Investor Presentaiton
a. Basis of preparation
The accompanying consolidated financial statements have been prepared in conformity
with IFRS issued by the IASB, as well as all the interpretations issued by the International
Financial Reporting Interpretation Committee (IFRIC), including those issued by the
former Standing Interpretations Committee (SIC).
The consolidated statements of comprehensive income were prepared on a functional
basis, which allows for the disclosure of cost of sales separately from other costs
and expenses, in conformity with IAS 1, Presentation of Financial Statements. The
consolidated statement of comprehensive income also includes a separate operating
income line to provide a better understanding of the Company's business performance.
The preparation of consolidated financial statements in conformity with IFRS requires
the use of estimates and assumptions in some items.
Walmart Bank's financial statements, which are included in the Company's consolidated
financial statements, were prepared based on the accounting criteria established by the
Mexican National Banking and Securities Commission (CNBV per its acronym in Spanish),
as issued as part of the General Provisions for Credit Institutions. At date, there are no
significant differences between these standards and IFRS.
Before the financial statements of the Company's foreign subsidiaries are consolidated,
they are prepared under IFRS and translated to Mexican pesos using the average
exchange rate for the consolidated statement of comprehensive income and the year-
end exchange rate for the consolidated statement of financial position, in conformity
with IAS 21, The Effects of Changes in Foreign Exchange Rates.
The cumulative translation adjustment is the effect of translating the financial statements
of the Company's foreign subsidiaries into Mexican pesos. This effect is recognized in
equity.
WALMEX has sufficient resources to continue operating as a going concern and
accordingly, the accompanying consolidated financial statements have been prepared on
a going-concern basis and on a historical-cost basis. The Mexican peso is the Company's
functional currency and reporting currency.
b. Risk factors
The Company is exposed to the effects of future events that could affect the purchasing power
and/or buying habits of its population. These events may be economic, political or social in
nature and some of the most important are described below:
I. Employment and salary. Positive or negative changes in employment and/or
real salary levels could affect Mexico's per capita income and, consequently, the
Company's business performance.
II. Changes in interest rates and exchange rates. Historically, Walmart has generated cash
surpluses in Mexico and Central America on which it earns financial income. A reduction
in interest rates could cause a decrease in the Company's financial income, which would
affect its earnings growth. However, the Company believes that a reduction in interest rates
would actually have a positive effect on its business in the medium and long-term, since it
would help improve the purchasing power of its customers. On the other hand, exchange
rate fluctuations tend to put upward pressure on inflation and reduce the population's
purchasing power, which could ultimately hinder the Company's sales.
In compliance with its corporate governance policies, the Company has no transactions with
derivative financial instruments.
III. Competition. The retail sector has become very competitive in recent years, which
has led to the need for all the players in the market to constantly look for ways to
set themselves apart from the competition. This puts the Company's market share
at risk. Other factors affecting the Company's market share could be the business
expansion of its competitors and the possible entrance of new competitors into the
market.
IV. Inflation. Over the last few years, the inflation rates in Mexico and Central America
have remained at low levels. A significant increase in inflation rates could have a
direct effect on the purchasing power of the Company's customers and the demand
for its products and services.
V. Changes in government regulations. The Company is exposed to the changes in
different laws and regulations, which, after becoming effective, they could affect
the Company's operating results, such as an impact on sales, expenses for payroll
indirect taxes and changes in applicable rates.
c. Consolidation
The accompanying consolidated financial statements include the Financial Statements of
WALMEX and those of its subsidiaries in Mexico and abroad, which are grouped as described
in Note 1 paragraph a, and they are prepared for the same accounting period. All related party
balances and transactions have been eliminated in the consolidation, in conformity with
IFRS 10, Consolidated Financial Statements.
Non-controlling interests represent the portion of equity interest in the net assets of a subsidiary
not attributable to the controlling company. Non-controlling interests is presented as a separate
component of equity.
2013 Financial and
Social Responsibility Report
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