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Accounting Policies

12 Months Ended

Dec. 31, 2024

Significant Accounting Policies [Text Block]

Basis of Presentation

The consolidated financial statements include the accounts of Wesco International and all of its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

In 2023 we changed our presentation in tables from thousands to millions. Certain amounts as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022 in the consolidated financial statements and associated notes may not foot or recalculate due to rounding.

Reclassifications

The Consolidated Statements of Cash Flows and the reconciliation between the federal statutory income tax rate and the effective tax rate in Note 11, “Income Taxes” for the years ended December 31, 2023 and 2022 include certain reclassifications to previously reported amounts to conform to the current period’s presentation. The table of deferred tax assets and liabilities in Note 11, “Income Taxes” for the year ended December 31, 2023 also includes certain reclassifications to previously reported amounts to conform to the current period’s presentation. Such reclassifications had no impact on the totals of operating, investing and financing cash flow activities, the effective tax rates, or totals of the deferred tax assets and liabilities for those years.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s best knowledge of current events and actions Wesco may undertake in the future, actual results may ultimately differ from the estimates.

Revenue Recognition

Wesco’s revenue arrangements generally consist of single performance obligations to transfer a promised good or service, or a combination of goods and services. Revenue is measured as the amount of consideration Wesco expects to receive in exchange for transferring goods or providing services. Revenue is recognized when control has transferred to the customer, which is generally when the product has shipped from a Wesco facility or directly from a supplier. However, transfer may occur at a later date depending on the agreed upon terms, such as delivery at the customer’s designated location, or based on consignment terms. For products that ship directly from suppliers to customers, Wesco generally acts as the principal in the transaction and recognizes revenue on a gross basis. When providing services, sales are generally recognized over time as control transfers to the customer, which occurs as services are rendered. Wesco generally satisfies its performance obligations within a year or less.

Wesco generally does not have significant financing terms associated with its contractual arrangements; payments are normally received within 60 days. There are generally no significant costs associated with obtaining customer contracts. Wesco typically passes through warranties offered by manufacturers or suppliers to its customers. Sales taxes (and value added taxes in foreign jurisdictions) collected from customers and remitted to governmental authorities are excluded from net sales.

Supplier Volume Rebates

Wesco receives volume rebates from certain suppliers based on contractual arrangements with such suppliers. Volume rebates are included within other accounts receivable in the Consolidated Balance Sheets, and represent the estimated amounts due to Wesco based on forecasted purchases and the rebate provisions of the various supplier contracts. The Company’s volume rebate arrangements with suppliers are generally for the period of January 1 through December 31. The corresponding rebate income is recorded as a reduction to cost of goods sold. Receivables under the supplier rebate program were $210.0 million at

December 31, 2024 and $233.1 million at December 31, 2023. Supplier volume rebate income as a percentage of net sales was 1.3% in 2024, 1.4% in 2023 and 1.6% in 2022.

Supplier Finance Programs

The Company has supplier finance programs that are administered by intermediaries. Under these arrangements, participating suppliers may elect to receive early payment of invoices that have been confirmed by the Company, less an interest deduction or fees paid by the supplier, which is paid to the supplier by third-party finance providers. Wesco agrees to pay the stated amount of confirmed invoices in full on the original due date of the invoices, which is typically within 45 to 180 days of the invoice date, regardless of whether the supplier elects to receive early payment from the third-party finance providers. The Company does not provide assets pledged as security or other forms of guarantees to the finance providers or intermediaries under these arrangements. During the fourth quarter of 2024, the Company finalized the termination of one of its supplier finance programs and settled all obligations under the program. As of December 31, 2024 and 2023, the amounts due to suppliers that participate in the Company’s supplier finance programs were approximately $12.4 million and $32.6 million, respectively, which are included in accounts payable in the Consolidated Balance Sheets.

The following table sets forth the rollforward of outstanding obligations confirmed as valid under the Company’s supplier finance programs for the year ended December 31, 2024:


(In millions)	2024
Confirmed obligations outstanding at the beginning of the year	$	32.6
Invoices confirmed during the year	106.0
Confirmed invoices paid during the year	(126.2)
Confirmed obligations outstanding at the end of the year	$	12.4

Cash and Cash Equivalents

Cash equivalents are defined as highly liquid investments with original maturities of 90 days or less when purchased. Cash and cash equivalents in the Consolidated Balance Sheets include $19.7 million and $21.9 million as of December 31, 2024 and 2023, respectively, that is restricted from use to fund operations.

Allowance for Expected Credit Losses

Wesco recognizes expected credit losses resulting from the inability of its customers to make required payments through an allowance account that is measured each reporting period. Wesco estimates credit losses over the life of its trade accounts receivable using a combination of historical loss data, current credit conditions, specific customer circumstances, and reasonable and supportable forecasts of future economic conditions. The allowance for expected credit losses was $55.0 million and $55.9 million at December 31, 2024 and 2023, respectively. The total amount recorded as selling, general and administrative expense related to credit losses was $18.7 million, $18.6 million and $18.0 million for 2024, 2023 and 2022, respectively.

Inventories

Inventories primarily consist of merchandise purchased for resale and are stated at the lower of cost or net realizable value. Cost is determined principally under the average cost method. Wesco reduces the carrying value of its inventories at the earlier of identifying an item that is considered to be obsolete or in excess of supply relative to demand, or no movement in a prescribed number of months. The carrying value of inventories reflect reductions for excess and obsolescence of $131.3 million and $113.4 million at December 31, 2024 and 2023, respectively. The total expense related to excess and obsolete inventories, which is included in cost of goods sold, was $66.0 million, $63.1 million and $43.2 million for 2024, 2023 and 2022, respectively.

Property, Buildings and Equipment

Property, buildings and equipment are recorded at cost. Depreciation expense is determined using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over either their respective lease terms or their estimated lives, whichever is shorter. Estimated useful lives typically range from five to forty years for buildings and leasehold improvements and three to eight years for furniture, fixtures and equipment.

Costs incurred during the application development stage of internally developed software are capitalized and are reported at the lower of unamortized cost or net realizable value. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Capitalized costs include external direct costs of materials and services consumed in developing internal-use computer software, payroll and payroll-related costs for employees who are directly associated with and

who devote time to the internal-use computer software project, as well as interest costs. Internal-use computer software is amortized using the straight-line method over its estimated useful life, typically three to seven years.

Expenditures for new facilities and improvements that extend the useful life of an asset are capitalized. Ordinary repairs and maintenance are expensed as incurred. When property or other long-lived assets are retired, abandoned, or otherwise disposed, the cost and the related accumulated depreciation are removed from the accounts and any resulting gains or losses are recorded and reported as selling, general and administrative expenses.

Of Wesco’s $442.9 million net book value of property, buildings and equipment as of December 31, 2024, $183.1 million consists of land, buildings and leasehold improvements that are geographically dispersed among Wesco’s more than 700 sites, including distribution centers, fulfillment centers, and sales offices, mitigating the risk of impairment. Wesco assesses its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of any such assets may not be fully recoverable. Changes in circumstances include, among others, technological advances, changes in the business model, capital structure, economic conditions or operating performance. The evaluation is based upon, among other things, utilization, serviceability and assumptions developed by management, which are categorized as Level 3 of the fair value hierarchy, related to the estimated future undiscounted cash flows that these assets are expected to generate. When the sum of the undiscounted cash flows is less than the carrying value of the asset (asset group), an impairment loss is recognized to the extent that carrying value exceeds fair value. Management applies its best judgment when performing these evaluations.

Leases

The determination of whether an arrangement is, or contains, a lease is performed at the inception of the arrangement. Classification and initial measurement of the right-of-use asset and lease liability are determined at the lease commencement date. The Company has elected the short-term lease measurement and recognition exemption; therefore, leases with an initial term of twelve months or less are not recorded on the balance sheet. Operating lease expense is recognized on a straight-line basis over the lease term.

Operating lease assets and liabilities are recognized at the commencement date based on the present value of the future minimum lease payments. Certain leases contain rent escalation clauses that are either fixed or adjusted periodically for inflation or market rates and such clauses are factored into the Company’s determination of lease payments. Wesco also has variable lease payments that do not depend on a rate or index, primarily for items such as common area maintenance and real estate taxes, which are recorded as variable expense when incurred. The operating lease asset includes advance payments and excludes incentives and initial direct costs incurred.

The Company’s arrangements include certain non-lease components such as common area and other maintenance for leased real estate, as well as mileage, fuel and maintenance costs related to leased automobiles and trucks. Wesco accounts for these non-lease components separately from the associated lease components. The Company does not guarantee any residual value in its lease agreements, and there are no material restrictions or covenants imposed by lease arrangements. Real estate leases typically include one or more options to extend the lease, or terminate early. The Company regularly evaluates the renewal options, and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. For most of Wesco’s leases, the discount rate implicit in the lease is not readily determinable. Accordingly, the Company uses its incremental borrowing rate on a secured basis based on the information available at the lease commencement date to discount lease payments to the present value.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and indefinite-lived intangible assets are tested for impairment annually as of October 1, or more frequently if triggering events occur, indicating that their carrying value may not be recoverable. Wesco tests for goodwill impairment on a reporting unit level. We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value as a basis for determining whether it is necessary to perform quantitative impairment tests. If performing a qualitative assessment, the Company assesses factors, including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant events such as changes in key personnel, changes in the composition or carrying amount of the net assets of a reporting unit, and changes in share price, among others, to determine whether it is more likely than not that the fair value of Wesco’s reporting units are less than their carrying values. If the qualitative assessment indicates that the fair values of the Company’s reporting units or indefinite-lived intangible assets may not exceed their respective carrying values, or if the Company elects to bypass the optional qualitative assessments, then Wesco performs quantitative tests for impairment by comparing the fair value of each reporting unit or indefinite-lived intangible asset to its carrying value. The Company determines the fair values of its reporting units using a discounted cash flow analysis and consideration of market multiples. The discounted cash flow analysis uses certain assumptions, including projected revenues and expected operating margins supported by a combination of historical results, current forecasts, market data and recent economic events, which are categorized within Level 3 of the fair value hierarchy. The Company uses a discount rate that reflects market participants’ cost of capital. The Company evaluates the recoverability of indefinite-lived intangible assets using the relief-from-royalty method based on projected financial information. The relief-from-royalty method uses certain assumptions including projected revenues, discount rates, royalty rates, and applicable income tax rates. At December 31, 2024 and 2023, goodwill and indefinite-lived intangible assets totaled $4.1 billion.

The determination of fair value involves significant management judgment, particularly as it relates to the underlying assumptions and factors around projected revenues, future expected operating margins and discount rate. Management applies its best judgment when assessing the reasonableness of financial projections. Fair values are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and indefinite-lived intangible assets impairment tests will prove to be an accurate prediction of future results.

Definite-Lived Intangible Assets

Definite-lived intangible assets are amortized over five to twenty years. Certain customer relationships are amortized using an accelerated method whereas all other definite-lived intangible assets subject to amortization use a straight-line method. In either case, the amortization method reflects the pattern in which the economic benefits of the respective assets are consumed or otherwise used. Wesco continually evaluates whether events or circumstances have occurred that would indicate the remaining estimated useful lives of definite-lived intangible assets require revision or that the remaining carrying value of such assets may not be recoverable.

Cloud Computing Arrangements

The Company capitalizes costs associated with implementing its various cloud computing arrangements, which are amortized using the straight-line method over the estimated useful life, typically three to seven years. Capitalized implementation costs, which are recorded as a component of other assets in the Consolidated Balance Sheets, were $257.8 million and $195.4 million as of December 31, 2024 and 2023, respectively, and the related accumulated amortization was $29.6 million and $15.5 million, respectively. Amortization expense related to cloud computing arrangements totaled $14.1 million, $9.2 million and $4.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

During the second quarter of 2024, management determined that a third-party developed operations management software product would be abandoned in favor of an application that better suits the Company’s operations and the Company recognized a $17.8 million loss on abandonment of assets, which is recorded as a component of selling, general and administrative expenses in the Consolidated Statement of Income and Comprehensive Income for the year ended December 31, 2024.

Insurance Programs

Wesco uses commercial insurance for auto, workers’ compensation, casualty and health claims, and information technology as a risk-reduction strategy to minimize catastrophic losses. The Company’s strategy involves large deductible policies where Wesco must pay all costs up to the deductible amount. Wesco estimates the reserve for these programs based on historical incident rates and costs. The assumptions included in developing this accrual include the period of time between the incurrence and payment of a claim. The total liability related to insurance programs was $33.4 million and $28.1 million at December 31, 2024 and 2023, respectively.

Income Taxes

Wesco accounts for income taxes under the asset and liability method, which requires the recognition of deferred income taxes for events that have future tax consequences. Under this method, deferred income taxes are recognized (using enacted tax laws and rates) based on the future income tax effects of differences in the carrying amounts of assets and liabilities for financial reporting and tax purposes. The effect of a tax rate change on deferred tax assets and liabilities is recognized in income in the period of change.

Wesco recognizes deferred tax assets consistent with amounts expected to be realized. To make such determination, management evaluates all positive and negative evidence, including but not limited to, prior, current and future taxable income, tax planning strategies and future reversals of existing taxable temporary differences. A valuation allowance is recognized if it is “more-likely-than-not” that some or all of a deferred tax asset will not be realized. Wesco regularly assesses the realizability of deferred tax assets.

Wesco accounts for uncertainty in income taxes using a “more-likely-than-not” recognition threshold. Due to the subjectivity inherent in the evaluation of uncertain tax positions, the tax benefit ultimately recognized may materially differ from the estimate recognized in the consolidated financial statements. Wesco recognizes interest and penalties related to uncertain tax benefits as part of interest expense and income tax expense, respectively.

The Tax Cuts and Jobs Act of 2017 (the “TCJA”) imposed a one-time tax on the deemed repatriation of undistributed foreign earnings (the “transition tax”). Except for a portion of foreign earnings previously taxed in the U.S. that can effectively be distributed without further material U.S. or foreign taxation, the Company continues to assert that the undistributed earnings of its foreign subsidiaries are indefinitely reinvested. To the extent the earnings of the Company’s foreign subsidiaries are distributed in the form of dividends, such earnings may be subject to additional taxes. The Company believes that it is able to maintain a sufficient level of liquidity for its domestic operations and commitments without incurring any material tax cost to repatriate cash held by its foreign subsidiaries.

The provisions of the TCJA also introduced U.S. taxation on certain global intangible low-taxed income (“GILTI”). Wesco has elected to account for GILTI tax as a component of income tax expense.

Foreign Currency

The functional currency for most of the Company’s operations outside the U.S. is generally the applicable local currency. Assets and liabilities of these operations are translated to U.S. dollars at the exchange rate in effect at the end of each period. Income statement accounts are translated at an exchange rate that approximates the average for the period. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Gains and losses from foreign currency transactions are included in net income for the period. The Company may re-evaluate the functional currencies of certain operations outside the U.S. if there are significant changes to operations that indicate that a change in functional currency may be necessary.

Defined Benefit Pension Plans

Liabilities and expenses for defined benefit pension plans are determined using actuarial methodologies and incorporate significant assumptions, including the interest rate used to discount the future estimated cash flows, the expected long-term rate of return on plan assets, and several assumptions relating to the employee workforce (salary increases, retirement age, and mortality). Unrealized gains and losses related to the Company’s defined benefit pension obligations are recognized as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Gains or losses resulting from plan amendments, curtailments, and settlements are recognized as a component of other non-operating income and expenses (“other expense (income), net”) in the period of the remeasurement.

Fair Value of Financial Instruments

The Company measures the fair value of assets and liabilities on a recurring and nonrecurring basis according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date; Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, and Level 3 inputs are unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to measurements involving significant unobservable inputs (Level 3).

The Company measures the fair values of goodwill, intangible assets and property, buildings and equipment on a nonrecurring basis if required by impairment tests applicable to these assets, as described above.

Other (Income) Expense, net

Other non-operating income and expenses (“other (income) expense, net”) primarily includes the non-service cost components of net periodic pension cost (benefit), foreign exchange gains and losses, and periodic, non-operating transactions. For the year ended December 31, 2024, these periodic, non-operating transactions included the divestiture of the Wesco Integrated Supply (“WIS”) business, which resulted in a gain from the sale of $122.2 million, described further in Note 5, “Acquisitions and Divestitures”.

Recently Adopted and Recently Issued Accounting Standards

In September 2022, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted this ASU in the first quarter of 2023, except for the amendment on rollforward information, which the Company adopted in the fourth quarter of 2024. The adoption of this ASU resulted in additional disclosure of the Company’s supplier finance programs.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances prior reportable segment disclosure requirements in part by requiring entities to disclose significant expenses related to their reportable segments. The amendments in this ASU are effective on a retrospective basis for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this ASU in the fourth quarter of 2024. The adoption of this ASU resulted in additional required disclosures, including the disclosure of certain expenses at the reportable segment level, described further in Note 16, “Business Segments”.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024 on a prospective basis. Management is currently evaluating the impact that this accounting standard will have on its consolidated financial statements and notes thereto.

In March 2024, the SEC issued final climate-related disclosure rules requiring disclosure of material climate-related risks, board and management governance of such risks, and material direct and indirect greenhouse gas emissions. The rules also require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions. Disclosures will be made prospectively, with phased-in effective dates starting with fiscal years beginning on or after January 1, 2025. In April 2024, the SEC voluntarily stayed implementation of the climate-related disclosure rules, pending completion of judicial review of consolidated challenges to the rules by the Court of Appeals for the Eighth Circuit. Management is currently evaluating the impact that these rules could have on its consolidated financial statements and notes thereto.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to enhance expense disclosures, primarily by requiring disclosure of disaggregated information about certain income statement expense line items on an annual and interim basis. The amendments in this ASU are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. The amendments in this ASU should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating the impact that this accounting standard will have on its consolidated financial statements and notes thereto.

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to Wesco’s financial position, results of operations or cash flows.

Reclassifications

Supplier Finance Program

Supplier Finance Programs

The following table sets forth the rollforward of outstanding obligations confirmed as valid under the Company’s supplier finance programs for the year ended December 31, 2024:


(In millions)	2024
Confirmed obligations outstanding at the beginning of the year	$	32.6
Invoices confirmed during the year	106.0
Confirmed invoices paid during the year	(126.2)
Confirmed obligations outstanding at the end of the year	$	12.4