Walmart 2014 Annual Report Download - page 45

Walmart 2014 Annual Report 43
Payments from Suppliers
The Company receives consideration from suppliers for various programs,
primarily volume incentives, warehouse allowances and reimbursements
for specic programs such as markdowns, margin protection, advertising
and supplier-specic xtures. Payments from suppliers are accounted for
as a reduction of cost of sales and are recognized in the Company’s
Consolidated Statements of Income when the related inventory is sold,
except when the payment is a reimbursement of specic, incremental
and identiable costs.
Operating, Selling, General and Administrative Expenses
Operating, selling, general and administrative expenses include all
operating costs of the Company, except cost of sales, as described above.
As a result, the majority of the cost of warehousing and occupancy for
the Walmart U.S. and Walmart International segments’ distribution facili-
ties is included in operating, selling, general and administrative expenses.
Because the Company does not include most of the cost of its Walmart
U.S. and Walmart International segments’ distribution facilities in cost of
sales, its gross prot and gross prot as a percentage of net sales (“gross
prot margin”) may not be comparable to those of other retailers that
may include all costs related to their distribution facilities in cost of sales
and in the calculation of gross prot.
Advertising Costs
Advertising costs are expensed as incurred and were $2.4 billion for
scal 2014 and $2.3 billion for both scal 2013 and 2012. Advertising costs
consist primarily of print, television and digital advertisements and are
recorded in operating, selling, general and administrative expenses in
the Company’s Consolidated Statements of Income. Reimbursements
from suppliers that are for specic, incremental and identiable adver-
tising costs are recognized as a reduction of advertising expenses in
operating, selling, general and administrative expenses.
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. The expected term is used in the determination of
whether a store or club 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 signicant expenditures
are made for leasehold improvements late in the expected term of a
lease and renewal is reasonably assured, 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.
Pre-Opening Costs
The cost of start-up activities, including organization costs, related to
new store openings, store remodels, relocations, expansions and con-
versions are expensed as incurred and included in operating, selling,
general and administrative expenses in the Company’s Consolidated
Statements of Income. Pre-opening costs totaled $338 million, $316 million
and $308 million for scal 2014, 2013 and 2012, respectively.
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. Related translation adjustments are recorded
as a component of accumulated other comprehensive income (loss). The
income statements of international subsidiaries are translated from the
respective local currencies to the U.S. dollar using average exchange
rates for the period covered by the income statements.
Reclassications
Certain reclassications have been made to previous scal year amounts
and balances to conform to the presentation in the current scal year.
These reclassications did not impact consolidated operating income or
net income. Additionally, certain segment asset and expense allocations
have been reclassied among segments in the current period. See
Note 14 for further discussion of the Company’s segments.
2 Net Income Per Common Share
Basic income per common share from continuing operations
attributable to Walmart is based on the weighted-average common
shares outstanding during the relevant period. Diluted income per
common share from continuing operations attributable to Walmart is
based on the weighted-average common shares outstanding during
the relevant period adjusted for the dilutive eect of outstanding stock
options and other share-based awards. The Company did not have
signicant stock options or other share-based awards outstanding that
were antidilutive and not included in the calculation of diluted income
per common share from continuing operations attributable to Walmart
for scal 2014, 2013 and 2012.
The following table provides a reconciliation of the numerators and
denominators used to determine basic and diluted income per common
share from continuing operations attributable to Walmart:
Fiscal Years Ended January 31,
(Amounts in millions, except per share data) 2014 2013 2012
Numerator
Income from continuing operations $16,551 $17,704 $16,408
Less income from continuing
operations attributable to
noncontrolling interest (633) (741) (674)
Income from continuing operations
attributable to Walmart $15,918 $16,963 $15,734
Denominator
Weighted-average common shares
outstanding, basic 3,269 3,374 3,460
Dilutive impact of stock options
and other share-based awards 14 15 14
Weighted-average common shares
outstanding, diluted 3,283 3,389 3,474
Income per common share
from continuing operations
attributable to Walmart
Basic $ 4.87 $ 5.03 $ 4.55
Diluted 4.85 5.01 4.53
Notes to Consolidated Financial Statements