Integrative Case 9 1Walmart LO 9 4 Exhibits 1 26, 1 27 and 1 28 of Integrative Case 1 1 (Chapter 1) present the financial statements for Walmart for 20122015 In addition, the website for this text contains Walmarts December 31, 2015, Form 10 K You should read the management discussion and analysis (MD A), financial statements, and notes to the financial statements, especially Note 2, Summary of Significant Accounting Policies Required Revenue Recognition a Does Walmart recognize all of its revenue at a point in time If not, how is it recognized Required Cost of Sales and Inventory b What costing method does Walmart use to determine cost of sales and inventory c How does Walmart handle the requirement to report inventory at lower of cost or market d Does Walmart have a large LIFO reserve If not, why e Walmart receives discounts from suppliers because it purchases large volumes of merchandise Is this reported as other income or accounted for in another way Required Working Capital f Operations create working capital accounts Which of Walmarts working capital accounts are the most financially significant g Does Walmarts working capital management yield a positive or negative net investment in working capital Is this a good situation for Walmarts profitability Why Required Income Taxes h Note 9 to Walmarts consolidated financial statements presents a substantial amount of income taxrelated information, including an effective income tax rate reconciliation Which reconciling items appear to be relatively persistent i What is the effect of Walmarts generation of income in foreign jurisdictions on the effective tax rate Is the effect changing over time j Are Walmarts foreign earnings growing relative to U S earnings k What is the interpretation of the line item Net impact of repatriated international earnings Why is it a positive reconciling item in some years but negative in other years l What are the two largest deferred tax assets Explain how they have arisen and why they are assets m What is the valuation allowance It has decreased during the two year period What is the implication of this decrease for earnings n Why does Walmart report a deferred tax liability for property and equipment Speculate whether Walmart expanded or contracted based on the information in this section of the tax note Required Pensions o What kind of pension plans does Walmart have, and how are earnings affected by each Go to pg help

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Integrative Case 9.1Walmart LO 9-4 Exhibits 1.26, 1.27 and 1.28 of Integrative Case 1.1 (Chapter 1) present the financial statements for Walmart for 20122015. In

Integrative Case 9.1Walmart

LO 9-4

Exhibits 1.26, 1.27 and 1.28 of Integrative Case 1.1 (Chapter 1) present the financial statements for Walmart for 20122015. In addition, the website for this text contains Walmarts December 31, 2015, Form 10-K. You should read the management discussion and analysis (MD&A), financial statements, and notes to the financial statements, especially Note 2, Summary of Significant Accounting Policies.

Required: Revenue Recognition

a.
Does Walmart recognize all of its revenue at a point in time? If not, how is it recognized?

Required: Cost of Sales and Inventory

b.
What costing method does Walmart use to determine cost of sales and inventory?
c.
How does Walmart handle the requirement to report inventory at lower-of-cost-or-market?
d.
Does Walmart have a large LIFO reserve? If not, why?
e.
Walmart receives discounts from suppliers because it purchases large volumes of merchandise. Is this reported as other income or accounted for in another way?

Required: Working Capital

f.
Operations create working capital accounts. Which of Walmarts working capital accounts are the most financially significant?
g.
Does Walmarts working capital management yield a positive or negative net investment in working capital? Is this a good situation for Walmarts profitability? Why?

Required: Income Taxes

h.
Note 9 to Walmarts consolidated financial statements presents a substantial amount of income taxrelated information, including an effective income tax rate reconciliation. Which reconciling items appear to be relatively persistent?
i.
What is the effect of Walmarts generation of income in foreign jurisdictions on the effective tax rate? Is the effect changing over time?
j.
Are Walmarts foreign earnings growing relative to U.S. earnings?
k.
What is the interpretation of the line item Net impact of repatriated international earnings? Why is it a positive reconciling item in some years but negative in other years?
l.
What are the two largest deferred tax assets? Explain how they have arisen and why they are assets.
m.
What is the valuation allowance? It has decreased during the two-year period. What is the implication of this decrease for earnings?
n.
Why does Walmart report a deferred tax liability for property and equipment? Speculate whether Walmart expanded or contracted based on the information in this section of the tax note.