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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2025
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation Policy. The Consolidated Financial Statements and accompanying data in this report include the accounts of AWI and its majority-owned subsidiaries. All significant intercompany transactions have been eliminated from the Consolidated Financial Statements. Use of Estimates. We prepare our financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. When preparing an estimate, management determines the amount based upon the consideration of relevant internal and external information. Actual results may differ from these estimates. Reclassifications. Certain amounts in the prior year’s Consolidated Financial Statements and Notes have been recast to conform to the 2025 presentation, most notably revised income tax disclosures. See the subheading, “Recently Adopted Accounting Standards” below and Note 15 for additional information. Revenue Recognition. We recognize revenue upon transfer of control of our products to the customer, which typically occurs upon shipment. Our main performance obligation to our customers is the delivery of products in accordance with purchase orders. Each purchase order confirms the transaction price for the products purchased under the arrangement. Direct sales to building materials distributors, home centers, direct customers and retailers represent the majority of our sales. Our standard sales terms are Free On Board (“FOB”) shipping point, with a minor portion of sales terms that are FOB destination. At the point of shipment, the customer is required to pay under normal sales terms. In most cases our normal payment terms are 45 days or less and our sales arrangements do not have any material financing components. Within our Architectural Specialties segment, the majority of revenues are customer project driven, which includes a portion of revenues derived from the sale of customer specified customized products that have no alternative use to us. Revenue for such product sales are recognized over time. Custom project customer arrangements have the potential to produce contract assets or liabilities. Contract liabilities exist when we have received contractual billings but our obligation to transfer the goods or services to a customer remains, and thus revenue is not yet recognized. These liabilities are typically less than one year, as they align with our project completion timing. The manufacturing cycle for most custom products is typically short. Incremental costs to fulfill our customer arrangements are expensed as incurred, as the amortization period is less than one year. Our products are sold with normal and customary return provisions. We provide limited warranties for defects in materials or factory workmanship and certain manufacturing defects. Warranties are generally not sold separately to customers. Our product warranties place certain requirements on the purchaser, including installation and maintenance in accordance with our written instructions. In addition to our warranty program, under certain limited circumstances, we will occasionally, at our sole discretion, provide a customer accommodation repair or replacement. Warranty repairs and replacements are most commonly made by professional installers employed by or affiliated with our independent distributors. Reimbursement for costs associated with warranty repairs are provided to our independent distributors through a credit against accounts receivable from the distributor to us. Sales returns and warranty claims have historically not been material and do not constitute separate performance obligations. We often offer incentive programs to our customers, primarily volume rebates and promotions. The majority of our rebates are designated as a percentage of annual customer purchases. We estimate the amount of rebates based on actual sales for the period and accrue for the projected incentive programs’ costs. We record the costs of rebate accruals as a reduction to the transaction price. See Note 4 to the Consolidated Financial Statements for additional information related to our revenues. Shipping and Handling Costs. We account for product shipping and handling costs as fulfillment activities and present the associated costs in cost of goods sold in the period in which we sell our product. Advertising Costs. We recognize advertising expenses as they are incurred. See Note 24 to the Consolidated Financial Statements for additional details. Research and Development Costs. We expense research and development costs, or product innovation costs, as they are incurred. See Note 24 to the Consolidated Financial Statements for additional details. Business Combinations. We account for acquisitions under the acquisition method and the results of acquired operations are included in the Consolidated Financial Statements from the acquisition date. Acquisition-related costs are expensed as incurred. We allocate total consideration to the assets acquired and liabilities assumed based on their estimated fair values, with the remaining unallocated amount recorded as goodwill. Goodwill recorded upon acquisition relates to many factors, including the technical competencies and capabilities of the acquired workforce and our strategic intent to integrate and leverage those competencies and capabilities to advance and expand our portfolio of solutions and offerings. Our definite-lived intangible assets are amortized over each respective asset's estimated useful life on a straight-line basis and recorded within our selling, general and administrative (“SG&A”) expenses on our Consolidated Statements of Earnings and Comprehensive Income. The fair value of acquired intangible assets is estimated by applying discounted cash flow models based on significant inputs not observable in the market. Key assumptions are developed based on each acquirees’ historical experience, future projections and comparable market data including future cash flows, long-term growth rates, implied royalty rates, attrition rates and discount rates. Acquisition-related contingent consideration that is classified as a liability is measured at fair value at the acquisition date. Changes in the fair value of contingent consideration liabilities in reporting periods after the acquisition date are recorded within SG&A expenses on our Consolidated Statements of Earnings and Comprehensive Income. Acquisition-related contingent consideration paid is classified as cash flows from financing activities on our Consolidated Statements of Cash Flows, up to the acquisition date fair value. The portions of additional cash consideration paid in excess of the acquisition date fair value are classified as cash flows from operating activities on our Consolidated Statements of Cash Flows. Pension and Postretirement Benefits. We have benefit plans that provide for pension, medical and life insurance benefits to certain eligible employees when they retire from active service. See Note 17 to the Consolidated Financial Statements for additional details. Taxes. The provision for income taxes has been determined using the asset and liability approach of accounting for income taxes to reflect the expected future tax consequences of events recognized in the financial statements. Deferred income tax assets and liabilities are recognized by applying enacted tax rates to temporary differences that exist as of the balance sheet date, which result from differences in the timing of reported taxable income between tax and financial reporting. We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed quarterly. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more likely than not standard, we give appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses and forecasts of future profitability, the duration of statutory carryforward periods, and our experience with operating loss and tax credit carryforward expirations. A history of cumulative losses is a significant piece of negative evidence used in our assessment. If a history of cumulative losses is incurred for a tax jurisdiction, forecasts of future profitability are generally not used as positive evidence related to the realization of the deferred tax assets in the assessment. We recognize the tax benefits of an uncertain tax position if those benefits are more likely than not to be sustained based on existing tax law. Additionally, we establish a reserve for tax positions that are more likely than not to be sustained based on existing tax law, but uncertain in the ultimate benefit to be sustained upon examination by the relevant taxing authorities. Unrecognized tax benefits are subsequently recognized at the time the more likely than not recognition threshold is met, the tax matter is effectively settled or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired, whichever is earliest. Taxes collected from customers and remitted to governmental authorities are reported on a net basis. See Note 15 to the Consolidated Financial Statements for additional details. Earnings per Share. Basic earnings per share is computed by dividing the earnings attributable to common shares by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings and is calculated using the treasury stock method. Cash and Cash Equivalents. Cash and cash equivalents include cash on hand and short-term investments that have maturities of three months or less when purchased. Concentration of Credit. We principally sell products to customers in building products industries. We monitor the creditworthiness of our customers and generally do not require collateral. In September 2025, GMS, Inc., one of our largest distributor customers, was acquired by The Home Depot, Inc. In addition, in October 2025, Foundation Building Materials, Inc., another one of our largest distributor customers, was acquired by Lowe's Companies, Inc. Gross sales to Lowe's Companies, Inc. (including sales to Foundation Building Materials, Inc.) and The Home Depot, Inc. (including sales to GMS, Inc.) totaled $937.8 million and each individually exceeded 10% of our revenues in 2025. Gross sales to Foundation Building Materials, Inc. and GMS, Inc. individually exceeded 10% of our revenues in 2024 and 2023, and totaled $735.6 million and $631.9 million in 2024 and 2023, respectively. Gross sales to these customers were included within our Mineral Fiber and Architectural Specialties segments. Receivables. We sell our products to select, pre-approved customers using customary trade terms that allow for payment in the future. Customer trade and miscellaneous receivables (which include supply related rebates and other), net of allowances for credit losses, customer credits and warranties, are reported in accounts and notes receivable, net. Cash flows from the collection of receivables are classified as operating cash flows on the Consolidated Statements of Cash Flows. We establish creditworthiness prior to extending credit. We estimate the recoverability of receivables each period. This estimate is based upon new information in the period, which can include the review of any available financial statements and forecasts, as well as discussions with legal counsel and the management of the debtor company. When events occur that impact the collectability of the receivable, all or a portion of the receivable is reserved. Account balances are charged off against the allowance when the potential for recovery is considered remote. We do not have any off-balance sheet credit exposure related to our customers. Inventories. Inventories are valued at the lower of cost and net realizable value. See Note 7 to the Consolidated Financial Statements for additional details. Property Plant and Equipment. Property plant and equipment is recorded at cost reduced by accumulated depreciation and amortization. Depreciation and amortization expense is recognized on a straight-line basis over the assets’ estimated useful lives. Machinery and equipment includes manufacturing equipment (depreciated over 2 to 15 years), computer equipment (depreciated over 4 to 5 years) and office furniture and equipment (depreciated over 5 to 7 years). Within manufacturing equipment, assets that are subject to accelerated obsolescence or wear out quickly, such as dryer components, are generally depreciated over shorter periods while heavy production equipment, such as conveyors and production presses, are generally depreciated over longer periods. Buildings are depreciated over 15 to 30 years, depending on factors such as type of construction and use. Computer software is amortized over 3 to 7 years. Property, plant and equipment is tested for impairment by asset group when indicators of impairment are present, such as operating losses and/or negative cash flows for each identified asset group. If an indication of impairment exists, we compare the carrying amount of the asset group to the estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying value exceeds the undiscounted future cash flows, we determine the fair value of the asset group based on discounted future cash flows expected to be generated by the asset group, or based on management’s estimated exit price assuming the assets could be sold in an orderly transaction between market participants, or estimated salvage value if no sale is assumed. If the fair value is less than the carrying value of the asset group, we record an impairment charge equal to the difference between the fair value and carrying value of the asset group. Impairments of assets related to our manufacturing operations are recorded in cost of goods sold. We did not test tangible assets for impairment in 2025, 2024 or 2023 as no indicators of impairment existed. When assets are disposed of or retired, their costs and related depreciation or amortization are removed from the financial statements, and any resulting gains or losses are normally reflected in cost of goods sold or SG&A expenses depending on the nature of the asset. See Note 9 to the Consolidated Financial Statements for additional details. Leases. We enter into operating and finance leases for certain manufacturing plants, warehouses, equipment and automobiles. Our leases have remaining lease terms of up to 12 years. Several leases include options for us to purchase leased items at fair value or renew for up to 10 years, or multiple 10-year renewal periods. Some of our leases include early termination options. We consider all of these options in determining the lease term used to establish our right-of-use (“ROU”) assets and lease liabilities when it is reasonably certain that we will exercise that option. Our lease agreements do not contain any residual value guarantees or material restrictive covenants. We have lease agreements with lease and non-lease components, which we have elected to combine to determine the ROU assets and lease liabilities. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. As most of our leases do not provide an implicit rate, we use our Incremental Borrowing Rate (“IBR”) based on information that is available at the lease commencement date to compute the present value of lease payments. Relevant information used in determining the IBR includes the transactional currency of the lease and the lease term. See Note 11 to the Consolidated Financial Statements for additional details. Asset Retirement Obligations. We recognize the fair value of obligations associated with the retirement of tangible long-lived assets in the period in which they are incurred. Upon initial recognition of a liability, the discounted cost is capitalized as part of the related long-lived asset and depreciated over the corresponding asset’s useful life. Over time, accretion of the liability is recognized as an operating expense to reflect the change in the liability’s present value. Investments in Unconsolidated Affiliates. We account for investments in entities over which we have significant influence but do not control using the equity method of accounting. Under the equity method, our initial investment is recorded at cost and subsequently adjusted to recognize our share of the investee’s earnings or losses, which are included as a component of our net earnings. The carrying amount of the investment is also adjusted for dividends received from the investee, which are recorded as a reduction in the carrying amount of the investment, as well as contributions made, which are recorded as an increase in the carrying amount of the investment. Investments in unconsolidated affiliates as of December 31, 2025 reflected the equity interest in our 50% investment in our WAVE joint venture and our 19.2% equity interest in Overcast. Both the WAVE joint venture and Overcast investment are reflected within our Consolidated Financial Statements using the equity method of accounting. WAVE is reflected as a component of our Mineral Fiber segment while Overcast is included as a component of our Unallocated Corporate segment. We use the cumulative earnings approach to determine the appropriate classification of distributions from WAVE on our Consolidated Statements of Cash Flows. For all years presented, cumulative distributions received in prior periods, less distributions that were returns of investment, exceeded our cumulative equity earnings from WAVE as adjusted for the amortization of basis differences. Accordingly, the distributions were reflected as returns of investment within cash flows from investing activities on our Consolidated Statements of Cash Flows for all years presented. Management regularly evaluates its investment in unconsolidated affiliates for impairment. Based on those evaluations, management concluded that its investments were not impaired in 2025, 2024 or 2023. See Note 10 to the Consolidated Financial Statements for additional details. Goodwill and Intangible Assets. Our definite-lived intangible assets consist primarily of customer relationships (amortized over 3 to 20 years), developed technology (amortized over 10 to 20 years), trademarks and brand names (amortized over 3 to 20 years), acquired internally-developed software (amortized over 5 to 7 years) and non-compete agreements (amortized over 3 to 5 years). We review definite-lived intangible assets for impairment by asset group when indicators of impairment are present, such as operating losses and/or negative cash flows for the respective asset group. If an indication of impairment exists, we compare the carrying amount of the asset group to the estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying value exceeds the undiscounted future cash flows, we determine the fair value of the asset group based on discounted future cash flows expected to be generated by the asset group or based on management’s estimated exit price assuming the assets could be sold in an orderly transaction between market participants. If the fair value is less than the carrying value of the asset group, we record an impairment charge equal to the difference between the fair value and carrying value of the asset group. We did not test definite-lived intangible assets for impairment in 2025, 2024 or 2023 as no indicators of impairment existed. Our indefinite-lived assets include goodwill, trademarks and brand names, with Armstrong representing our primary trademark. Trademarks and brand names are integral to our corporate identity and are expected to contribute indefinitely to our cash flows. Accordingly, they have been assigned an indefinite life. We conduct our annual impairment tests on these indefinite-lived intangible assets and goodwill during the fourth quarter. These assets undergo more frequent tests if an indication of possible impairment exists. When performing an impairment test for indefinite-lived intangible assets and goodwill, we compare the carrying amount of the asset (when testing indefinite-lived intangible assets) and reporting unit (when testing goodwill) to the estimated fair value. For indefinite-lived intangible assets, the estimated fair value is based on discounted future cash flows using the relief from royalty method. For goodwill, the estimated fair value is based on discounted future cash flows expected to be generated by the reporting unit. If the fair value is less than the carrying value of the asset/reporting unit, we record an impairment charge equal to the difference between the fair value and carrying value of the asset/reporting unit. We did not test indefinite-lived intangible assets for impairment during any interim periods during 2025, as no indicators of impairment existed. We completed our annual impairment test in the fourth quarter of 2025. No impairment charges were recorded in 2025, 2024 or 2023. See Note 12 to the Consolidated Financial Statements for additional details. Foreign Currency. Assets and liabilities of our foreign subsidiaries whose functional currency is not the U.S. dollar are translated to U.S. dollars using the period-end exchange rate. Revenues and expenses are translated at average exchange rates effective during each month. Foreign currency translation gains or losses are included as a component of accumulated other comprehensive (loss) (“AOCL”) within shareholders' equity. Gains or losses on foreign currency transactions are recognized through earnings. Derivatives. We use derivatives to offset the effect of interest rate variability. Derivatives are recognized on the balance sheet at fair value. For derivatives that meet the criteria as designated cash flow hedges, the changes in the fair value of the derivative are recognized in other comprehensive income (loss) until the hedged item is recognized in operations. See Notes 18 and 19 to the Consolidated Financial Statements for further discussion. Share-based Employee Compensation. We generally recognize share-based compensation expense on a straight-line basis over the vesting period for the entire award. Compensation expense for performance-based awards with non-market-based conditions are also recognized over the vesting period for the entire award, however, compensation expense may vary based on the expectations for actual performance relative to defined performance measures. We estimate forfeitures based on actual historical forfeitures. See Note 21 to the Consolidated Financial Statements for additional information. Treasury Stock. Common shares repurchased by AWI are recorded on the settlement date at cost as treasury shares and result in a reduction of equity. We may reissue these treasury shares. When treasury shares are reissued, we determine the cost using the First-in, first-out cost method (“FIFO”). The difference between the cost of the treasury shares and reissuance price is included in additional paid-in capital or retained earnings. Recently Adopted Accounted Standards In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Improvements to Income Tax Disclosures,” which enhances the transparency of income tax disclosures, including expanded statutory‑to‑effective tax rate reconciliations and disaggregation of income taxes by jurisdiction. Effective December 31, 2025, we retrospectively adopted this guidance, resulting in an impact to our income tax disclosures. See Note 15 to the Consolidated Financial Statements for additional details. Recently Issued Accounting Standards In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures,” which expands disclosure of significant costs and expenses. This ASU requires expanded disclosures of significant costs and expenditures within cost of goods sold and SG&A expenses, including amounts of inventory purchased, employee compensation, depreciation, amortization and selling expenses. This ASU also requires expanded qualitative disclosures, including a description of selling expenses and a description of non-disaggregated expenses. This guidance is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We expect this ASU to only impact our disclosures with no impact to our results of operations, cash flows and financial condition. In July 2025, the FASB issued ASU 2025-05, “Financial Instruments - Credit Losses,” which simplifies the application of the current expected credit loss model by providing a practical expedient and accounting policy election permitting entities to assume that conditions as of the balance sheet date remain unchanged over the life of the asset when measuring credit losses on current accounts receivable and current contract assets. If elected, entities are required to apply the guidance on a prospective basis. The update is effective for interim and annual reporting periods beginning after December 15, 2025. Early adoption is permitted. We are evaluating the impact the adoption of this ASU will have to our results of operations, cash flows and financial condition. In September 2025, the FASB issued ASU 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software,” which modernizes and clarifies the threshold entities apply to begin capitalizing development costs for internal-use software. This guidance is effective for interim and annual periods beginning after December 15, 2027. Early adoption is permitted. We are evaluating the impact the adoption of this ASU will have to our results of operations, cash flows and financial condition.

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