American Intercontinental University
Unit 5 Individual Project
ACCT205 –1405B-03 Principles of Accounting I
Wal-Mart’s Internal Growth Breakdown
Wal-Mart has been front runner on the Fortune 500 list for the past several years, continuing to increase and expand its corporation in extreme growth. Based on Wal-Mart’s financial reports of 2014, it currently has 109,100 global points of distribution with approximately 2.2M associates globally, which is by far the biggest distribution and manpower it’s operated in the past years. Wal-mart also increased its sales revenue by 68 billion over the last five years alone with a 2 million dollar approximated square footage in retail expansion. Wal-Marts growth is not just physically based; due to its beneficial payout to its investors as well as its shareholders its stocks steadily increase. Last year Wal-Mart returned 68 billion to shareholders through dividends and share repurchase, along with a 12% return to total shareholders. Wal-mart also averaged 33% per share of growth last year. With astronomical increase of these proportions it’s no wonder wal-mart continues to remain number one.
Wal-mart uses several methods to account for its assets, liabilities, and shareholder equity. Wal-mart uses the LIFO method for its impairment assets and liabilities to determine asset longevity and possible increases. The LIFO method is also used to evaluate Wal-Marts long-lived assets as well as its goodwill with indefinite lives for indicators of impairment. This method is only exercised whenever changes in circumstances indicate assets amounts may not be recoverable. Management’s judgments regarding the existence of impairment Indicators of non-recoverable assets are based on market conditions and operational performance, such as operating income and cash flows. A quote from wal-marts management and financial analysis stated that their LIFO provision is calculated based on inventory levels, markup rates and internally generated retail price indices. As of January 31, 2014 and 2013, Wal-Marts inventories valued at LIFO approximated those inventories as if they were valued at FIFO. Most of Wal-Marts international stores assets, liabilities, and share holder equity are based on FIFO calculations which are centered on store retail sales.
A negative downside to Wal-Mart Corporation is its internal control issues. Wal-Mart had reportedly had issues with its internal control as far back as 2011; however its biggest and still current issue was with its retail stores in Mexico. It was reported in late 2012 that bribery and cautionary scandals where being conducted at a very high catastrophic rate. During that incident Wal-Mart strengthened its internal controls by implementing the creation of a new corruption watchdog positioning to deal with that threat. It was also reported that key management personnel did not operate within in the Sarbanes Oxley act regulations during this issue. The Sarbanes Oxley act was create in 2002 to prevent major companies from hiding internal breaches from the public to prevent scrutiny and SOX investigations. These act was created after the internal control failures of major corporations with accounting scandals at Enron, WorldCom, Tyco, Adelphia, and other public companies. Wal-Mart’s auditors did not report the issue immediately to respective personnel and allegedly tried to cover the issue altogether. Wal-Mart has since then established the position of global FCPA (Foreign Corrupt Practices Act) compliance officer, overseeing five FCPA compliance directors based in different international markets, including Mexico. Wal-Mart continues to initiated a global review of its anticorruption programs with new developments and implementation of new practices for FCPA training, anticorruption safeguards and internal controls. Based on the Wal-Mart’s 2014 audit committee these new improvements are affect in controlling internal issues, as well…