However, the company will have to switch from last-in first-out (LIFO) inventory valuation to a first-in first-out (FIFO) system, which could conceivably create an appreciable tax liability in the near-term. 8. If Wal-mart uses the cash basis of accounting, how would that differ from the accrual basis?

First, Wal-mart is currently not allowed to conduct its business on a cash accounting basis because it is too large to do so under prevailing IRS rules (Pub. 538) and because it necessarily keeps a significant inventory within its stores and warehouses. And even after it adopts IASD standards, it will operate on an accrual basis.

However, if it were to use cash accounting, its receivables are unlikely to be greatly distorted. As a retailer, Wal-mart deals primarily in electronic transactions that clear within three days;...

In terms of accounts payable, shifting to cash would give the company a longer window of time between when it replenishes its inventory and when it actually pays its suppliers.
Works Cited

Internal Revenue Service. "Publication 538: Accounting Periods and Methods." 2008. Web. 17 Apr. 2010.

Wal-Mart Stores Inc. "Walmart Reports Fourth Quarter and Fiscal Year 2010 Results." Bentonville, AR. 18 Feb. 2010. Web. 17 Apr. 2010.

Yu, Carrie, and David Mason. "Issues and Solutions for the Retail and Consumer Goods Industries: International Financial Reporting Standards / U.S. GAAP." PricewaterhouseCoopers, 2008. Adobe PDF document. 17 Apr. 2010.