StudentShare solutions
Triangle menu


Not dowloaded yet

Extract of sample

Wal-Mart values its inventories at the lower of cost or market value, which essentially means if the market value of inventory falls, the company will write-down the inventory value in its balance sheet. Wal-Mart is divided into three segments: Wal-Mart U.S, Wal-Mart International and Sam’s Club. All of the merchandise related to the U.S segment is valued using the Last in First out (LIFO) method. LIFO is an inventory valuation method allowed under US GAAP but not under IFRS (CFA institute, 2012). LIFO assumes that inventory items purchased most recently are sold first and hence the items remaining in the inventory are assumed to be the oldest items purchased. In period of rising prices, LIFO reports a higher cost of sales and lower ending inventory figure than other inventory valuation methods. Higher cost of sales lead to lower gross profit and hence results in tax savings. The company reports a LIFO reserve in its annual statements for reconciliation of LIFO cost of sales and inventory with FIFO cost of sales and inventory. This is to ensure that comparisons can be made with other companies in the retail industry that use FIFO as their inventory valuation method. Wal-Mart’s inventory turnover rate has been on the lower side considering the diverse range of product it sells. Inventory turnover rate fell from 8.6 times in 2011 to 8.2 times in 2012 which means that it took almost 44 days for Wal-Mart to convert its inventory into sales in 2012 and 42 days in 2011. Wal-Mart uses accrual accounting to prepare its annual statements. Accrual accounting is different from cash accounting in the sense that in accrual accounting revenues are recorded when they are earned and expenses are recorded when they are incurred whereas in cash accounting revenues are recorded when the money is received and expenses are recorded when cash is paid out (Investopedia, 2009). Wal-Mart has accrued liabilities of $18.154B indicating that these liabilities are due and Wal-Mart has not yet paid them. Moreover, prepaid expenses amounted to $1.685B in 2012 indicating that these expenses have already been paid in advance (Wal-Mart, 2012). In cash accounting, prepaid expenses and accrued liabilities are not recorded since these are obligations that are due but no cash outflow has been made in lieu of these obligations. Accrual accounting can be manipulated to show higher earnings by using estimates that inflate the income. For instance, unjustly inflating the ending inventory figure can result in a lower cost of sales and consequently inflate the net income of a company. In Wal-Mart’s case, figures are presented conservatively so that the income is not inflated unreasonably. The receivables of Wal-Mart increased by 16.7% from 5.089B in 2011 to $ 5.937B in 2012 (Wal-Mart, 2012). Wal-Mart records a provision for doubtful debts, which is a contra-asset account and is recorded to account for the prudence concept. According to the prudence concept, improbable expenses are recorded whereas improbable revenues are not accounted for. Provision for doubtful debts is created to account for debts that will remain unpaid. The reserve for doubtful accounts is based on historical trends in collection of the past due amounts that debtors owe to a company and on the write-off history of the company. The total provision for doubtful accounts increased by 28% from $252M in 2011 to $323M in 2012 ...Show more


Wal-Mart Stores Inc. (WMT) Wal-Mart is a huge name in the retail industry. It is highly popular among a class of the society that thinks a lot before purchasing. Wal-Mart is engaged in the operation of retail stores in over 50 states of United States. It has six merchandise units including grocery, entertainment, stationery and books, health, apparel and home…
Author : kristian70
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
with a personal 20% discount.
Grab the best paper

Related Essays

Annual Report
It normally deals with cancers and tumors. Our oncology department has developed the most innovative and effective radiation therapies globally. These therapies include proton beam therapy and IORT. Our ontology department efforts on laboratory research are focused on both epithelial and hematologic malignancies.
5 pages (1250 words) Essay
International Financial Accounting Bosch 2006 annual report
Bosch began as a Workshop for Precision Mechanics and Electrical Engineering. It was founded in 1886 by Robert Bosch (1861-1942). Its major shareholder is the not-for profit organisation "Robert Bosch Stiftung GmbH". (Company's Annual Report, 2005). Bosch offers the following spare parts products: Batteries, wiper blades, starters and airfilters.
12 pages (3000 words) Essay
Financial project report
The students, those who are pursuing higher education in colleges and universities outside their home town in particular have to bear the costs of college fees, accommodation, living expenses and other courseware related costs. Due to less employment opportunities and lack of means for income generation students are on a very tight budget which is borne either by their parents or by banks as loans.
34 pages (8500 words) Essay
Annual Financial Report Analysis for British Airways PLC
s of the company to better evaluate the company’s financial performance and position and to compare and contrast these results for the year 2005 with those of the previous year to identify any improvements, hindrances, cut backs or decline in the company’s performance over
14 pages (3500 words) Essay
Annual Report- Starbucks
We responded with innovative approaches, which have yielded the desired results. We shall continue to pursue growth and profitability through fresh and innovative measures in the
2 pages (500 words) Essay
Annual report
Furthermore, the company endeavors to give products services that are environmental friendly. Moreover, the corporation is essential in developing technology required to enhance advancement and progress in many areas. Therefore, these
2 pages (500 words) Essay
Annual Report Project
This part informs the user of the annual report on the qualifications and reliability of the accountants who compiled the data. This gives a sense of accurate data since they are considered to be of high standard. An auditor expresses his opinion on whether the
3 pages (750 words) Essay
Wynn Resorts Annual Report
It is also the mission of the company to provide quality and unique services to its customer in all branches. The company has recorded an improvement in its financial performance for the two financial years. For example, the was an improvement
6 pages (1500 words) Essay
Budget vs Comprehensive Annual Financial Report (CAFR)
The CAFR is a significant document that comprises of different financial reports that a budget lacks and the budget is even a portion of the several financial reports that
1 pages (250 words) Essay
Financial management analysis
The capital structure decision affects the earnings available to the shareholders and also affects the value of the firm. There are two primary source of raising capital, which are discussed henceforth along with weighted average cost of capital. Debt capital is
11 pages (2750 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation