1 / 28

Module 10 – Adjusting Enterprise Operations Junichi Hara

Module 10 – Adjusting Enterprise Operations Junichi Hara. Agenda. Inventory method Operating leases Special-purpose entities Share-based compensation. 1. Inventory method. No Adjustment Needed. Walmart US utilizes LIFO International utilizes FIFO Sam’s Club weighted average

tyanne
Download Presentation

Module 10 – Adjusting Enterprise Operations Junichi Hara

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Module 10 – Adjusting Enterprise OperationsJunichi Hara

  2. Agenda • Inventory method • Operating leases • Special-purpose entities • Share-based compensation

  3. 1. Inventory method

  4. No Adjustment Needed • Walmart US utilizes LIFO • International utilizes FIFO • Sam’s Club weighted average • But inventory under LIFO ≈ FIFO for Walmart • No adjustment needed

  5. No Adjustment Needed • Note 1: • At January 31, 2014 and January 31, 2013, the Company's inventories valued at LIFO approximate those inventories as if they were valued at FIFO.

  6. 2. Operating leases

  7. Before Adjustment • Note 11: The Company has long-term leases for stores and equipment.

  8. Results Why did capitalized operating lease go down? Total minimum payments go down? (2013 to 2014: $16,803 to $17,170) Discount rate go up?

  9. Results Discount rate for lease going up year after year Reason? Is such a dramatic increase reasonable? Implication for future and projection? Firm discount rate implications?

  10. 3. Special-purpose entities

  11. No mention of SPEs • No hits for “special purpose entities” on 10-K • No mention of SPEs in “Off Balance Sheet Arrangements” section • Is there something not disclosed/missing?

  12. Walmart’s Tax Strategy in 2007

  13. Don’t have to pay taxes on dividends Can deduct from state income tax

  14. Is it still relevant? • Now several state regulators are trying to crack down on the strategy, used largely by retailers and banks, and some other states have changed their laws to try to end the practice. Yesterday, New York Gov. Eliot Spitzer included elimination of the loopholeas part of his proposed budget, a fix he said would bring the state $83 million a year. – WSJ

  15. Conclusion • Can’t conclude anything… • Financial reports don’t provide information • New information not reported by media • Personally unfamiliar with tax laws • Are there more arrangements?

  16. Conclusion • Regardless, consolidation should make EPAT and NEA same after capitalization of leases • Only (?) effect is state taxes

  17. Note 9. Taxes

  18. 4. Share-based compensation

  19. Three Award Types • Restricted Stock and Performance Share Awards • Restricted Stock Rights • Stock Options

  20. Three Award Types • Restricted Stock and Performance Share Awards • Restricted Stock Rights • Stock Options Gives employee stock Give employees right to buy stock

  21. Three Award Types • Restricted Stock and Performance Share Awards • Restricted Stock Rights • Stock Options Fair value of stock expensed Fair value of option expensed

  22. Note 3. Shareholders' Equity

  23. Only Adjust Stock Options • Since first two awards already expensed no liability needed

  24. WMT Stock Prices

  25. Results

  26. Results Price at 1/30/2009: $47.12 Weighted average exercise price: $49.11 Value of option = $0

  27. Results Can’t grasp much intuition from results How to incorporate into projections?

  28. Questions?

More Related