determining the fair value of the related reporting units.
Fair value is measured based on the discounted cash fl ow method and
relative market-based approaches. Based on the results of the qualitative
assessments performed, the Company determined that the fair value of
each reporting unit is more likely than not greater than the carrying amount
and, as a result, quantitative analyses were not required. The Company
has not recorded any impairment charges related to goodwill.
The following table refl ects goodwill activity, by reportable segment, for
fi scal 2012 and 2011:
Walmart
(Amounts in millions) Walmart U.S. International Sam’s Club Total
February 1, 2010 $207 $15,606 $313 $16,126
Currency translation
and other — 605 — 605
Acquisitions 32 — — 32
January 31, 2011 239 16,211 313 16,763
Currency translation
and other — (535) — (535)
Acquisitions 200 4,223 — 4,423
January 31, 2012 $439 $19,899 $313 $20,651
In April 2011 and June 2011, the Company completed acquisitions of
147 Netto stores from Dansk Supermarked in the United Kingdom and
a 51% ownership in Massmart, a South African retailer, respectively. In
these transactions, the Company acquired approximately $748 million
and $3.5 billion in goodwill, respectively. Refer to Note 14 for more
information on the Company’s acquisitions.
Indefi nite-lived intangible assets are included in other assets and deferred
charges in the Company’s 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 indefi nite-
lived intangible assets recorded during fi scal 2012, 2011 and 2010.
Self-Insurance Reserves
The Company uses a combination of insurance, self-insured retention
and self-insurance for a number of risks, including, but not limited to,
workers’ compensation, general liability, vehicle liability, property and
the Company’s obligation for employee-related health care benefi ts.
Liabilities relating to these claims associated with these risks are estimated
by considering historical claims experience, including frequency, severity,
demographic factors, and other actuarial assumptions, including incurred
but not reported claims. In estimating its liability for such claims, the
Company periodically analyzes its historical trends, including loss
development, and applies appropriate loss development factors to the
incurred costs associated with the claims. The Company also maintains
stop-loss insurance coverage for workers’ compensation and general
liability of $5 million and $15 million, respectively, per occurrence to limit
exposure to certain risks. See Note 6 for more information.
Notes to Consolidated Financial Statements