Walmart 2003 Annual Report Download - page 37

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evaluated periodically when events or circumstances indicate a possible inability to recover the carrying amount. These
evaluations are based on undiscounted cash flow and profitability projections that incorporate the impact of existing
Company businesses. The analyses require significant management judgment to evaluate the capacity of an acquired
business to perform within projections. Historically, the Company has generated sufficient returns from acquired
businesses to recover the cost of the goodwill and other intangible assets.
Goodwill is recorded on the balance sheet in the operating segments as follows (in millions):
January 31, 2003 January 31, 2002
International $ 8,985 $ 8,028
SAM’S CLUB 305 305
Other 231 233
Total Goodwill $ 9,521 $ 8,566
Changes in International segment goodwill are the result of foreign currency exchange rate fluctuations and the addition
of $197 million of goodwill resulting from the Company’s Amigo acquisition. See Note 6.
Foreign Currency Translation
The assets and liabilities of all foreign subsidiaries are translated at current exchange rates. Related translation
adjustments are recorded as a component of other accumulated comprehensive income.
Revenue Recognition
The Company recognizes sales revenue at the time it sells merchandise to the customer, except for layaway transactions.
The Company recognizes layaway transactions when the customer satisfies all payment obligations and takes possession
of the merchandise. The Company recognizes SAM’S CLUB membership fee revenue over the twelve-month term of
the membership. Customer purchases of Wal-Mart/SAM’S CLUB shopping cards are not recognized until the card is
redeemed and the customer purchases merchandise by using the shopping card.
SAM’S CLUB Membership Revenue Recognition
The Company recognizes SAM’S CLUB membership fee revenues both domestically and internationally over the term of
the membership, which is 12 months. The following table provides unearned revenues, membership fees received from
members and the amount of revenues recognized in earnings for each of the fiscal years 2001, 2002 and 2003:
Deferred revenue January 31, 2000 $ 337
Membership fees received 706
Membership revenue recognized (674)
Deferred revenue January 31, 2001 369
Membership fees received 748
Membership revenue recognized (730)
Deferred revenue January 31, 2002 387
Membership fees received 834
Membership revenue recognized (784)
Deferred revenue January 31, 2003 $ 437
SAM’S CLUB membership revenue is included in the other income line in the revenues section of the consolidated
statements of income.
The Company’s deferred revenue is included in accrued liabilities in the consolidated balance sheet. The Company’s
analysis of historical membership fee refunds indicates that such refunds have been insignificant. Accordingly, no reserve
exists for membership fee refunds at January 31, 2003.
Cost of Sales
Cost of sales includes actual product cost, change in inventory, buying allowances received from our suppliers, the
cost of transportation to the Company’s warehouses from suppliers and the cost of transportation from the Company’s
warehouses to the stores and Clubs and the cost of warehousing for our SAM’S CLUB segment.
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