Walmart 2014 Annual Report Download - page 42

1 Summary of Significant Accounting Policies
General
Wal-Mart Stores, Inc. (“Walmart” or the “Company”) operates retail stores
in various formats under 71 banners around the world, aggregated into
three reportable segments: Walmart U.S., Walmart International and
Sam’s Club. Walmart is committed to saving people money so they can
live better. Walmart earns the trust of its customers every day by providing
a broad assortment of quality merchandise and services at everyday low
prices (“EDLP”), while fostering a culture that rewards and embraces mutual
respect, integrity and diversity. EDLP is the Company’s pricing philoso-
phy under which it prices items at a low price every day so its customers
trust that its prices will not change under frequent promotional activity.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Walmart
and its subsidiaries as of and for the scal years ended January 31, 2014
(“scal 2014”), January 31, 2013 (“scal 2013”) and January 31, 2012 (“scal
2012”). All material intercompany accounts and transactions have been
eliminated in consolidation. Investments in unconsolidated aliates,
which are 50% or less owned and do not otherwise meet consolidation
requirements, are accounted for primarily using the equity method.
These investments are immaterial to the Company’s Consolidated
Financial Statements.
The Company’s Consolidated Financial Statements are based on a scal
year ending on January 31 for the United States (“U.S.”) and Canadian
operations. The Company consolidates all other operations generally
using a one-month lag and based on a calendar year. There were no
signicant intervening events during January 2014 that materially
aected the Consolidated Financial Statements.
In scal 2014, the Company corrected certain amounts pertaining to
previous scal years as management determined they were not material,
individually or in the aggregate, to any of the periods presented in the
Company’s Consolidated Financial Statements.
Use of Estimates
The Consolidated Financial Statements have been prepared in conformity
with U.S. generally accepted accounting principles. Those principles
require management to make estimates and assumptions that aect the
reported amounts of assets and liabilities. Management’s estimates and
assumptions also aect the disclosure of contingent assets and liabilities
at the date of the nancial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results may
dier from those estimates.
Cash and Cash Equivalents
The Company considers investments with a maturity when purchased
of three months or less to be cash equivalents. All credit card, debit card
and electronic benets transfer transactions that process in less than
seven days are classied as cash and cash equivalents. The amounts due
from banks for these transactions classied as cash and cash equivalents
totaled $1.6 billion and $1.3 billion at January 31, 2014 and 2013, respec-
tively. In addition, cash and cash equivalents included restricted cash of
$654 million and $715 million at January 31, 2014 and 2013, respectively,
which was primarily related to cash collateral holdings from various
counterparties, as required by certain derivative and trust agreements.
The Company’s cash balances are held in various locations around
the world. Of the Company’s $7.3 billion and $7.8 billion of cash and
cash equivalents at January 31, 2014 and 2013, respectively, $5.8 billion and
$5.2 billion, respectively, were held outside of the U.S. and were generally
utilized to support liquidity needs in the Company’s non-U.S. operations.
The Company employs nancing strategies (e.g., global funding structures)
in an eort to ensure that cash can be made available in the country in
which it is needed with the minimum cost possible. Management does
not believe it will be necessary to repatriate cash and cash equivalents
held outside of the U.S. and anticipates its domestic liquidity needs will
be met through other funding sources (ongoing cash ows generated
from operations, external borrowings or both). Accordingly, management
intends, with only certain exceptions, to continue to indenitely reinvest
the Company’s cash and cash equivalents held outside of the U.S. in its
foreign operations. When the income earned (either from operations or
through global funding structures) and indenitely reinvested outside of
the U.S. is taxed at local country tax rates, which are generally lower than
the U.S. statutory rate, the Company realizes an eective tax rate benet.
If the Company’s intentions with respect to reinvestment were to change,
most of the amounts held within the Company’s foreign operations could
be repatriated to the U.S., although any repatriation under current U.S. tax
laws would be subject to U.S. federal income taxes, less applicable foreign
tax credits. As of January 31, 2014 and 2013, cash and cash equivalents of
approximately $1.9 billion may not be freely transferable to the U.S. due
to local laws or other restrictions. Management does not expect local laws,
other limitations or potential taxes on anticipated future repatriations of
cash amounts held outside of the U.S. to have a material eect on the
Company’s overall liquidity, nancial condition or results of operations.
Receivables
Receivables are stated at their carrying values, net of a reserve for
doubtful accounts. Receivables consist primarily of amounts due from:
• insurance companies resulting from pharmacy sales;
• banks for customer credit and debit cards and electronic bank transfers
that take in excess of seven days to process;
• consumer nancing programs in certain international operations;
• suppliers for marketing or incentive programs; and
• real estate transactions.
The Walmart International segment oers a limited number of consumer
credit products, primarily through its nancial institutions in select
countries. The receivable balance from consumer credit products was
$1.3 billion, net of a reserve for doubtful accounts of $119 million at
January 31, 2014, compared to a receivable balance of $1.2 billion, net
of a reserve for doubtful accounts of $115 million at January 31, 2013.
These balances are included in receivables, net, in the Company’s
Consolidated Balance Sheets.
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 inventories. The Walmart International segment’s inventories
are primarily valued by the retail method of accounting, using the rst-in,
rst-out (“FIFO”) method. The retail method of accounting results in
inventory being valued at the lower of cost or market since permanent
markdowns are immediately recorded as a reduction of the retail value
of inventory. The Sam’s Club segment’s inventories are valued based on
the weighted-average cost using the LIFO method. At January 31, 2014
40 Walmart 2014 Annual Report
Notes to Consolidated Financial Statements