Investor Presentaiton
d. Cash and cash equivalents
Cash and cash equivalents principally consist of bank deposits and highly liquid
investments with original maturities of less than 90 days. Such investments are stated
at historical cost plus accrued interest, not in excess of their market value.
Walmart Bank makes the monetary regulation deposits required by Banco de México
(the Central Bank), the amounts of which are calculated based on traditional deposits in
Mexican pesos.
e. Financial instruments
The Company has no transactions with derivative financial instruments.
f. Accounts receivable and reserve for bad debts
The balance of Walmart Bank's loan receivables portfolio is represented by outstanding
loan balances, plus uncollected earned interest. The preventive allowance for credit risks
is presented net of portfolio balances.
WALMEX recognizes the reserve for bad debts at the time the legal collection process
begins in conformity with its internal procedures.
g. Inventories
Inventories are valued using the retail method, except for merchandise for the Sam's
Club, ClubCo and distribution centers, which are valued using the average-cost method,
and Vips restaurant inventories, which are valued using the first-in, first-out method.
These inventory valuation methods are the same as those applied in the prior year.
Inventories, including obsolete, slow-moving and defective items or items in poor
condition, are stated at amounts not in excess of their net realizable value.
Inventory pertaining to the Agro-industrial Development of grains, edibles and meat is
valued using the average-cost method.
Buying allowances are recognized in the income statement based on the turnover of the
inventories that gave rise to them.
h. Prepaid expenses
Prepaid expenses are recognized as current assets in the consolidated statement of
financial position as of the date the prepayments are made. At the time the goods are
received, prepaid expenses are charged to the income statement or capitalized in the
corresponding asset line when there is certainty that the acquired goods will generate
future economic benefits.
i. Property and equipment
Property and equipment are recorded at acquisition cost and presented net of
accumulated depreciation.
Depreciation of property and equipment is computed on a straight-line method at the
following annual rates:
j. Lease
Buildings, facilities
and leasehold improvements
Furniture and equipment
2.5%
5.0%
to 33.3%
to 33.3%
In conformity with IAS 17, Leases, the Company classifies its property lease agreements
as either finance or operating leases.
A lease is considered a finance lease if it transfers substantially all the risks and rewards
incident to ownership of the underlying property to the lessee, considering the renewals
established in each lease agreement. Rent is recognized in the income statement over
the lease term as incurred.
Lease agreements that do not qualify as finance leases are treated as operating leases.
Fixed lease payments are recognized in the income statement on a straight-line method
over the lease term. The commencement date of lease is considered the occupancy date
of the leased property, including the lessee's rights to renewal. Variable lease payments
are based on a percentage of the Company's sales, and are recognized as an expense in
the period in which they are incurred.
k. Impairment in the value of property and equipment
Based on the guidelines of IAS 36, Impairment of Assets, the Company recognizes
impairment in the value of property and equipment by applying the expected present
value technique to determine value in use, considering each store or restaurant as the
minimum cash generating unit.
The present value technique requires detailed budget calculations, which are prepared
separately for each cash-generating unit. These budgets generally cover five years and
for those projected beyond five years, an expected growth percentage is applied.
Impairment losses are recognized in the consolidated statement of comprehensive
income in the other income (expenses), net line.
2013 Financial and
Social Responsibility Report
22
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