1. Summarize the accounting treatment for Walmart’s VIE’s, if any. 2. Summarize
ID: 2571278 • Letter: 1
Question
1. Summarize the accounting treatment for Walmart’s VIE’s, if any.
2. Summarize the Walmart’s hedging strategies, if any. There could be several strategies.
3. Find an interim financial statement and disclosures and summarize the similarities and differences you find when comparing the interim financial statements to the annual consolidated year-end financial statements. For instance, was there evidence of earnings management each quarter or other manipulations during the year?
http://d18rn0p25nwr6d.cloudfront.net/CIK-0000104169/a3e8c2af-54d6-4b4b-ade2-f5392efccf20.pdf
Pages 11-15
Explanation / Answer
Our operations consist of three reportable segments: Walmart U.S., Walmart International and Sam's Club. • Walmart U.S. is our largest segment with three primary store formats, as well as digital retail, including recent acquisitions of several e-commerce entities such as Jet.com, Inc. Of our three reportable segments, Walmart U.S. has historically had the highest gross profit as a percentage of net sales ("gross profit rate"). In addition, it has historically contributed the greatest amount to the Company's net sales and operating income. • Walmart International consists of our operations outside of the U.S. and includes retail, wholesale and other businesses. These businesses consist of numerous formats, including supercenters, supermarkets, hypermarkets, warehouse clubs, including Sam's Clubs, cash & carry, home improvement, specialty electronics, drug stores and convenience stores, as well as digital retail. The overall gross profit rate for Walmart International is lower than that of Walmart U.S. primarily because of its merchandise mix. Walmart International is our second largest segment and has grown through acquisitions, as well as by adding retail, wholesale and other units, and expanding digital retail. • Sam's Club consists of membership-only warehouse clubs as well as digital retail. As a membership-only warehouse club, membership income is a significant component of the segment's operating income. Sam's Club operates with a lower gross profit rate and lower operating expenses as a percentage of net sales than our other segments. Each of our segments contributes to the Company's operating results differently. Each, however, has generally maintained a consistent contribution rate to the Company's net sales and operating income in recent years other than minor changes to the contribution rate for the Walmart International segment due to fluctuations in currency exchange rates.
al-Mart Stores, Inc. ("Walmart," the "Company" or "we") is engaged in retail and wholesale operations in various formats around the world. Through our
operations, we help people around the world save money and live better – anytime and anywhere – in retail stores or through our e-commerce and mobile
capabilities. Through innovation, we are striving to create a customer-centric experience that seamlessly integrates digital and physical shopping and saves time for
our customers. Physical retail encompasses our brick and mortar presence in each of the markets in which we operate.
Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, we discuss segment operating income, comparable store
and club sales and other measures. Management measures the results of the Company's segments using each segment's operating income, including certain
corporate overhead allocations, as well as other measures. From time to time, we revise the measurement of each segment's operating income, including certain
corporate overhead allocations, and other measures as determined by the information regularly reviewed by our chief operating decision maker. When we do so,
the previous period amounts and balances are reclassified to conform to the current period's presentation.
ompany Performance Metrics
We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs. At times, we adjust our
business strategies to maintain and strengthen our competitive positions in the countries in which we operate. We recently redefined our financial framework as: • strong, efficient growth; • operating discipline; and
• strategic capital allocation.
As we execute on this financial framework, particularly in the U.S., we believe our returns on capital will improve over time.
Strong, Efficient Growth
Our objective of prioritizing strong, efficient growth means we will focus on increasing comparable store and club sales and accelerating e-commerce sales growth
while slowing the rate of growth of new stores and clubs. At times, we make strategic investments which are focused on the long-term growth of the Company,
which may not benefit comparable sales in the near term.
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