Wmt Financial Ratios: Wmt (All Term Paper

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Other applications of IASB are equally irrelevant to Wal-mart's particular operational model: The company does not hold a significant portfolio of hard-to-value financial instruments, engage in significant research & development, or conduct multiple distinct business lines that must be accounted for under different segments in an IASB framework. However, the company will have to switch from last-in first-out (LIFO) inventory valuation to a first-in first-out (FIFO) system, which could conceivably create an appreciable tax liability in the near-term.

8. If Wal-mart uses the cash basis of accounting, how would that differ from the accrual basis?

First, Wal-mart is currently not allowed to conduct its business on a cash accounting basis because it is too large to do so under prevailing IRS rules (Pub. 538) and because it necessarily keeps a significant inventory within its stores and warehouses.

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And even after it adopts IASD standards, it will operate on an accrual basis.

However, if it were to use cash accounting, its receivables are unlikely to be greatly distorted. As a retailer, Wal-mart deals primarily in electronic transactions that clear within three days; thus, the lag between when revenue is accrued and when the cash arrives is much shorter than it would be if the company operated on a longer-term billing basis. In terms of accounts payable, shifting to cash would give the company a longer window of time between when it replenishes its inventory and when it actually pays its suppliers.

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