Financial Statement Research: Costco Wholesale Corporation (LIFO, FIFO)

Financial Statement Research
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Costco Wholesale Corporation
This paper threads through Costco’s financial statement for the fiscal year 2012 and the 10K Form, the dollar amounts used are in millions except when and if stated otherwise. Costco’s Wholesale Corporation is listed on NASDAQ, and its stock price as at 2012 was 121.66 per share. The Financial Report of Costco for the FY 2012 was stable with the assets standing at $13,706 at the beginning of the Financial Period and $13,526 at the end of the financial year. Costco’s most priced assets are its merchandise inventory, which add up to $7,096 million together with cash and cash equivalents of $3,500 million. The Income statement showed that the total revenue was $99,137 million, which was an improvement from the $88,915 recorded the previous financial year (Bloomberg News (Firm), 2013, p. 2).
Costco operates the wholesale industry in eight countries including the United Sates with its main competitors being Wal-Mart, Target Corporation and BJ Wholesale Club. Additionally, the company also serves under a private wing, Kirkland Signature. Costco Wholesale’s success relies heavily on the pricing strategy. Costco is a low-cost company that has per unit prices that the competitors find hard to beat. However, it should be noted that the company sells its products in batches directly from the warehouse rather than per unit. The backbone of Costco is efficiency at a low cost, and this is possible due to the operating model in use. As a result, the company has a high inventory turnover because of the low price they charge for products (Thompson, 2012, p. 2).
The Inventory accounting assumptions in the United States demands that companies use LIFO when valuing merchandise inventory. The 10k report reassures that the company uses the LIFO method of inventory accounting because the method matches current costs to it corresponding current revenues fairly. Since other companies use the FIFO method of cash flow assumption, Costco uses footnotes to ease up on comparison with the other companies. LIFO method has proven t...