Goodwill and Intangible Assets Accounting Policy
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations and is allocated to the appropriate reporting unit when acquired. Other acquired intangible assets are stated at the fair value acquired as determined by a valuation technique commensurate with the intended use of the related asset. Goodwill and indefinite-lived intangible assets are not amortized; rather, they are evaluated for impairment annually during Walmart's fourth fiscal quarter or whenever events or changes in circumstances indicate that the value of the asset may be impaired. Definite-lived intangible assets are considered long-lived assets and are amortized on a straight-line basis over the periods that expected economic benefits will be provided.
Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill impairment test is necessary. If Walmart determines, based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the quantitative goodwill impairment test would be required. This quantitative test for goodwill impairment is performed by determining the fair value of the related reporting units. Fair value is measured based on the discounted cash flow method and relative market-based approaches. Based on the results of the qualitative assessments performed, Walmart determined that the fair value of each reporting unit is more likely than not greater than the carrying amount and, as a result, quantitative analyses were not required. Walmart has not recorded any impairment charges related to goodwill.
Indefinite-lived intangible assets are included in other assets and deferred charges in Walmart's Consolidated Balance Sheets. These assets are evaluated for impairment based on their fair values using valuation techniques which are updated annually based on the most recent variables and assumptions. There were no impairment charges related to indefinite-lived intangible assets recorded during fiscal 2012, 2011 and 2010.
Source: Wal-Mart Stores Inc., Annual Report
Analyst Adjustments: Removal of Goodwill
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Wal-Mart Stores Inc., adjustments to financial data
Adjusted Ratios: Removal of Goodwill (Summary)
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Wal-Mart Stores Inc., adjusted ratios
| Ratio |
Description |
The company |
| Adjusted total asset turnover |
An activity ratio calculated as total revenue divided by adjusted total assets. |
Wal-Mart Stores Inc.'s adjusted total asset turnover deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.
|
| Adjusted financial leverage |
A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Wal-Mart Stores Inc.'s adjusted financial leverage increased from 2010 to 2011 and from 2011 to 2012.
|
| Adjusted ROE |
A profitability ratio calculated as net income divided by adjusted shareholders' equity. |
Wal-Mart Stores Inc.'s adjusted ROE improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.
|
| Adjusted ROA |
A profitability ratio calculated as net income divided by adjusted total assets. |
Wal-Mart Stores Inc.'s adjusted ROA improved from 2010 to 2011 but then deteriorated significantly from 2011 to 2012.
|
Adjusted Total Asset Turnover
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2012 Calculations
| Ratio |
Description |
The company |
| Adjusted total asset turnover |
An activity ratio calculated as total revenue divided by adjusted total assets. |
Wal-Mart Stores Inc.'s adjusted total asset turnover deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.
|
Adjusted Financial Leverage
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2012 Calculations
| Ratio |
Description |
The company |
| Adjusted financial leverage |
A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Wal-Mart Stores Inc.'s adjusted financial leverage increased from 2010 to 2011 and from 2011 to 2012.
|
Adjusted Return On Equity (ROE)
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2012 Calculations
| Ratio |
Description |
The company |
| Adjusted ROE |
A profitability ratio calculated as net income divided by adjusted shareholders' equity. |
Wal-Mart Stores Inc.'s adjusted ROE improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.
|
Adjusted Return On Assets (ROA)
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2012 Calculations
| Ratio |
Description |
The company |
| Adjusted ROA |
A profitability ratio calculated as net income divided by adjusted total assets. |
Wal-Mart Stores Inc.'s adjusted ROA improved from 2010 to 2011 but then deteriorated significantly from 2011 to 2012.
|
