Integrative Case $9\mathrm{.}1.$ Walmart

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 Walmart$$s working capital accounts are the most financially significant?

g$.$ Does Walmart$$s working capital management yield a positive or negative net investment in working capital? Is this a good situation for Walmart$$s profitability? Why?

Required: Income Taxes

h$.$ Note $9$ to Walmart$$s consolidated financial statements presents a substantial amount of income tax$-$related information, including an effective income tax rate reconciliation. Which reconciling items appear to be relatively persistent?

i$.$ What is the effect of Walmart$$s generation of income in foreign jurisdictions on the effective tax rate? Is the effect changing over time?

j$.$ What are the two largest deferred tax assets? Explain how they have arisen and why they are assets.

k$.$ What is the $$valuation allowance$?$ It has increased during the two$-$year period. What is the implication of this increase for earnings?

l$.$ 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

m$.$ What kind of pension plans does Walmart have, and how are earnings affected by each?