Analysis of Walmart and Carrefour

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Wal-Mart Store, Inc was branded as Walmart in 2008. It is an American multinational retailer corporation that operates chains of discount department stores as well as warehouse stores. It is ranked as the 18 largest public corporations worldwide. It is regarded as the largest retailer in the world and the biggest private employer with over 2 million employees.

The firm was started in 1962 by Sam Walton; it was incorporated on 31 October 1969 and privatized in 1972. Walmart is regarded as the biggest grocery retailer in United States of America. In 2009, it realized 51% of its total U.S. sales of $ 258 billion from selling groceries.

Walmart has over 8,500 stores in more than 15 countries. The firm operates as Walmart in United States, as Walmax in Mexico, as Asda in United Kingdom, Seiyu in Japan and as Best Price in India.

Carrefour was founded in 1959 as collaboration between two entrepreneurs Louis Defforey and Marcel Fournier. Carrefour is ranked as the second largest retailer enterprise in the world. The venture runs over 10,300 stores in France as well as abroad under more than 24 different brands. Among its most successful brands include; Carrefour, Shopi, Champion as well as Promocash.

The corporation recent merger with Promodes SA in 2000 enabled it to augment its market share to become the largest operator of supermarkets, discount stores, hypermarkets as well as convenience stores in Europe.

It is the Carrefour management that initiated the idea of hypermarkets which enables customers to access variety of merchandise such as groceries, clothing, electronics as well as automobiles from one store. The concept of hypermarket was embraced worldwide which helped to transform many supermarkets to hypermarkets that enabled customers to buy diverse merchandises from one store (Davidson 8).

The two corporations have shown great performances locally as well as in their international ventures. Walmart has been noted to record steady earnings both during instances of strong economic growths as well as during periods of economic recessions.

Conversely, Carrefour has reflected good earnings during period of economic growth, while performed poorly during periods of recessions to a point of being forced to close some of its stores in some countries. Carrefour is famous in its tasks of assisting the community, employees as well as financing projects that are tailored in upgrading the environment.

Walmart on the hand is well known in underpaying its employees as well as being discriminately in its recruitment processes (Ellison 20).

That is why it is imperative for this discussion to explore the 2010 annual reports of the two firms in order to establish whether the Carrefour approach of helping the community, employees as well as the environment is more beneficial to the society than the Walmart strategy of low pricing to help people live better.

Walmart annual reports are approximately 60 pages long and they reflect financial information from the second page. The first approximately 16 pages mostly concentrates on key facts, letters from executes as well as the progress of Walmart in various areas.

After, the 16^th page, Walmart presents its financial statements extensively with footnotes. The footnotes used are colored and appealing. After page 16, the remaining pages of the annual report contain the financial performance of Walmart in the year.

Carrefour annual report is more of a marketing tool than a financial reporting tool. The corporation offers two different reports on its website. One of its reports referred as annual activity and sustainability report focuses on the sustainability, employee as well as community participation in the business.

The other report that is referred as the financial report comprise of the financial performance of Carrefour Corporation during the year. It is approximately 80 pages in length. Carrefour report has is more extensive in nature than that of Walmart with a lot of charts as well as footnotes.

Carrefour financial report is more specific than that of Walmart as it presents exact performance of Carrefour stores in all the countries as well as regions it operates. Moreover, Carrefour financial reports go an extra step to include the company internal control processes.

The Carrefour financial report is more detailed than Walmart annual report which makes it to be more suitable and particularly to investors (Walmart 2010 Annual Report 16-30).

The two corporations are audited by the BIG 4 firm. Walmart is audited by Ernst & Young, while Carrefour is audited by KPMG. The two reports have some few similarities as reflected by the auditors’ reports. Both auditors’ reports contain a statement that expresses their responsibility to shareholders in expressing their opinion of whether the financial statements presented are free from material misstatement.

Similarly, both reports provide a clause that expresses an opinion of whether the financial statements are presented fairly. These two sections indicate that the two auditors share the same responsibility in executing their audits. Conversely, the two reports employ different standards in their auditing. The Ernst & Young’s audit of Walmart was done in accordance to Public Company Accounting Oversight Board.

On the contrary, when KPMG presented an opinion with regard to Carrefour financial statements, it did so in accordance to IFRS. Generally, there exists a difference between the United States GAAP and IFRS that subsequently have a direct impact on the financial statements of Walmart as well as Carrefour.

As reflected in Ernst & Young’s 2010 report, assets are categorized as current or non-current under the United States GAAP standard as shown in Walmart balance sheets. On the other hand, they are classified as non-current under IFRS standard as shown in the Carrefour’s balance sheet. GAAP permits the use of extraordinary items on income statements, while IFRS does not allow it (VanBreda 23).

Another difference between GAAP and IFRS is that IFRS have less prescriptive requirements in term of its income statements as well as in its balance sheet layout (Johnson 5). Lastly, there is a great difference between the Walmart and Carrefour auditors’ reports on how they discussion the internal controls.

Walmart has one auditor’s annual report where Ernst & Young discusses both the financial report as well as the internal controls of Walmart in a single report and provide an appropriate opinion for each case. Conversely, Carrefour has two separate auditors’ reports on their annual report.

One report discusses the firm’s financial report, while the other one focuses on the firm’s internal controls. KPMG provides a suitable opinion for each of the two reports.

The Security and Exchange Commission requires public firms to have a Management Discussion and Analysis (MD&A) in their annual reports. Thus, MD&A is an essential aspect of a firm’s annual report. The MD&A part in Walmart 2010 annual report comprised of 22% of the entire report.

The MD&A in the Walmart 20 annual report outlined the performance of Walmart in 2009 as well as its expected performance and its goal in 2011. The MD&A part of Walmart annual report expounds on the performance of Walmart metrics, the company’s performances in its various specializations, Walmart operations and future goals.

The MD&A section played an important role in helping readers to comprehend Walmart financial statement. The MD&A also discussed intensively the company’s risks that it categories into two; the industry risk and market risk. The section in the annual report that is referred as Retail Industry contained a discussion of Walmart industrial risk. Walmart appreciates the idea that it operates in a very competitive retail industry.

It admits that it faces very stiff competition from other local as well as international retail corporations. Walmart also explains its difficulties in establishing strategic niche to venture into as well the challenges it faces in recruiting and maintain quality workforce. Walmart also discussed about the possible risks that the management of the company were worried about.

The worry pertained to issues such as consumer disposable income, cost of goods sold, consumer debt levels as well as consumer buying patterns which had declined as a result of the previous economic recession. In the section titled market risk in the annual report, Walmart discussed about the risks that it faced because of the changes in foreign exchange rates as well as changes in interest rates.

In order for the company to project about possible losses as well as possible gains because of the changes in the foreign exchange rates as well as interest rates, Walmart posed appropriate hypothetical changes on the exchange rates and interest rates and their corresponding changes in interest payments on the outstanding debt and profits or loss on the currency swaps the corporate engages in.

On the other hand Carrefour annual report also featured the MD&A section. The MD&A of Carrefour indicated yearly comparisons of the company’s performance in their different regions of operation. Similarly, Carrefour’s MD&A section highlighted the Firm’s goals for the following year. Likewise, Carrefour annual report used the MD& A section to discuss the risks that it faced during the year.

Some of the risk it identified includes potential litigation, environmental as well as industrial risk. Walmart annual report used MD&A section to assess its risk basing on how the other business can pose a risk to their business.

This strategy was contrary to the one used by Carrefour in evaluating its risk. While Walmart concentrated on the risk that it is likely to experience due to other players, Carrefour looked at the risk their enterprise can impose to other businesses (Walmart 2010 Annual Report 50).

Walmart international segment gross profit increased by 0.2 % that of the preceding year. The increase was associated with the high fluctuation in the currency exchange rate as well as the inclusion of D & S. The annual report for Walmart had not clearly illustrated the consolidated information for all company’s foreign segments.

Carrefour report had clearly illustrated how foreign segments are consolidated. The report had clearly indicated how the processes that are used to leverage companies in foreign nations with high inflations rate as well as accounting principal adopted.

Walmart has diverse inventory assessment methods for its different stores. For instance, inventory for Walmart is calculated at the lower market cost as determined by the LIFO method. Both Walmart stores as well as Walmart foreign operations employ the retail method that uses cost-to-retail ratio to get inventory costs.

Walmart uses the U.S. GAAP standard. On the other hand Carrefour uses IAS 2 inventories. It requires inventories to be valued at NPV or the lowest cost. NPV is calculated by an estimated selling price less additional costs that accompanies sale. Carrefour calculates its cost as the latest purchase price plus any additional costs (Carrefour 2010 Annual Report 50-53).

In calculating its tax expense as well as the deferred taxes, Walmart employs the liability and asset method. Through this process, deferred taxes are recognized for estimated tax effects of carry forward as well as temporary differences. In Walmart these taxes are measured using enacted tax rates that are recognized as per the year when these temporal differences are expected to be recovered.

Walmart breaks down all its tax information in the footnote. These include taxes that are paid to the local and federal government as well as for foreign purposes for current as well as the deferred tax segments. Subsequently, it lists all the items that bring most of the deferred tax, liabilities and assets. Finally it indicates how they are classified in the balance sheet.

Carrefour unlike Walmart reports its taxes by using balance sheet method. Carrefour accounts the deferred taxes based on how the firm anticipates settling or realizing the book value of assets and liabilities, by the help of tax rates that have been enacted on the balance-sheet date (Carrefour 2010 Annual Report 70).

Works Cited

“Carrefour 2010 Annual Report”. 2010. Web.

Davidson, Jay, “Carrefour Revisited,” Discount Merchandiser, 1990, pp. 24-30.

Ellison, Sarah, “Carrefour’s Net Rises, But Market Share Slips,” Wall Street Journal, 2001, p. A11.

Johnson, Sarah. “Guessing the costs of IFRS Conversion.” CFO Magazine. 2009. Web.

VanBreda, Michael, “IASB Standards: Converging from US GAAP to IFRS”. 2010. Web.

“Walmart 2010 Annual Report”. 2010. Web.

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Analysis of Walmart and Carrefour

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