Below presented paper is the SEC analysis of Wal-Mart. The paper comprises of the brief profile of the company with its key financial information. The paper also includes the transfer pricing practices and taxation issues at Wal-Mart. With that, the corporate social responsibilities of the company have been also highlighted. Every company reports different information of its business operations, in this course Wal-Mart’s reporting have been also discussed.
This is followed with the accounting and audit issues at Wal-Mart. At the end of the paper the competitive environment of Wal-Mart has been discussed, followed with the conclusion of the paper.pg. 3
Wal-Mart is a chain of retail stores that are in the form warehouse stores and large department stores. The corporation operates at international level. The mission of the company is to help people save their money and live a better life. The company provide the people with their services through retail stores and also via online. Wal-Mart is currently operating 11,000 stores in 27 countries under 71 banners.
The company also runs its e-commerce websites in 10 different countries of the world. In the fiscal year of 2014 the company has reported around $473 billion, and it employees 2.2 million of associates across the globe. The company is based known for its unbeatable discount offers in the market (Wal-Mart, 2014a).
Key financial information:
In the fiscal year 2014, the performance of the company reflected in the term of its sales that grew from $473 billion in last year to $7.5billion (Wal-Mart, 2014b). The operating of the company has also grown by 4% of net sales increase of the company that is $5billion (Wal-Mart, 2014b). On an international level, the net sales of the company have increased by 1.3% and have cross $136 billion (Wal-Mart, 2014b). The management of Wal-Mart at United States has put substantial efforts to reduce the costs and the expenses of the company. Wal-Mart values its inventory at the lower of the cost determined by retail method of accounting and according to this method; the company stated its inventory as cost (Wal-Mart, 2014b).
This year the company has increased its inventories by 2.4%, from $43,803 in 2013 to $44,854 in 2014 (Wal-Mart, 2014b). The company stated a slight decline in its net receivables amounting to $6,677 in this year as compared to the 6,768 in the previous year (Wal-Mart, 2014b).
The receivables at Wal-Mart includes due amount from the insurance companies, customer credit and debit card banks along with electronic transfers, from suppliers, consumer financing programs and transactions from real estate. The company is performing substantially well at international level, and it possess beyond 10,900 physically distribution points around the globe. Wal-Mart is willing to expand its e-commerce services in United States and other countries to develop a strong and consistent stream of sales (Wal-Mart, 2014b).
Transfer pricing and Taxation at Wal-Mart:
The term transfer pricing is defined as the level of pricing at which one division of the company trade the goods and services with the other division. It can also be understood as a transaction price of a company for its parent company. The chains of retailers in US are very much inclined towards creating the subsidiaries. In due course, Wal-Mart has set a subsidiary that that provides the rent collection services from different Wal-Mart stores.
According to the estimation, the company is able hide around $7.3billion in the form of profits in four year’s duration. It has been also observed that by paying the rent itself through REIT (Real estate investment trust), Wal-Mart keeps itself away from the additional taxes and takes the money inside the company.
Now with the help of creating these subsidiaries, requirements for national combined reporting does not seem to be like an issue. By developing the subsidiary especially in the international level, the company gets the tax shelter, and this let the company make huge profits (BP, n.d.).
Wal-Mart’s corporate social responsibility:
With its business activities, the company pays attention towards its corporate social responsibilities. Moreover, to serve the purpose, Wal-Mart has taken many initiatives, these initiatives are not just within the borders of USA, in fact, Wal-Mart has spread these measures across the globe. For this, Wal-Mart has put emphasis on the sustainability of the environment by utilizing the energy supplied by 100% renewable energy (Wal-Mart, 2014c; 2014d; 2013).
Also, the company aims to create zero waste of water. Wal-Mart also focuses on the economic empowerment of women, families of veterans and military. The company supports the US manufacturing by creating more jobs and with that Wal-Mart has set the responsible sourcing in its supply chain (Wal-Mart, 2014c; 2014d; 2013).
The company performs its financial reporting in an appropriate manner. To serve the purpose, the company mentions its SEC (security and exchange commission) filings, its quarterly results, its non-GAAP measures, results of the comparable stores and details of the units’ counts and the square footage. The quarterly results of the company carry the financial data of the business activities and operations and tell the earnings generated by the company. The reporting of the non-GAAP measures carries the details about the return on investment and return on assets by time to time. With that, the reporting also includes the calculations of the free cash flow. This information from the Wal-Mart helps the investors to assess the performance of the company.
Accounting Issues at Wal-Mart:
With other issues faced by the company, Wal-Mart is facing the accounting issues as well.
The company has been found in the persistent and inexorable strategy of cutting the cost at a level that is damaging the franchising of the company. With that, it has been also figured out the company is involved in the manipulation of its inventory, and this has reached the level that comes under the boundaries of accounting fraud. One example of this at Wal-Mart is seen in the form of “Channel Stuffing, in which the shipments have been made to customers, but these are counted as sales despite of being advance orders. This has led to the improper and inappropriate reporting of the revenues (Smith, 2013).
Audit Issues at Wal-Mart:
The traces of corruption have been found in the operations of the Wal-Mart at international level (McDonald, 2013). This has alarmed the investigation of the operations of the stores at an internal level.
This has been figured out at compliance audit conducted on a routine basis. It was acclaimed that the Wal-Mart has given bribes in China, Brazil and India. Later on, a detail and thorough investigation has been conducted which involved three formal federal prosecutors and hundreds of lawyers. This has reduced the growth of the company and overseas expansion of the business also declined. In order to overcome from the repercussions of the issue, Wal-Mart pg. 5
increased the internal investigation. It has taken the facilities of Jones Day, KPMG and Greenberg Traurig (Clifford and Barstow, 2012). Wal-Mart’s competitive environment:The competitive environment at Wal-Mart is unique. The Wal-Mart faces a tough competition from other merchandise retailer, supermarket retailers and some warehouse clubs. The overallsize of the retail discount industry is quite substantial with a constant change and growth.
The main competition is prevailing over pricing, store size, its innovation and technology, layout,environment, location, mix of merchandise and the overall image of the store. Wal-Mart maincompetitors include Kmart and Target. Wal-Mart has got a competitive edge over its competitorson lower prices with a vast variety and better selection of products with good quality. Wal-Martuses low pricing strategy; this is done by the cost effective supply chain management of Wal-Mart.
The company keenly monitors the movement of products by its values chain; this helpsWal-Mart to be cost effective. The company has also adopted some operational and distributionalstrategies that supported Wal-Mart to sell the products at low process.Conclusion: The Wal-Mart is one of the largest retail chain stores in United States of America, with itsoperation in many other countries of the world. The company can pull a great number of
customers and is providing low prices, creating a competitive edge over its competitors. However, on the other side, the company has adopted some practices that are questionable, and few of them have been out during the audit of the company. Further, there were someaccountings issues in the form of “Channel Stuffing” have been observed.pg. 6 ReferencesMcDonald, J. (2013).
Audit finds problems with Walmart review. Retrieved November 12, 2014, from http://www.utsandiego.com/news/2013/apr/25/aud it-walmart- approval-sherman-heights/ Wal-Mart. (2014b). Wal-Mart 2014 annual report. Retrieved November 12, 2014, from http://cdn.corporate.walmart.com/66/e5/9ff9a87445949173fde56316ac5f/2014-annual-report.pdfBP. (n.d.). 5 Tricks Corporations Use to Avoid Paying Taxes. Retrieved November 12, 2014,from http://www.businesspundit.com/5- tricks-corporations-use-to-avoid-pa ying-taxes/Wal-Mart. (2014d). Environmental Responsibility.
Retrieved November 12, 2014, fromhttp://corporate.walmart.com/global-responsibility/environmental-sustainabilityWal-Mart. (2013). 2013 global responsibility report. Retrieved November 12, 2014, fromhttp://corporate.walmart.com/microsites/global- responsibility-report-2013/Smith, Y. (2013). Has Walmart Been Engaging in Large Scale Accounting Fraud? RetrievedNovember 12, 2014, from http://www.nakedcapit alism.com/2013/04/has-walmart-been-engaging-in-large-scale-accounting-fraud.ht mlClifford, S., and Barstow, D. (2012). Wal-Mart Inquiry Reflects Alarm on Corruption. RetrievedNovember 12, 2014, from http://www.n ytimes.com/2012/11/16/business/wal-mart- expands-foreign-bribery-investigation.html?pagewanted=all&_r=0pg. 7
Wal-Mart. (2014c). Corporate Responsibility. Retrieved November 12, 2014, fromhttp://corporate.walmart.com/global-responsibility/