The following note related to accounting for inventory was taken from the 2016 annual report of Wal-
Question:
The following note related to accounting for inventory was taken from the 2016 annual report of Wal- Mart Stores, Inc.: Inventories The Company values inventories at the lower of cost or market as determined primarily by the retail inventory method of accounting, using the last-in, first-out (“LIFO”) method for substantially all of the Walmart U.S. segment’s inventories. The inventory at the Walmart International segment is valued primarily by the retail inventory method of accounting, using the first-in, first-out (“FIFO”) method. The retail inventory 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 inventory at the Sam’s Club segment is valued based on the weighted-average cost using the LIFO method. At January 31, 2016 and January 31, 2015, the Company’s inventories valued at LIFO approximated those inventories as if they were valued at FIFO.
Required Write a brief report explaining the reason or reasons that best explain why Walmart uses the LIFO cost flow method for its operations in the United States, but the FIFO method for its non-U.S. operations.
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