Wal-Mart Annual Financial Reporting - Assignment Example

WALMART Contents Contents 2 Introduction 3 Question a 3 Legal influence on the financial reporting of Wal-Mart 3 Influence of Taxation on the financial reporting of Wal-Mart 4 Influence of corporate finance on the financial reporting of Wal-Mart 5 Influence of the accounting profession on the financial reporting of Wal-Mart 6 Influence of culture on the financial reporting of Wal-Mart 6 Question b. 6 Question C. 7 Conclusion 10 References 11 Introduction Wal-Mart is a well known multinational retail corporation of America. It is considered as the company earning large amount of revenue. Wal-Mart is the largest business that is family owned and is operated by Walton family. The founder of Wal-Mart is Sam Walton. The vision and mission of Wal-Mart is creating value by providing various goods at low cost so that it is affordable for the customers. The company is listed in the New York stock exchange. Wal-Mart maintains strong corporate governance and the financial performance of Wal-Mart are mainly guided by the priorities which include the leverage, return and its growth. Wal-mart mainly focuses on providing various opportunities to serve its customers in effective and better way. Wal-Mart earns revenue of around US$ 485.651 billion. Wal-Mart is engaged in serving more than 140 million customers each week. Wal-Mart is very famous and renowned because of its wide assortment and it mainly focuses on providing the merchandise at low cost. Wal-Mart is engaged in improving and advancing its logistics and store operations, improving the productivity and reducing the cost. Wal-Mart mainly deals with the footwear and apparel which includes specialty in cash and carry, discount store, super centre, super market, hyper market, e-commerce, super store. Question a Legal influence on the financial reporting of Wal-Mart Wal-Mart is engaged and involved in the legal proceedings and Wal-Mart has also arranged accruals in accordance with the matter or the issues which is mainly reflected in the consolidated financial statement (Abbas, 2012). The liabilities involved in the operation are disclosed in the financial statement and Wal-Mart is engaged in settling the agreements and the settlement is done on the basis of the best interest of the shareholders of the company. Wal-Mart is of the opinion that it has various substantial factual as well as legal defences against the issue of claims. The purchase obligation of the Wal-Mart generally includes the legal binding and the contracts of the firm in the form of commitment for the purchase of inventory and the capital expenditure involved in the acquisition of software and licensing of commitments towards legally binding the service contracts (Ball, 2006). The contractual obligations involved in the purchase of the goods and services. The legal proceedings are mainly subjected to the interest rate fluctuations and also the economic and political conditions of the economy. Influence of Taxation on the financial reporting of Wal-Mart Wal-Mart has adopted a strategy for its taxation structure. Wal-Mart has reduced its cost by charging fair share of the US taxation and United States has adopted a strategy of adopting territorial tax system or structure. Wal-Mart is also trying hard and attempting to reduce and eliminate the profit that is earned through us taxation. Wal-Mart is attempting to reduce its corporate tax by 25%. America requires a significant increase in investment in the public infrastructure, research for adopting new medical treatment but if Wal-Mart succeeds in its attempt to reduce or cut the cost then the families or the people in America will be able to pay off their tax in various and different ways or process. Wal-Mart is avoiding the payment of US tax of around $ 21.4 billion in case of its offshore profit (Banerjee, 2010). The international capital spending of Wal-Mart have remained stable over a definite period of time and the untaxed offshore profit and Wal-Mart has started pulling up its cash in order to avoid the payment of US taxes on the earning instead of utilizing the profit for the offshore investments. Wal-Mart is trying to affect its tax legislations in three ways campaign, lobbying and contributions and it is mainly engaged in employing 74 lobbyists out of which 80% is mainly served by the government (Brown, 2003). Just like the other corporation US is mainly engaged in earning profit. Under the US tax structure Wal-Mart is paying tax to the foreign country on its earnings at a levied country tax rate. Just like the other multinational corporations US explains and clarifies its demand or need of the territorial tax system (Christian, 2010).Wal-Mart which is considered as the world’s second largest company mainly dominates the market in US through the payment of the lowest effective tax rate as compared to the top rivals. Wal-Mart have records that is linked with the interest and the penalties for receiving the unrecognized tax benefits in case of operating, selling, interest expense, administrative expenses (Gary, and Curtis, 2014). Influence of corporate finance on the financial reporting of Wal-Mart Wal-Mart measures and evaluates the performance of each of its segments related to the operating income that includes the overhead allocation of corporate finance. Wal-Mart is engaged in time to time measurement and evaluation of each of its segment and parts in case of operating income that mainly includes the corporate allocation of overhead for regularly reviewing the information by the chief operating decision maker . Wal-Mart is planning to refinance its long term debt when it matures and Wal-Mart has the capacity and the ability for refinancing its long term debt when it matures from the long term debt market and in case of the commercial paper. Wal-Mart has planned to expand its Global cash flow activities. The long term debt of corporate finance is mainly used for refinancing the existing debt and it is also used for other corporate purposes (Gron, and Winton, 2001). Influence of the accounting profession on the financial reporting of Wal-Mart The accounting profession mainly adopts the standard principle of Fundamental Accepted Security Board for influencing and practice of accounting in US and the standard is also followed by Wal-Mart for protecting and safeguarding the prestige and the reputation for setting the good and the appropriate standard. The FASB is building a relationship for the continuous improvement of the accounting practices and principles for providing full and fair information to the various external users of the financial report or the financial statement. The accounting profession mainly considers the Return on asset for evaluating the financial position or condition of the business (Helfert, 2001). Influence of culture on the financial reporting of Wal-Mart The culture of Wal-Mart is considered as the prime or the important factor for the operation or the conduct of business. Wal-Mart enjoys and experiences a rich cultural history and background. Wal-Mart has fostered and improved its culture by focusing and emphasizing on the rewards and embracing the mutual trust. The culture of Wal-Mart makes it special and unique as compared to other retail store. The culture of Wal-Mart is developed in such a way that it mainly strives towards the excellence and it discloses the financial position of the company which reflects the integrity and rich culture of Wal-Mart (Hopper, 2012). Question b. The bribery scandal of Wal-Mart is very unique in case that Wal-Mart has come to towards the clean enforcement of the shareholders and the agencies when it was forced and compelled by the media. The scandal that was faced and encountered by Wal-Mart is very ordinary. Wal-Mart has illustrated and explained the dilemma of the scandal that is faced by it routinely over a definite period of time (Jaara, 2014). The Sarbanes Oxley Act of 2002 which was established for strengthening the internal compliance requirement for establishment of the corporate audit committee as it is responsible and accountable for accounting policing and financial reporting of the fraud and error. According to the Sarbanes Oxley act of 2002 has emphasized that the audit committee is required to be authorized for receiving and perceiving the complaints and retaining outside as a independent counsel in case of the event of investigation . Voluntarily disclosing the fraud is very critical and complex task (Jack, Davison and Craig, 2013). Wal-Mart prefers to remain silent in case of the voluntary disclosures of the information and the facts and figures that mainly facilitates the company to skirt the enforcement of its related proceedings and the consequences that is related or associated with the reputation and the stock price of the company. Wal-Mart is required to disclose the material information that is important and valuable for the investors. The disclosures protect and safeguard the investors by promoting and developing the transparency in the market. The main objective and the purpose of the voluntary disclosure is it promotes and informs the process of investment decision making. Without the disclosure of this information it would have been difficult for the investors for investing in the securities. The main interest of the investors of Wal-Mart is economic in nature and the disclosures facilitate the shareholders to invest with ethical interest in the mind and derive return from its investments (Khan, 2010). Question C. Wal-Mart has made an expenditure of around $ 7.3 million on thecae of lobbying activities in which it was involved in the year 2013. The amount was paid in order to affect and influence the legislation from lobbying for the promotion of reduction or cutting of the tax rate. The trade policy in which Wal-Mart was involved is considered as one of the issues of lobbying. Wal-Mart mainly utilizes the corporate funds for the contribution that is made to the candidates and the measurement of the ballot committees (Magnan and Cormier, 2005). Figure 1: Wal-Mart Lobbying expenditure Wal-Mart was alleged in the underestimation of the cost. It was accused for spending more than 12% in the second quarter as compared to the first quarter in the fiscal year 2014.Walmart has failed to meet its deadlines in many of the countries (Penman, 2007). Figure 2: Wal-Mart underestimating the FCPA Disclosure of the corporate fraud and misconduct is very essential and important in the sense that it can punish and penalized its shareholders where the investigations do not result in the liability of the company. Disclosures of the corporate wrong doing have resulted in the fall of the share prices. The management of Wal-Mart is engaged in providing timely information and disclosure of the procedures. The management has been responsible for establish adequate internal control and financial reporting for increasing the reliability of the financial reporting. The process of financial reporting is mainly designed in such a way for increasing the reliability of the financial reporting. The management is engaged in the disclosure for increasing the effectiveness and the efficiency of the internal control of the financial reporting of the company. Wal-Mart mainly discloses the information for facilitating the shareholders to increase the sustainability. The accounting policies are also followed in such a way that it discloses the rules and regulations for the preparation of the consolidated balance sheet and the financial statement and the management con tenuously reviews and evaluates the application of the accounting policies for providing assistance to its shareholders. Wal-Mart maintains its cost at a fair value it records and evaluates the cash and the cash equivalents in order to meet its short term requirements and liabilities. Wal-Mart also maintains an audit committee for evaluating the reports and preparation of the financial report of the company and it follows the accounting principles for the evaluation of the accounts and the audit committee is responsible for the full disclosure of the information and facts and figure of the company. Therefore the management together with the audit committee is engaged in the presentation of financial statement. The disclosure in the financial reporting facilitates the investor in understanding the financial position and performance of the company (Walmart, 2014). Conclusion Wal-Mart focuses on delivering value to its investors, shareholders and also to its customers and it emphasizes on providing importance and quality products and services to its customers at an affordable price and it maintains full disclosure of the financial position in its financial report. In case of the scandal in which it was involved was also been disclosed publically and it provides the full and fair value of the financial reporting in order to assist the shareholders and investors about the performance and the efficiency of the company. Wal-Mart is considered as the largest company in terms of generation of revenue according to the list of fortune 500 companies of the world and it is well known among its customers due to its wide variety of assortment of merchandise. References Abbas, A. M., 2012. Wiley International Trends in Financial Reporting under IFRS, Canada: John Wiley & Sons. Ball, R., 2006. International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and Business Research, 14(2), pp. 956-960. Banerjee, B.K., 2010. Financial Accounting: Concepts, Analyses, Methods And Uses. New Delhi: PHI Learning Pvt. Ltd. Brown, K., 2003, Investment Analysis and Portfolio Management. Boston: Thompson Learning. Christian, L., 2010. The crisis of fair-value accounting: Making sense of the recent debate. Accounting, Organizations and Society, 34(1). pp. 826-834. Gary. P. and Curtis. N., 2014. Financial Accounting: The Impact on Decision Makers. Stamford: Cengage Learning. Gron, A., and Winton, A., 2001. Risk Overhang and Market Behavior. The Journal of Business, 74(1). pp. 591-612. Helfert, E., 2001. Techniques of Financial Analysis: A Practical Guide to Measuring Business Performance. New York: McGraw Hill. Hopper, T., 2012. Handbook of Accounting and Development. USA: Edward Elgar Publishing. Jaara, O., 2014. Reality and Accounting: The Case for Interpretive Accounting Research. International Journal of Accounting and Financial Reporting, 4(1), PP-155-168. Jack, L. Davison, J. and Craig, R., 2013. The Routledge Companion to Accounting Communication. New York: Routledge. Khan,U., 2010. Does Fair Value Accounting Contribute to Systemic Risk in the Banking Industry. Columbia Business School Research Paper Series, 1(1).pp. 15-30. Magnan, M., and Cormier, D., 2005. From accounting to fore counting. Accounting Perspectives, 4(2). pp. 243 – 57. Penman, S.H., 2007. Financial reporting quality: is fair value a plus or a minus. International Accounting Policy. 33(1). pp. 33-44. Walmart, 2014. Annual report. Available at: http://cdn.corporate.walmart.com/66/e5/9ff9a87445949173fde56316ac5f/2014-annual-report.pdf. [Accessed on 17 March 2015]. Read More