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Item 8. Financial Statements and Supplementary Data

2023-10-11 compared with 2022-10-05 · 152 added, 161 removed, 794 unchanged (28% of the section changed)

13 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Costco Wholesale Corporation and subsidiaries (the Company) as of August 28, 2022, and August 29, 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the 52-week periods ended August 28, 2022, August 29, 2021, and August 30, 2020, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 28, 2022, and August 29, 2021, and the results of its operations and its cash flows for each of the 52-week periods ended August 28, 2022, August 29, 2021, and August 30, 2020, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Costco Wholesale Corporation and subsidiaries (the Company) as of September 3, 2023, and August 28, 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for the 53-week period ended September 3, 2023, and the 52-week periods ended August 28, 2022, and August 29, 2021, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 3, 2023, and August 28, 2022, and the results of its operations and its cash flows for each of the 53-week period ended September 3, 2023, and the 52-week periods ended August 28, 2022, and August 29, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 28, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated October 4, 2022, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 3, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated October 10, 2023, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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As discussed in Note 1 to the consolidated financial statements, the Company estimates its self-insurance liabilities by considering historical claims experience, demographic factors, severity factors, and other actuarial assumptions.

The estimated self-insurance liabilities as of August 28, 2022, were $1,364 million, a portion of which related to workers’ compensation self-insurance liabilities for the United States operations.

The estimated self-insurance liabilities as of September 3, 2023, were $1,513 million, a portion of which related to workers’ compensation self-insurance liabilities for the United States operations.

We identified the evaluation of the Company’s workers’ compensation self-insurance liabilities for the United States operations as a critical audit matter because of the extent of specialized skill and knowledge needed to evaluate the underlying assumptions and judgments made by the Company in the actuarial models.

14 unchanged sentences

Opinion on Internal Control Over Financial Reporting

We have audited Costco Wholesale Corporation and subsidiaries ’ (the Company) internal control over financial reporting as of August 28, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 28, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of August 28, 2022, and August 29, 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the 52-week periods ended August 28, 2022, August 29, 2021, and August 30, 2020 , and the related notes (collectively, the consolidated financial statements), and our report dated October 4, 2022, expressed an unqualified opinion on those consolidated financial statements.

We have audited Costco Wholesale Corporation and subsidiaries ’ (the Company) internal control over financial reporting as of September 3, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 3, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 3, 2023, and August 28, 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for the 53-week period ended September 3, 2023, and the 52-week periods ended August 28, 2022, and August 29, 2021 , and the related notes (collectively, the consolidated financial statements), and our report dated October 10, 2023, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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(amounts in millions, except per share data)

52 Weeks Ended

53 Weeks Ended 52 Weeks Ended 52 Weeks Ended

2023 August 28,

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(amounts in millions)

52 Weeks Ended

53 Weeks Ended 52 Weeks Ended 52 Weeks Ended

2023 August 28,

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Shares (000’s) Amount

BALANCE AT SEPTEMBER 1, 2019 439,625 $ 4 $ 6,417 $ ( 1,436 ) $ 10,258 $ 15,243 $ 341 $ 15,584

BALANCE AT AUGUST 30, 2020 441,255 $ 4 $ 6,698 $ ( 1,297 ) $ 12,879 $ 18,284 $ 421 $ 18,705

— — — — 5,007 5,007 72 5,079

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( 1,358 ) — ( 23 ) — ( 472 ) ( 495 ) — ( 495 )

Cash dividends declared and other

— — — — ( 1,193 ) ( 1,193 ) — ( 1,193 )

Cash dividends declared — — — — ( 5,748 ) ( 5,748 ) — ( 5,748 )

BALANCE AT AUGUST 29, 2021 441,825 4 7,031 ( 1,137 ) 11,666 17,564 514 18,078

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1,702 — ( 363 ) — — ( 363 ) — ( 363 )

Dividend to noncontrolling interest — — — — — — ( 208 ) ( 208 )

Acquisition of noncontrolling interest — — ( 499 ) ( 6 ) — ( 505 ) ( 337 ) ( 842 )

Repurchases of common stock

( 863 ) — ( 15 ) — ( 427 ) ( 442 ) — ( 442 )

Cash dividends declared — — — — ( 5,748 ) ( 5,748 ) — ( 5,748 )

Cash dividends declared and other — ( 2 ) 2 — ( 1,498 ) ( 1,498 ) — ( 1,498 )

BALANCE AT AUGUST 28, 2022 442,664 2 6,884 ( 1,829 ) 15,585 20,642 5 20,647

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1,470 — ( 303 ) — — ( 303 ) — ( 303 )

Dividend to noncontrolling interest — — — — — — ( 208 ) ( 208 )

Acquisition of noncontrolling interest — — ( 499 ) ( 6 ) — ( 505 ) ( 337 ) ( 842 )

Repurchases of common stock

1 unchanged sentence

Cash dividends declared and other — — 5 — ( 1,703 ) ( 1,698 ) ( 5 ) ( 1,703 )

BALANCE AT AUGUST 28, 2022 442,664 $ 2 $ 6,884 $ ( 1,829 ) $ 15,585 $ 20,642 $ 5 $ 20,647

BALANCE AT SEPTEMBER 3, 2023 442,793 $ 2 $ 7,340 $ ( 1,805 ) $ 19,521 $ 25,058 $ — $ 25,058

The accompanying notes are an integral part of these consolidated financial statements.

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(amounts in millions)

52 Weeks Ended

53 Weeks Ended 52 Weeks Ended 52 Weeks Ended

2023 August 28,

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Stock-based compensation

Other non-cash operating activities, net

Deferred income taxes

( 37 ) 59 104

Impairment of assets and other non-cash operating activities, net 495 39 144

Changes in operating assets and liabilities:

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Additions to property and equipment ( 4,323 ) ( 3,891 ) ( 3,588 )

Acquisitions — — ( 1,163 )

Other investing activities, net 36 ( 48 ) ( 62 )

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CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of long-term debt — — 3,992

Repayments of short-term borrowings ( 935 ) ( 6 ) —

Proceeds from short-term borrowings 917 53 41

Repayments of long-term debt ( 75 ) ( 800 ) ( 94 )

2 unchanged sentences

Cash dividend payments ( 1,251 ) ( 1,498 ) ( 5,748 )

Financing lease payments ( 291 ) ( 176 ) ( 67 )

Dividend to noncontrolling interest — ( 208 ) —

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SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

Cash dividend declared, but not yet paid $ 452 $ — $ —

Capital expenditures included in liabilities $ 170 $ 156 $ 184

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Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses based on the concept that offering members low prices on a limited selection of nationally-branded and private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover.

At August 28, 2022, Costco operated 838 warehouses worldwide:

578 in the United States (U.S.) located in 46 states, Washington, D.C., and Puerto Rico, 107 in Canada, 40 in Mexico, 31 in Japan, 29 in the United Kingdom (U.K.), 17 in Korea, 14 in Taiwan, 13 in Australia, four in Spain, two each in France and China, and one in Iceland.

The Company operates e-commerce websites in the U.S., Canada, U.K., Mexico, Korea, Taiwan, Japan, and Australia.

At September 3, 2023, Costco operated 861 warehouses worldwide:

591 in the United States (U.S.) located in 46 states, Washington, D.C., and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom (U.K.), 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one each in Iceland, New Zealand, and Sweden.

The Company operates e-commerce websites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia.

Basis of Presentation

The consolidated financial statements include the accounts of Costco, its wholly-owned subsidiaries, and subsidiaries in which it has a controlling interest.

The consolidated financial statements include the accounts of Costco and its subsidiaries.

The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity.

All material inter-company transactions between and among the Company and its consolidated subsidiaries have been eliminated in consolidation.

During 2022, the Company paid a cash dividend of $ 208 and purchased the equity interest of its Taiwan operations from its former joint-venture partner for $ 842 , totaling $ 1,050 in the aggregate.

The remaining noncontrolling interest represents the portion of equity interests in a consolidated joint venture that is not 100% owned by the Company.

Unless otherwise noted, references to net income relate to net income attributable to Costco.

1 unchanged sentence

The Company operates on a 52/53-week fiscal year basis with the year ending on the Sunday closest to August 31.

References to 2022, 2021, and 2020 relate to the 52-week fiscal years ended August 28, 2022, August 29, 2021, and August 30, 2020, respectively.

References to 2023 relate to the 53-week fiscal year ended September 3, 2023.

References to 2022 and 2021 relate to the 52-week fiscal years ended August 28, 2022, and August 29, 2021.

Use of Estimates

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles (U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

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Reclassification

Reclassifications were made to our 2021 and 2020 consolidated statements of income and cash flows to conform with current year presentation.

Reclassifications were made to the 2022 and 2021 consolidated statements of cash flows to conform with current year presentation.

Cash and Cash Equivalents

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Credit and debit card receivables were $ 2,282 and $ 2,010 at the end of 2023 and 2022.

The Company provides for the daily replenishment of major bank accounts as payments are presented.

Included in accounts payable at the end of 2022 and 2021, are $ 995 and $ 999 representing the excess of outstanding payments over cash on deposit at the banks on which the payments were drawn.

Short-Term Investments

1 unchanged sentence

Government and Agency Notes), with maturities at the date of purchase of three months to five years.

Investments with maturities beyond five years may be classified, based on the Company’s determination, as short-term based on their highly liquid nature and because they represent the investment of cash that is available for current operations.

Investments with maturities beyond five

years may be classified, based on the Company’s determination, as short-term based on their highly liquid nature and because they represent the investment of cash that is available for current operations.

Short-term investments classified as available-for-sale are recorded at fair value using the specific identification method with the unrealized gains and losses reflected in accumulated other comprehensive income (loss) until realized.

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The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables and accounts payable, approximate fair value due to their short-term nature or variable interest rates.

See Notes 2 , 3 , and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt, respectively.

See Notes 2 , 3 , and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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Valuation methodologies used to measure the fair value of all other non-derivative financial instruments are based on independent external valuation information.

The pricing process uses data from a variety of independent external valuation information providers, including trades, bid price or spread, two-sided markets, quotes, benchmark curves including but not limited to treasury benchmarks and LIBOR or Secured Overnight Financing Rate and swap curves, discount rates, and market data feeds.

The pricing process uses data from a variety of independent external valuation information providers, including trades, bid price or spread, two-sided markets, quotes, benchmark curves including but not limited to treasury benchmarks, Secured Overnight Financing Rate and swap curves, discount rates, and market data feeds.

All are observable in the market or can be derived principally from or corroborated by observable market data.

The Company reports transfers in and out of Levels 1, 2, and 3, as applicable, using the fair

value of the individual securities as of the beginning of the reporting period in which the transfer(s) occurred.

The Company reports transfers in and out of Levels 1, 2, and 3, as applicable, using the fair value of the individual securities as of the beginning of the reporting period in which the transfer(s) occurred.

Current financial liabilities have fair values that approximate their carrying values.

Long-term financial liabilities include the Company's long-term debt, which are recorded on the balance sheet at issuance price and adjusted for unamortized discounts or premiums and debt issuance costs, and are being amortized to interest expense over the term of the loan.

The estimated fair value of the Company's long-term debt is based primarily on reported market values, recently completed market transactions, and estimates based upon interest rates, maturities, and credit.

Discounts, premiums and debt issuance costs are amortized to interest expense over the term of the loan.

The estimated fair

value of the Company's long-term debt is based primarily on reported market values, recently completed market transactions, and estimates based upon interest rates, maturities, and credit.

Receivables, Net

Receivables consist primarily of vendor, credit card incentive, reinsurance, third-party pharmacy and other receivables.

Receivables consist primarily of vendor, reinsurance, credit card incentive, third-party pharmacy and other receivables.

Vendor receivables include discounts and volume rebates.

1 unchanged sentence

In certain circumstances, these receivables may be settled against the related payable to that vendor, in which case the receivables are presented on a net basis.

Credit card incentive receivables primarily represent amounts earned under the co-branded credit card arrangements in the U.S.

Reinsurance receivables are held by the Company’s wholly-owned captive insurance subsidiary and primarily represent amounts ceded through reinsurance arrangements gross of the amounts assumed under reinsurance, which are presented within other current liabilities in the consolidated balance sheets.

Credit card incentive receivables primarily represent amounts earned under co-branded credit card arrangements.

Third-party pharmacy receivables generally relate to amounts due from members’ insurers.

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The Company records an adjustment each quarter, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at year-end, after actual inflation or deflation rates and inventory levels have been determined.

Due to inflation, a $ 438 charge was recorded during 2022 to merchandise costs to increase the cumulative LIFO valuation on merchandise inventories at August 28, 2022.

An immaterial LIFO charge was recorded in 2023.

Due to inflation in 2022, a $ 438 charge was recorded to merchandise costs to increase the cumulative LIFO valuation on merchandise inventories at August 28, 2022.

Canadian and Other International merchandise inventories are predominantly valued using the cost and retail inventory methods, respectively, using the first-in, first-out (FIFO) basis.

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To the extent that the assets become ready for their intended use, these costs are included in equipment and fixtures and amortized on a straight-line basis over their estimated useful lives.

In 2022 and 2021, the Company recognized in SG&A expenses write-offs of $ 118 and $ 84 for certain information technology assets.

Repair and maintenance costs are expensed when incurred.

8 unchanged sentences

Equipment and fixtures 3 - 20 years

11,512 10,275

Construction in progress N/A 1,266 1,582

7 unchanged sentences

The Company estimates fair value by obtaining market appraisals from third party brokers or using other valuation techniques.

There were no impairment charges recognized in 2022 or 2020.

Impairment charges recognized in 2023 were immaterial.

In 2022 and 2021, the Company recognized write-offs of $ 118 and $ 84 for information technology assets which are reflected in SG&A.

The Company leases land, buildings, and/or equipment at warehouses and certain other office and distribution facilities.

1 unchanged sentence

(a) renew the lease for a defined number of years at the then-fair market rental rate or rate stipulated in the lease agreement;

(b) purchase the property at the then-fair market value;

(b) purchase the property at the then-fair market value or purchase price stated in the agreement;

or (c) a right of first refusal in the event of a third-party offer.

Some leases include free-rent periods and step-rent provisions, which are recognized on a straight-line basis over the original term of the lease and any extension options that the Company is reasonably certain to exercise from the date the Company has control of the property.

Certain leases provide for periodic rent increases based on price indices or the greater of minimum guaranteed amounts or sales volume.

Certain leases provide for periodic rent increases based on price indices or the greater of minimum guaranteed amounts or sales volume, which are recognized as variable lease payments.

Our leases do not contain any material residual value guarantees or material restrictive covenants.

7 unchanged sentences

Impairment of ROU assets is evaluated in a similar manner as described in Property and Equipment, Net above.

During 2023, the Company recognized charges totaling $391, primarily related to the impairment of certain leased assets associated with charter shipping activities.

This charge is included in merchandise costs.

The Company's asset retirement obligations (ARO) primarily relate to leasehold improvements that must be removed at the end of a lease.

13 unchanged sentences

Balance at August 29, 2021 $ 953 $ 28 $ 15 $ 996

Changes in currency translation and other (1)

Balance at August 29, 2021 $ 953 $ 28 $ 15 $ 996

Changes in currency translation — ( 1 ) ( 2 ) ( 3 )

Balance at August 28, 2022 $ 953 $ 27 $ 13 $ 993

(1) Other consists of changes to the purchase price allocation.

Changes in currency translation — ( 1 ) 2 1

Balance at September 3, 2023 $ 953 $ 26 $ 15 $ 994

Definite-lived intangible assets, which are not material, are included in other long-term assets on the consolidated balance sheets and are amortized on a straight-line basis over their estimated lives, which approximates the pattern of expected economic benefit.

Insurance/Self-insurance Liabilities

Claims for employee health care benefits, workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability, inventory loss, and other exposures are funded predominantly through self-insurance.

Claims for employee health-care benefits, workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability, inventory loss, and other exposures are funded

predominantly through self-insurance.

Insurance coverage is maintained for certain risks to limit exposures arising from very large losses.

The Company uses different risk management mechanisms, including a wholly-owned captive insurance subsidiary (the captive) and participates in a reinsurance program.

Liabilities associated with the risks that are retained by the Company are not discounted and are estimated, in part, by considering historical claims experience, demographic factors, severity factors, and other actuarial assumptions.

The estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

At the end of 2022 and 2021, these insurance liabilities were $ 1,364 and $ 1,257 in the aggregate, respectively, and were included in accrued salaries and benefits and other current liabilities in the consolidated balance sheets, classified based on their nature.

The captive receives direct premiums, which are netted against the Company’s premium costs in selling, general and administrative expenses, in the consolidated statements of income.

The captive participates in a reinsurance program that includes other third-party participants.

The reinsurance agreement is one year in duration, and new agreements are entered into by each participant at their discretion at the commencement of the next calendar year.

The Company uses various risk management mechanisms, including a wholly-owned captive insurance subsidiary (the captive) and participates in a reinsurance program.

Liabilities associated with the risks that are retained by the Company are not discounted and are estimated using historical claims experience, demographic factors, severity factors, and other actuarial assumptions.

The estimated accruals for these liabilities could be significantly affected if future occurrences, claims, or expenses differ from these assumptions and historical trends.

At the end of 2023 and 2022, these insurance liabilities were $ 1,513 and $ 1,364 in the aggregate, and were included in accrued salaries and benefits and other current liabilities in the consolidated balance sheets, classified based on their nature.

The captive receives direct premiums, which are netted against the Company’s premium costs in SG&A expenses in the consolidated statements of income.

The captive participates in a reinsurance program that includes third-party participants.

The participant agreements and practices of the reinsurance program are designed to limit a participating members’ individual risk.

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Some of these contracts contain credit-risk-related contingent features that require settlement of outstanding contracts upon certain triggering events.

The aggregate fair value amounts of derivative instruments in a net liability position and the amount needed to settle the instruments immediately if the credit-risk-related contingent features were triggered were immaterial at the end of 2022.

There were no derivative instruments in a net liability position at the end of 2021.

The aggregate notional amounts of open, unsettled forward foreign-exchange contracts were $ 1,242 and $ 1,331 at the end of 2022 and 2021, respectively.

The aggregate notional amounts of open, unsettled forward foreign-exchange contracts were $ 1,068 and $ 1,242 at the end of 2023 and 2022.

See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts at the end of 2023 and 2022.

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The Company also enters into variable-priced contracts for some purchases of natural gas, in addition to fuel for its gas stations, on an index basis.

These contracts meet the characteristics of

derivative instruments, but generally qualify for the “normal purchases and normal sales” exception under authoritative guidance and require no mark-to-market adjustment.

These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases and normal sales” exception under authoritative guidance and require no mark-to-market adjustment.

Foreign Currency

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Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts.

These items were $ 84 in 2022 and immaterial in 2021 and 2020.

These items were $ 46 and $ 84 in 2023 and 2022 and immaterial in 2021.

Revenue Recognition

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The Company accounts for membership fee revenue, net of refunds, on a deferred basis, ratably over the one-year membership period.

Deferred membership fees at the end of 2022 and 2021 were $ 2,174 and $ 2,042 , respectively.

Deferred membership fees at the end of 2023 and 2022 were $ 2,337 and $ 2,174 .

In most countries, the Company's Executive members qualify for a 2% reward on qualified purchases, subject to an annual maximum value, which does not expire and is redeemable at Costco warehouses.

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Estimated breakage is computed based on redemption data.

For 2022, 2021, and 2020, the net reduction in sales was $ 2,307 , $ 2,047 , and $ 1,707 respectively.

For 2023, 2022, and 2021, the net reduction in sales was $ 2,576 , $ 2,307 , and $ 2,047 .

The Company sells and otherwise provides proprietary shop cards that do not expire and are redeemable at the warehouse or online for merchandise or membership.

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Citibank, N.A.

became the exclusive issuer of co-branded credit cards to U.S.

members in June 2016.

is the exclusive issuer of co-branded credit cards to U.S.

The Company receives various forms of consideration from Citibank, including a royalty on purchases made on the card outside of Costco.

3 unchanged sentences

Merchandise Costs

Merchandise costs consist of the purchase price or manufacturing costs of inventory sold, inbound and outbound shipping charges and all costs related to the Company’s depot, fulfillment and manufacturing operations, including freight from depots to selling warehouses, and are reduced by vendor consideration.

Merchandise costs also include salaries, benefits, depreciation, and utilities in fresh foods and certain ancillary departments.

Merchandise costs also include salaries, benefits, depreciation, and utilities in fresh foods departments and certain ancillary businesses.

Vendor Consideration

The Company has agreements to receive funds from vendors for discounts and a variety of other programs.

These programs are evidenced by signed agreements that are reflected in the carrying value of the inventory when earned or as the Company progresses towards earning the rebate or discount, and as a component of merchandise costs as the merchandise is sold.

The Company receives funds from vendors for discounts and a variety of other programs.

These programs are evidenced by agreements that are reflected in the carrying value of the inventory when earned or as the Company progresses towards earning the rebate or discount, and as a component of merchandise costs as the merchandise is sold.

Other vendor consideration is generally recorded as a reduction of merchandise costs upon completion of contractual milestones, terms of the related agreement, or by another systematic approach.

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Stock-Based Compensation

Restricted Stock Units (RSUs) granted to employees generally vest over five years and allow for quarterly vesting of the pro-rata number of stock-based awards that would vest on the next anniversary of the grant date in the event of retirement or voluntary termination.

Actual forfeitures are recognized as they occur.

Compensation expense for stock-based awards is predominantly recognized using the straight-line method over the requisite service period for the entire award.

Awards for employees and non-employee directors provide for accelerated vesting based on cumulative years of service with the Company.

The Company grants stock-based compensation, primarily to employees and non-employee directors.

Grants to executive officers are generally performance-based.

Through a series of shareholder approvals, there have been amended and restated plans and new provisions implemented by the Company.

Restricted Stock Units (RSUs) granted to employees and to non-employee directors generally vest over five years and three years and are subject to quarterly vesting in the event of retirement or voluntary termination.

Employees who attain at least 25 years of service with the Company receive shares under accelerated vesting provisions on the annual vesting date.

Forfeitures are recognized as they occur.

Compensation expense for awards is predominantly recognized using the straight-line method over the requisite service period for the entire award.

The terms of the RSUs, including performance-based awards, provide for accelerated vesting for employees and non-employee directors who have attained 25 or more and five or more years of service with the Company, respectively.

Recipients are not entitled to vote or receive dividends on unvested and undelivered shares.

Compensation expense for the accelerated shares is recognized upon achievement of the long-service term.

The cumulative amount of compensation cost recognized at any point in time equals at least the portion of the grant-date fair value of the award that is vested at that date.

The fair value of RSUs is calculated as the market value of the common stock on the measurement date less the present value of the expected dividends forgone during the vesting period.

The fair value of RSUs is calculated as the market value of the

common stock on the measurement date less the present value of the expected dividends forgone during the vesting period.

Stock-based compensation expense is predominantly included in SG&A expenses in the consolidated statements of income.

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The Company accounts for income taxes using the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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The benefits of uncertain tax positions are recorded in the Company’s consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge from tax authorities.

When facts and circumstances change, the Company reassesses these probabilities and records any changes as appropriate.

When facts and circumstances change, the Company reassesses these probabilities and records changes as appropriate.

Net Income per Common Share Attributable to Costco

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Basis Unrealized

Gains, Net Recorded

Losses, Net Recorded

Available-for-sale:

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Total short-term investments $ 851 $ ( 5 ) $ 846

Gross unrecognized holding gains and losses on available-for-sale securities were not material for the years ended August 28, 2022, and August 29, 2021.

Gross unrecognized holding gains and losses on available-for-sale securities were not material for the years ended September 3, 2023, and August 28, 2022.

At those dates, there were no available-for-sale securities in a material continuous unrealized-loss position.

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Total $ 644 $ 561

(1) At August 29, 2021, $ 12 cash and cash equivalents and $ 381 short-term investments are included in the consolidated balance sheets.

(1) The asset and the liability values are included in other current assets and other current liabilities, respectively, in the consolidated balance sheets.

At August 28, 2022, and August 29, 2021, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis.

At September 3, 2023, and August 28, 2022, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis.

There were no transfers between levels during 2023 or 2022.

2 unchanged sentences

These assets are measured at fair value if determined to be impaired.

There were no fair value adjustments to nonfinancial assets during 2022 and in 2021 they were immaterial.

Please see Note 1 for additional information.

Short-Term Borrowings

The Company maintains various short-term bank credit facilities, with a borrowing capacity of $ 1,257 and $ 1,050 , in 2022 and 2021, respectively.

Borrowings on these short-term facilities were immaterial during 2022 and 2021.

Short-term borrowings outstanding were $ 88 and $ 41 at the end of 2022 and 2021.

The Company maintains various short-term bank credit facilities, with a borrowing capacity of $ 1,234 and $ 1,257 , in 2023 and 2022.

Short-term borrowings outstanding were immaterial at the end of 2023 and 2022.

Long-Term Debt

The Company's long-term debt consists primarily of Senior Notes, described below.

On December 1, 2021, the Company repaid, prior to maturity, the 2.300 % Senior Notes at a redemption price plus accrued interest as specified in the Notes' agreement.

The Company at its option may redeem the Senior Notes at any time, in whole or in part, at a redemption price plus accrued interest.

The redemption price is equal to the greater of 100 % of the principal amount or the sum of the present value of the remaining scheduled payments of principal and interest to maturity.

Additionally, upon certain events, the holder has the right to require the Company to purchase this security at a price of 101 % of the principal amount plus accrued and unpaid interest to the date of the event.

Additionally, upon certain events, a holder has the right to require a repurchase at a price of 101 % of the principal amount plus accrued and unpaid interest.

Interest on all outstanding long-term debt is payable semi-annually.

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Other long-term debt consists of Guaranteed Senior Notes issued by the Company's Japanese subsidiary, valued using Level 3 inputs.

At the end of 2022 and 2021, the fair value of the Company's long-term debt, including the current portion, was approximately $ 6,033 and $ 7,692 , respectively.

In May 2023, the Japanese subsidiary repaid $ 75 of its Guaranteed Senior Notes.

At the end of 2023 and 2022, the fair value of the Company's long-term debt, including the current portion, was approximately $ 5,738 and $ 6,033 .

The carrying value of long-term debt consisted of the following:

2.750 % Senior Notes due May 2024

$ 1,000 $ 1,000

3.000 % Senior Notes due May 2027

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Financing lease assets obtained in exchange for new or modified leases 100 794 399

As of August 28, 2022, future minimum payments during the next five fiscal years and thereafter are as follows:

As of September 3, 2023, future minimum payments during the next five fiscal years and thereafter are as follows:

Operating Leases (1)

8 unchanged sentences

Note 6—Equity

Cash dividends declared in 2022 totaled $ 3.38 per share, as compared to $ 12.98 per share in 2021.

Dividends in 2021 included a special dividend of $ 10.00 per share, aggregating approximately $ 4,430 .

Cash dividends declared in 2023 totaled $ 3.84 per share, as compared to $ 3.38 in 2022.

The Company's current quarterly dividend rate is $ 1.02 per share.

Stock Repurchase Programs

The Company's stock repurchase program is conducted under a $ 4,000 authorization by the Board of Directors, which expires in April 2023.

As of the end of 2022, the remaining amount available under the approved plan was $ 2,808 .

The Company's stock repurchase program is conducted under a $ 4,000 authorization by the Board of Directors, which expires in January 2027.

As of the end of 2023, the remaining amount available under the authorization was $ 3,563 .

The following table summarizes the Company’s stock repurchase activity:

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These amounts may differ from repurchases of common stock in the consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of each fiscal year.

Purchases are made from time to time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1.

Purchases are made

from time to time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1.

Note 7—Stock-Based Compensation

The Company grants stock-based compensation, primarily to employees and non-employee directors.

Grants to executive officers are generally performance-based.

Through a series of shareholder approvals, there have been amended and restated plans and new provisions implemented by the Company.

RSUs are subject to quarterly vesting upon retirement or voluntary termination.

Employees who attain at least 25 years of service with the Company receive shares under accelerated vesting provisions on the annual vesting date.

The 2019 Incentive Plan authorized the issuance of 17,500,000 shares ( 10,000,000 RSUs) of common stock for future grants, plus the remaining shares that were available for grant and the future forfeited shares from grants under the previous plan, up to a maximum aggregate of 27,800,000 shares ( 15,885,000 RSUs).

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Summary of Restricted Stock Unit Activity

RSUs granted to employees and to non-employee directors generally vest over five and three years, respectively.

Additionally, the terms of the RSUs, including performance-based awards, provide for accelerated vesting for employees and non-employee directors who have attained 25 or more and five or more years of service with the Company, respectively.

Recipients are not entitled to vote or receive dividends on unvested and undelivered shares.

At the end of 2022, 10,445,000 shares were available to be granted as RSUs under the 2019 Incentive Plan.

The following awards were outstanding at the end of 2022:

At the end of 2023, 8,747,000 shares were available to be granted as RSUs, and the following awards were outstanding:

• 2,869,000 time-based RSUs, which vest upon continued employment or service over specified periods of time;

• 176,000 performance-based RSUs, of which 135,000 were granted to executive officers subject to the determination of the attainment of performance targets for 2023.

This determination occurred in September 2022, at which time at least 33% of the units vested, as a result of the long service of all executive officers receiving performance-based RSUs.

This determination occurred in September 2023, at which time at least 33% of the units vested, as a result of the long service of all executive officers, with the exception of one executive officer who has less than 25 years of service.

The remaining awards vest upon continued employment over specified periods of time.

Please refer to Note 1 for accelerated vesting requirements.

The following table summarizes RSU transactions during 2023:

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Outstanding at the end of 2023 3,045 $ 405.63

The weighted-average grant date fair value of RSUs granted was $ 476.06 , $ 369.15 , and $ 294.08 in 2022, 2021, and 2020, respectively.

The weighted-average grant date fair value of RSUs granted was $ 471.47 , $ 476.06 , and $ 369.15 in 2023, 2022, and 2021.

The remaining unrecognized compensation cost related to non-vested RSUs at the end of 2023 was $ 790 and the weighted-average period of time over which this cost will be recognized is 1.6 years.

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These include benefits of $ 54 , $ 94 and $ 75 , related to stock-based compensation.

During 2021, there was a net tax benefit of $ 70 related to the portion of the special dividend paid through our 401(k) plan.

During 2021, there was a net tax benefit of $ 70 related to the portion of the special dividend paid through the Company's 401(k) plan.

The components of the deferred tax assets (liabilities) are as follows:

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Net deferred tax liabilities $ ( 304 ) $ ( 279 )

The deferred tax accounts at the end of 2022 and 2021 include deferred income tax assets of $ 445 and $ 444 , respectively, included in other long-term assets;

and deferred income tax liabilities of $ 724 and $ 754 , respectively, included in other long-term liabilities.

The deferred tax accounts at the end of 2023 and 2022 include deferred income tax assets of $ 491 and $ 445 , included in other long-term assets;

and deferred income tax liabilities of $ 795 and $ 724 , included in other long-term liabilities.

In 2023 and 2022, the Company had valuation allowances of $ 422 and $ 313 , primarily related to foreign tax credits that the Company believes will not be realized due to carry forward limitations.

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consolidated subsidiaries after 2017 to be indefinitely reinvested (other than China and Taiwan) and has recorded the estimated incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S.

The Company continues to consider undistributed earnings of certain non-U.S.

The Company considers undistributed earnings of certain non-U.S.

consolidated subsidiaries, which totaled $ 3,225 , to be indefinitely reinvested and has not provided for withholding or state taxes.

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Legal Proceedings

The Company is involved in a number of claims, proceedings and litigations arising from its business and property ownership.

The Company is involved in many claims, proceedings and litigations arising from its business and property ownership.

In accordance with applicable accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that are both probable and reasonably estimable.

There may be exposure to loss in excess of amounts accrued.

There may be losses in excess of amounts accrued.

The Company monitors those matters for developments that would affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate.

The Company has recorded immaterial accruals with respect to certain matters described below, in addition to other immaterial accruals for matters not described below.

If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable.

The Company has recorded immaterial accruals with

respect to certain matters described below, in addition to other immaterial accruals for matters not described below.

If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but monitors for developments that make the contingency both probable and reasonably estimable.

In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual.

For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because, among other things:

(i) the remedies or penalties sought are indeterminate or unspecified;

(ii) the legal and/or factual theories are not well developed;

and/or (iii) the matters involve complex or novel legal theories or a large number of parties.

the remedies or penalties sought are indeterminate or unspecified;

the legal and/or factual theories are not well developed;

and/or the matters involve complex or novel legal theories or a large number of parties.

The Company is a defendant in an action commenced in July 2013 under the California Labor Code Private Attorneys General Act (PAGA) alleging violation of California Wage Order 7-2001 for failing to provide seating to employees who work at entrance and exit doors in California warehouses.

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Santa Clara Superior Court).

The complaint seeks relief under the California Labor Code, including civil penalties and attorneys’ fees.

The Company filed an answer denying the material allegations of the complaint.

A bench trial was held in June and July;

no decision has been issued.

The complaint sought relief under the California Labor Code, including civil penalties and attorneys’ fees.

On April 26, 2023, the court entered a final judgment in favor of the Company.

The plaintiff appealed the judgment in June 2023.

In June 2022, a business center employee raised similar claims, alleging failure to provide seating to employees who work at membership refund desks in California warehouses and business centers.

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The Company filed an answer denying the material allegations of the complaint.

In December 2018, a depot employee raised similar claims, alleging that depot employees in California did not receive suitable seating or reasonably comfortable workplace temperature conditions.

Costco Wholesale Corp.

CIVDS 1908816;

San Bernardino Superior Court).

The Company filed an answer denying the material allegations of the complaint.

In October 2019, the parties settled for an immaterial amount the seating claims on a representative basis, which received court approval in

February 2020.

The parties settled the temperature claims for an immaterial amount in April 2022, and court approval was received in May 2022.

In March 2019, employees filed a class action against the Company alleging claims under California law for failure to pay overtime, to provide meal and rest periods and itemized wage statements, to timely pay wages due to terminating employees, to pay minimum wages, and for unfair business practices.

Relief is sought under the California Labor Code, including civil penalties and attorneys' fees.

Relief was sought under the California Labor Code, including civil penalties and attorneys' fees.

Costco Wholesale Corp.

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Final court approval of the settlement was granted on May 3, 2022.

A proposed intervenor has appealed the denial of her motion to intervene.

A proposed intervenor appealed the denial of her motion to intervene, and the appeal was dismissed on February 15, 2023.

In May 2019, an employee filed a class action against the Company alleging claims under California law for failure to pay overtime, to provide itemized wage statements, to timely pay wages due to terminating employees, to pay minimum wages, and for unfair business practices.

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Relief is sought under the California Labor Code, including civil penalties and attorneys' fees.

In September 2021, the court granted Costco’s motion for partial summary judgment and denied class certification.

In September 2021, the court granted the Company's motion for partial summary judgment and denied class certification.

In August 2019, the plaintiff filed a companion case in state court seeking penalties under PAGA.

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The state court action has been stayed pending resolution of the federal action.

In September 2023 the parties reached an agreement in principle on a settlement for an immaterial amount.

In December 2020, a former employee filed suit against the Company asserting collective and class claims on behalf of non-exempt employees under the Fair Labor Standards Act and New York Labor Law for failure to pay for all hours worked, failure to pay certain non-exempt employees on a weekly basis, and failure to provide proper wage statements and notices.

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1:20-cv-06067;

An amended complaint was filed, and the Company denied the material allegations of the amended complaint.

Based on an agreement in principle concerning settlement of the matter, involving a proposed payment by the Company of an immaterial amount, the federal action has been dismissed.

In April 2022, Cappadora and a second plaintiff filed an action against the Company in New York state court asserting the same class claims asserted in the federal action under the New York Labor Law and seeking preliminary approval of the class settlement.

In April 2022, Cappadora and a second plaintiff filed an action against the Company in New York state court, asserting the same class

claims asserted in the federal action under the New York Labor Law and seeking preliminary approval of the class settlement.

Cappadora and Sancho v.

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Nassau County Supreme Court).

Following final approval of the settlement, the case was dismissed on April 14, 2023.

In August 2021, a former employee filed a similar suit, asserting class claims on behalf of certain non-exempt employees under New York Labor Law for failure to pay on a weekly basis.

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2:21-cv-4814;

The Company answered the complaint on October 21, 2021, denying the material allegations.

The Company filed an answer, denying the material allegations of the complaint.

In August 2023, the parties reached an agreement in principle on a settlement for an immaterial amount.

In April 2022, a former employee filed a similar suit, asserting class claims on behalf of certain non-exempt employees under New York Labor Law, as well as under the Fair Labor Standards Act, for failure to pay on a weekly basis and failure to pay overtime.

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2:22-cv-02108;

The case was settled for an immaterial amount and was dismissed with prejudice in May 2023.

In February 2021, a former employee filed a class action against the Company alleging violations of California Labor Code regarding payment of wages, meal and rest periods, wage statements, reimbursement of expenses, payment of final wages to terminated employees, and for unfair business practices.

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5:21-cv-00716:

In May 2021, the Company filed a motion to dismiss the complaint, which was granted with leave to amend.

In June 2021, the plaintiff filed an amended complaint, which the Company moved to dismiss later that month.

The court granted the motion in part in July 2021 with leave to amend.

In August 2021, the plaintiff filed a second amended complaint and filed a separate representative action under PAGA asserting the same Labor Code claims and seeking civil penalties and attorneys' fees.

The Company filed an answer to the second

amended class action complaint, denying the material allegations.

The Company also filed an answer to the PAGA representative action, denying the material allegations.

On September 27, 2022, the parties reached a settlement for an immaterial amount, which is subject to court approval.

In July 2021, a former temporary staffing employee filed a class action against the Company and a staffing company alleging violations of the California Labor Code regarding payment of wages, meal and rest periods, wage statements, the timeliness of wages and final wages, and for unfair business practices.

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The Company has moved to compel arbitration of the plaintiff's individual claims and to dismiss the class action complaint.

On September 7, 2021, the same former employee filed a separate representative action under PAGA asserting the same Labor Code violations and seeking civil penalties and attorneys' fees.

The case has been stayed pending the motion to compel in the related case.

In September 2021, an employee filed a class action against the Company alleging violations of the California Labor Code regarding the alleged failure to provide sick pay, failure to timely pay wages due at separation from employment, and for violations of California's unfair competition law.

On September 7, 2021, the same plaintiff filed a separate representative action under PAGA, asserting the same Labor Code violations and seeking civil penalties and attorneys' fees.

The case has been stayed pending arbitration of the plaintiff's individual claims.

In September 2021, an employee filed a class action against the Company alleging violations of the California Labor Code regarding failure to provide sick pay, failure to timely pay wages due at separation from employment, and for violations of California's unfair competition law.

De Benning v.

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Sacramento Superior Court).

The Company answered the complaint in January 2022, denying its material allegations.

In April 2022, a settlement for an immaterial amount was agreed upon, subject to court approval.

Final approval of the settlement was granted on February 10, 2023.

In March 2022, an employee filed a class action against the Company alleging violations of the California Labor Code regarding the failure to:

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Los Angeles Superior Court).

The Company filed an answer denying the material allegations.

In May 2022, an employee filed a PAGA-only representative action against the Company alleging claims under the California Labor Code regarding the payment of wages, meal and rest periods, the timeliness of wages and final wages, wage statements, accurate records and business expenses.

In December 2022, the case was settled for an immaterial amount, and the case was dismissed.

In May 2022, an employee filed a PAGA action against the Company alleging claims under the California Labor Code regarding the payment of wages, meal and rest periods, the timeliness of wages and final wages, wage statements, accurate records and business expenses.

Costco Wholesale Corp.

Los Angeles Superior Court).

The Company filed an answer denying the allegations.

Beginning in December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases concerning the impacts of opioid abuses filed against various defendants by counties, cities, hospitals, Native American tribes, third-party payors, and others.

In re National Prescription Opiate Litigation (MDL No.

Included are cases that name the Company, including actions filed by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged increased insurance costs associated with opioid abuse in 43 states and American Samoa.

Included are cases filed against the Company by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged

increased insurance costs associated with opioid abuse in 43 states and American Samoa.

Claims against the Company filed in federal court outside the MDL have been asserted by certain counties and cities in Florida and Georgia;

claims filed by certain cities and counties in New York are pending in state court.

Claims against the Company in state courts in New Jersey, Oklahoma, Utah, and Arizona have been dismissed.

The Company is defending all of the pending matters.

Members of the Board of Directors, six corporate officers and the Company are defendants in a shareholder derivative action related to chicken welfare and alleged breaches of fiduciary duties.

Members of the Board of Directors, six corporate officers and the Company were defendants in a shareholder derivative action filed in June 2022 related to chicken welfare and alleged breaches of fiduciary duties.

Smith, et ano.

Vachris, et al., Superior Court of the State of Washington, County of King, No, 22-2-08937-7SEA, (filed 6/14/22, as amended, 6/30/22);

The complaint seeks from the individual defendants damages, injunctive relief, costs, and attorneys' fees.

A motion to dismiss the amended complaint has been filed.

Vachris, et al., Superior Court of the State of Washington, County of King, No, 22-2-08937-7SEA.

The complaint sought from the individual defendants' damages, injunctive relief, costs, and attorneys' fees.

On March 28, 2023, the court granted the defendants' motion to dismiss the action.

The plaintiffs subsequently made a demand that the Board of Directors take various actions, including among other things, pursuing claims against directors and officers of the type asserted in the litigation.

A demand review committee of the Board has been appointed to make a recommendation to the Board as to the demand.

In February 2023, Go Green Norcal, LLC filed an arbitration demand against the Company.

The demand alleged a breach of a supply agreement and sought unspecified damages and cancellation of a loan from the Company.

In March 2023, the Company filed its answer, denying any breach by the Company, along with counterclaims against Go Green and an affiliate for breach of contract, negligent misrepresentation, and an accounting.

In August 2023 the plaintiff asserted that its damages exceed $ 70 million.

In January 2023 the Company received a Civil Investigative Demand from the U.S.

Attorney's Office, Western District of Washington, requesting documents.

The government is conducting a False Claims Act investigation concerning whether the Company presented or caused to be presented to the federal government for payment false claims relating to prescription medications.

The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows;

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Note 11—Segment Reporting

The Company is principally engaged in the operation of membership warehouses through wholly owned subsidiaries in the U.S., Canada, Mexico, Japan, U.K., Korea, Taiwan, Australia, Spain, France, China, and Iceland.

The Company is principally engaged in the operation of membership warehouses through wholly owned subsidiaries in the U.S., Canada, Mexico, Japan, the U.K., Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden.

Reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which considers geographic locations.

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Inter-segment net sales and expenses have been eliminated in computing total revenue and operating income.

Effective for fiscal 2022, stock-based compensation was allocated to the segments in this reporting.

This change reflected a decision to evaluate the financial performance of the segments inclusive of this expense.

Operating income was restated in each of the segments for all prior periods to reflect this change.

The following table provides information for the Company's reportable segments:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data