Disposals, Acquisitions and Related Items

12 Months Ended

Jan. 31, 2021

Acquisitions, Disposals, and Related Items [Abstract]

Disposals, Acquisitions and Related Items

The following disposals and acquisitions impact the Company's Walmart International segment.

Walmart Argentina

In November 2020, the Company completed the sale of Walmart Argentina. As a result, the Company recorded a pre-tax loss of $1.0 billion in the third quarter of fiscal 2021 in other gains and losses in its Consolidated Statement of Income primarily due to the impact of cumulative translation losses on the carrying value of the disposal group.

Asda

In October 2020, the Company agreed to sell Asda, the Company’s retail operations in the U.K., for net consideration of $9.4 billion, which was classified as held for sale in the Consolidated Balance Sheet as of January 31, 2021.  Under the terms of the agreement, the Company agreed to indemnify the buyer for certain legal and tax matters and will retain an investment in Asda that will be accounted for as a debt security. As a result, the Company recognized an estimated pre-tax loss of $5.5 billion in other gains and losses in its Consolidated Statement of Income in the fourth quarter of fiscal 2021. In calculating the loss, the fair value of the disposal group was reduced by approximately $0.8 billion related to the estimated fair value of certain indemnities and other transaction related costs. The Company completed the sale in February 2021, and will deconsolidate the financial statements of Asda in the first quarter of fiscal 2022 and begin recognizing immaterial interest income related to its debt security.

In October 2019, Asda, Walmart, and the Trustee of the Plan entered into an agreement which provides for the issuance of individual annuity contracts to each Plan participant and will release the Plan and Asda from any future obligations. Upon classifying the Asda disposal group as held for sale, $2.3 billion of accumulated pension components associated with the expected derecognition of the Asda pension plan were included as part of the loss mentioned above, which will be reclassified from accumulated other comprehensive loss upon completion of the sale in February 2021.

Seiyu

In November 2020, the Company agreed to sell Seiyu, the Company's retail operations in Japan, for net consideration of $1.2 billion, which was classified as held for sale in the Consolidated Balance Sheet as of January 31, 2021. As a result, the Company recognized an estimated pre-tax loss of $1.9 billion in other gains and losses in its Consolidated Statement of Income in the fourth quarter of fiscal 2021. The sale was completed in March 2021 and the Company will deconsolidate the financial statements of Seiyu in the first quarter of fiscal 2022 and account for its retained 15 percent ownership interest as an equity investment.

Assets and liabilities held for sale associated with the Asda and Seiyu disposal groups as of January 31, 2021 were as follows:


	January 31,
(Amounts in millions)	2021
Cash and cash equivalents	$	1,848
Other current assets(1)	2,545
Property and equipment, net	13,193
Operating lease right-of-use assets	4,360
Finance lease right-of-use assets, net	1,395
Goodwill	2,211
Other long-term assets	1,063
Valuation allowance against assets held for sale(2)	(7,420)
Total assets held for sale	$	19,195

Current liabilities(3)	6,535
Operating lease obligations, including amounts due within one year	4,245
Finance lease obligations, including amounts due within one year	1,495
Deferred income taxes and other	459
Total liabilities held for sale	$	12,734

(1)Includes inventories, receivables, net and prepaid expenses and other.

(2)Includes the $2.3 billion loss associated with the derecognition of the Asda pension plan and $1.3 billion cumulative foreign currency and related net investment hedge and other impacts included within the disposal groups, which will be reclassified from accumulated other comprehensive loss upon closure of each transaction.

(3)Includes accounts payable and accrued liabilities.

Walmart Brazil

In August 2018, the Company sold an 80 percent stake of Walmart Brazil to Advent International ("Advent"). Under the terms of the sale, Advent agreed to contribute additional capital to the business over a three-year period and Walmart agreed to indemnify Advent for certain matters.

As a result, the Company recorded a pre-tax net loss of $4.8 billion during fiscal 2019 in other gains and losses in the Company's Consolidated Statement of Income. Substantially all of this charge was recorded during the second quarter of fiscal 2019 upon meeting the held for sale criteria. In calculating the loss, the fair value of the disposal group was reduced by $0.8 billion related to an indemnity, for which a liability was recognized upon closing and is recorded in deferred income taxes and other in the Company's Consolidated Balance Sheets. Under the indemnity, the Company will indemnify Advent for certain pre-closing tax and legal contingencies and other matters for up to R$2.3 billion, adjusted for interest based on the Brazilian interbank deposit rate.

The Company deconsolidated the financial statements of Walmart Brazil during the third quarter of fiscal 2019 and began accounting for its remaining 20 percent ownership interest using the equity method of accounting. This equity method investment was determined to have no fair value and continues to have no carrying value.

Flipkart

In August 2018, the Company acquired 81 percent of the outstanding shares, or 77 percent of the diluted shares, of Flipkart, an eCommerce marketplace in India, for cash consideration of approximately $16 billion. The acquisition increases the Company's investment in India, a large, growing economy. In the second quarter of fiscal 2020, the Company finalized the valuation of assets acquired and liabilities assumed for the Flipkart acquisition as follows:

•Assets of $24.1 billion, which comprise primarily of $2.2 billion in cash and cash equivalents, $2.8 billion in other current assets, $5.0 billion in intangible assets and $13.5 billion in goodwill. Of the intangible assets, $4.7 billion represents the fair value of trade names, each with an indefinite life, which were estimated using the income approach based on Level 3 unobservable inputs. The remaining $0.3 billion of intangible assets primarily relate to acquired technology with a life of 3 years. The goodwill arising from the acquisition consists largely of anticipated synergies and economies of scale primarily related to procurement and logistics and is not expected to be deductible for tax purposes;

•Liabilities of $3.7 billion, which comprise primarily of $1.8 billion of current liabilities and $1.7 billion of deferred income taxes; and

•Noncontrolling interest of $4.3 billion, for which the fair value was estimated using the income approach based on Level 3 unobservable inputs.

The Company began consolidating the financial statements of Flipkart in the third quarter of fiscal 2019, using a one-month lag. To finance the acquisition, the Company used a combination of cash provided by long-term debt as discussed in Note 6 and cash on hand. The Flipkart results of operations since acquisition and the pro forma financial information are immaterial.