What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-10-08 compared with 2024-10-09 · 173 added, 196 removed, 762 unchanged (33% 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 September 1, 2024 and September 3, 2023, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the fiscal years in the three-year period ended September 1, 2024, 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 1, 2024 and September 3, 2023, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended September 1, 2024, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Costco Wholesale Corporation and subsidiaries (the Company) as of August 31, 2025 and September 1, 2024, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the fiscal years in the three-year period ended August 31, 2025, 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 31, 2025 and September 1, 2024, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended August 31, 2025, 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 September 1, 2024, 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 8, 2024 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 August 31, 2025, 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 7, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of workers' compensation self-insurance liabilities

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 September 1, 2024, were $1,612 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.

Specifically, subjective auditor judgment was required to evaluate the Company's selected loss rates and initial expected losses used in the actuarial models.

Sufficiency of audit evidence over United States and Canada revenue

As discussed in Note 11 to the consolidated financial statements, the Company generated $200,046 million and $36,923 million of total revenue in the United States (U.S.) and Canada, respectively, for the year ended August 31, 2025, which included revenue from membership fees, merchandise sales, and gasoline sales (U.S.

and Canada revenue).

The processing and recording of U.S.

and Canada revenue is dependent upon the use of multiple information technology (IT) systems.

We identified the evaluation of the sufficiency of audit evidence over U.S.

and Canada revenue as a critical audit matter.

Evaluating the sufficiency of audit evidence required subjective auditor judgment due to the highly automated nature of certain processes to record U.S.

and Canada revenue, which involves interfacing significant volumes of data across multiple IT systems.

The complexity of the IT environment required the involvement of IT professionals with specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self-insurance workers' compensation process.

This included controls related to the development and selection of the assumptions listed above used in the actuarial calculation and review of the actuarial report.

We involved actuarial professionals with specialized skills and knowledge who assisted in:

• Assessing the actuarial models used by the Company for consistency with generally accepted actuarial standards

• Evaluating the Company’s ability to estimate self-insurance workers' compensation liabilities by comparing its historical estimates with actual incurred losses and paid losses

• Evaluating the above listed assumptions underlying the Company’s actuarial estimates by developing an independent expectation of the self-insurance workers' compensation liabilities and comparing them to the amounts recorded by the Company.

We applied auditor judgment to determine the nature and extent of procedures to be performed over the processing and recording of U.S.

and Canada revenue, including the IT systems tested.

We involved IT professionals with specialized skills and knowledge, who assisted in evaluating the design and testing the operating effectiveness of certain internal controls over the Company's revenue process, including general IT and application controls related to the IT systems used for the processing and recording of U.S.

and Canada revenue.

We performed a software-assisted data analysis to test the relationships among certain revenue journal entries.

We evaluated the sufficiency of audit evidence obtained over U.S.

and Canada revenue by assessing the results of procedures performed, including the appropriateness of nature and extent of such evidence.

We have served as the Company’s auditor since 2002.

5 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 September 1, 2024, 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 1, 2024, 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 1, 2024 and September 3, 2023, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the fiscal years in the three-year period ended September 1, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated October 8, 2024 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 August 31, 2025, 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 31, 2025, 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 31, 2025 and September 1, 2024, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the fiscal years in the three-year period ended August 31, 2025, and the related notes (collectively, the consolidated financial statements), and our report dated October 7, 2025 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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2025 September 1,

2023 August 28,

2024 September 3,

Net sales $ 269,912 $ 249,625 $ 237,710

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Provision for income taxes 2,719 2,373 2,195

Net income including noncontrolling interests 7,367 6,292 5,915

Net income attributable to noncontrolling interests

NET INCOME ATTRIBUTABLE TO COSTCO $ 7,367 $ 6,292 $ 5,844

NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:

NET INCOME $ 8,099 $ 7,367 $ 6,292

NET INCOME PER COMMON SHARE:

Basic $ 18.24 $ 16.59 $ 14.18

9 unchanged sentences

2025 September 1,

2023 August 28,

NET INCOME INCLUDING NONCONTROLLING INTERESTS

2024 September 3,

$ 8,099 $ 7,367 $ 6,292

Foreign-currency translation adjustment and other, net

( 23 ) 24 ( 721 )

COMPREHENSIVE INCOME

Comprehensive income attributable to noncontrolling interests

COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO

$ 8,157 $ 7,344 $ 6,316

21 unchanged sentences

Deferred membership fees 2,854 2,501

Current portion of long-term debt 103 1,081

Other current liabilities 6,589 6,313

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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

— — — — 7,367 7,367 — 7,367

7 unchanged sentences

( 1,004 ) — ( 18 ) — ( 680 ) ( 698 ) — ( 698 )

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

Cash dividends declared — — — — ( 8,589 ) ( 8,589 ) — ( 8,589 )

BALANCE AT SEPTEMBER 1, 2024 443,126 2 7,829 ( 1,828 ) 17,619 23,622 — 23,622

9 unchanged sentences

Cash dividends declared — — — — ( 2,183 ) ( 2,183 ) — ( 2,183 )

BALANCE AT SEPTEMBER 1, 2024 443,126 $ 2 $ 7,829 $ ( 1,828 ) $ 17,619 $ 23,622 $ — $ 23,622

BALANCE AT AUGUST 31, 2025 443,237 $ 2 $ 8,282 $ ( 1,770 ) $ 22,650 $ 29,164 $ — $ 29,164

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

4 unchanged sentences

2025 September 1,

2023 August 28,

2024 September 3,

CASH FLOWS FROM OPERATING ACTIVITIES

Net income including noncontrolling interests $ 7,367 $ 6,292 $ 5,915

Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:

Net income $ 8,099 $ 7,367 $ 6,292

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

9 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of short-term investments ( 1,470 ) ( 1,622 ) ( 1,121 )

Maturities and sales of short-term investments 1,790 937 1,145

Additions to property and equipment ( 5,498 ) ( 4,710 ) ( 4,323 )

Purchases of short-term investments ( 1,028 ) ( 1,470 ) ( 1,622 )

Maturities of short-term investments 1,141 1,790 937

Other investing activities, net 74 ( 19 ) 36

9 unchanged sentences

Financing lease payments and other financing activities, net ( 147 ) ( 137 ) ( 291 )

Dividend to noncontrolling interest — — ( 208 )

Acquisition of noncontrolling interest — — ( 842 )

Net cash used in financing activities ( 3,775 ) ( 10,764 ) ( 2,614 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

40 15 ( 249 )

Net change in cash and cash equivalents 4,255 ( 3,794 ) 3,497

14 unchanged sentences

Description of Business

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 September 1, 2024, Costco operated 890 warehouses worldwide:

614 in the United States (U.S.) located in 47 states, Washington, D.C., and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the U.K., 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, four in Spain, two in France, and one each in Iceland, New Zealand, and Sweden.

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

Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses and e-commerce sites 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 31, 2025, Costco operated 914 warehouses worldwide:

629 in the United States (U.S.) located in 47 states, Washington, D.C., and Puerto Rico, 110 in Canada, 42 in Mexico, 37 in Japan, 29 in the U.K., 20 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, two in Sweden, and one each in Iceland and New Zealand.

The Company operated e-commerce sites 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 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.

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

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

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

Fiscal Year End

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

References to 2024 and 2022 relate to the 52-week fiscal years ended September 1, 2024 and August 28, 2022.

References to 2025 and 2024 relate to the 52-week fiscal years ended August 31, 2025, and September 1, 2024.

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

5 unchanged sentences

Reclassification

Reclassifications were made to the 2023 and 2022 consolidated statements of cash flows to conform with current year presentation.

Reclassifications were made to the 2024 consolidated balance sheet to conform with current year presentation.

Cash and Cash Equivalents

4 unchanged sentences

government and agency securities), 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.

26 unchanged sentences

Receivables, Net

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

Vendor receivables include discounts and volume rebates.

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

Vendor receivables include discounts, volume rebates, and a variety of other programs.

Balances are generally presented on a gross basis, separate from any related payable due.

15 unchanged sentences

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 higher merchandise costs in 2025, a $ 142 charge was recorded to merchandise costs to increase the cumulative LIFO valuation on merchandise inventories at August 31, 2025.

An immaterial LIFO benefit was recorded in 2024 and an immaterial 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.

The Company initially provides for estimated inventory losses between physical inventory counts using estimates based on experience.

The provision is adjusted periodically to reflect physical inventory counts, which generally occur in the second and fourth fiscal quarters.

The provision is adjusted to reflect physical inventory counts, which generally occur in the second and fourth fiscal quarters.

Inventory cost where appropriate is reduced by estimates of vendor rebates when earned or as the Company progresses towards earning those rebates, provided that they are probable and reasonably estimable.

2 unchanged sentences

Depreciation and amortization expense is computed primarily using the straight-line method over estimated useful lives.

Leasehold improvements made after the beginning of the initial lease term are depreciated over the shorter of the estimated useful life of the asset or the remaining term of the initial lease plus any renewals that are reasonably certain at the date the leasehold improvements are made.

The Company capitalizes certain computer software and costs incurred in developing or obtaining software for internal use.

22 unchanged sentences

Impairment charges recognized in 2025, 2024 and 2023 were immaterial.

In 2022, the Company recognized a write-off of $ 118 for information technology assets, which is reflected in SG&A.

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

9 unchanged sentences

Non-lease components and the lease components to which they relate are accounted for together as a single lease component for all asset classes.

The Company initially records right-of-use (ROU) assets and lease obligations for its

finance and operating leases based on the discounted future minimum lease payments over the term.

The Company initially records right-of-use (ROU) assets and lease obligations for its finance and operating leases based on the discounted future minimum lease payments over the term.

The lease term is defined as the noncancelable period of the lease plus any options to extend when it is reasonably certain that the Company will exercise the option.

6 unchanged sentences

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

These obligations are generally recorded as a discounted liability, with an offsetting asset at the inception of the lease term, based upon the estimated fair value of the costs to remove the improvements.

These obligations are recorded as a discounted liability, with an offsetting asset, based upon the estimated fair value of the costs to remove the improvements.

These liabilities are accreted over time to the projected future value of the obligation.

The ARO assets are depreciated using the same depreciation method as the leasehold improvement assets and are included in buildings and improvements.

Estimated ARO liabilities associated with these leases are included in other liabilities in the consolidated balance sheet.

Estimated ARO liabilities associated with these leases are included in other long-term liabilities in the consolidated balance sheet.

Goodwill and Acquired Intangible Assets

5 unchanged sentences

Goodwill is included in other long-term assets in the consolidated balance sheets.

The following table summarizes goodwill by reportable segment:

United States Canada Other International Total

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

Changes in currency translation — ( 1 ) 2 1

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

Changes in currency translation — — — —

Balance at September 1, 2024 $ 953 $ 26 $ 15 $ 994

At the end of 2025, 2024, and 2023 goodwill balances in the Company's U.S., Canadian, and Other International operations were $ 953 , $ 26 , and $ 15 .

No impairment charges were recorded in 2025, 2024, or 2023.

Definite-lived intangible assets, which are immaterial, 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.

2 unchanged sentences

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

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 Company uses various risk management mechanisms, including a wholly-owned captive insurance subsidiary 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.

3 unchanged sentences

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

Income statement adjustments related to the reinsurance program and related impacts to the consolidated balance sheets are recognized as information becomes known.

Income statement adjustments

related to the reinsurance program and related impacts to the consolidated balance sheets are recognized as information becomes known.

In the event the Company leaves the reinsurance program, the Company retains its primary obligation to the participants for prior activity.

3 unchanged sentences

dollar merchandise inventory expenditures made by the Company’s international subsidiaries with functional currencies other than the U.S.

Currently, these contracts do not qualify for derivative hedge accounting.

These contracts either do not qualify for or the Company has not elected derivative hedge accounting.

The Company seeks to mitigate risk with the use of these contracts and does not intend to engage in speculative transactions.

4 unchanged sentences

The unrealized gains or losses recognized in interest income and other, net in the consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts were immaterial in 2025, 2024 and 2023.

The Company is exposed to fluctuations in prices for energy, particularly electricity and natural gas, and other commodity products used in retail and manufacturing operations, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S.

The Company is exposed to fluctuations in prices for energy, particularly electricity and natural gas, and other commodities used in retail and manufacturing operations, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S.

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.

8 unchanged sentences

dollar cash and cash equivalents and the U.S.

dollar payables of consolidated subsidiaries revalued to their

functional currency.

dollar payables of consolidated subsidiaries revalued to their functional currency.

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

These items were $ 64 , $ 46 and $ 84 in 2024, 2023, and 2022.

These items were immaterial in 2025, 2024, and 2023.

Revenue Recognition

The Company recognizes sales for the amount of consideration collected from the member, which includes gross shipping fees where applicable, and is net of sales taxes collected and remitted to government agencies and member returns.

The Company reserves for estimated returns based on historical trends in merchandise returns and reduces sales and merchandise costs accordingly.

The Company records, on a gross basis, a refund liability and an asset for recovery, which are included in other current liabilities and other current assets, respectively, in the consolidated balance sheets.

The Company reserves for estimated returns based on historical trends and reduces sales and merchandise costs accordingly.

The Company records on a gross

basis a refund liability and an asset for recovery, which are included in other current liabilities and other current assets, respectively, in the consolidated balance sheets.

The Company offers merchandise in the following core merchandise categories:

16 unchanged sentences

Revenue from shop cards is recognized upon redemption, and estimated breakage is recognized based on redemption data.

The Company accounts for outstanding shop card balances as a shop card liability, net of estimated breakage.

The Company accounts for outstanding shop card balances as a liability, net of estimated breakage.

Shop card liabilities are included in other current liabilities in the consolidated balance sheets.

4 unchanged sentences

The rebates are issued in February and expire on December 31.

The Company also maintains co-branded credit card arrangements in Canada and certain other International subsidiaries.

The Company also maintains varying co-branded credit card arrangements in Canada and certain other International subsidiaries.

Merchandise Costs

4 unchanged sentences

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, agreement terms or another systematic approach.

Other vendor consideration is generally recorded as a reduction of merchandise costs upon completion of contractual milestones, agreement terms, or other systematic approaches.

Selling, General and Administrative Expenses

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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 and non-employee directors with five or more years receive shares under accelerated vesting provisions.

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.

Employees who attain at least 25 years of service with the Company and non-employee directors with five or more years may receive shares under accelerated vesting provisions.

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.

In May 2025, the Compensation Committee approved changes to the vesting schedule applicable only to future grants.

Existing participants in the Plan had the option to make a one-time election to remain under the five-year vesting schedule with acceleration for long service or to change to a three-year vesting schedule with no such acceleration.

RSUs granted to new participants will vest over the three-year term with no such acceleration.

This has no impact on RSUs outstanding or the related disclosures in N ote 7 .

Compensation expense for awards is predominantly recognized using the straight-line method over the requisite service period for the entire award and forfeitures are recognized as they occur.

Under accelerated vesting provisions, compensation expense 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.

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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 tax bases, credits and loss carry-forwards.

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.

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.

3 unchanged sentences

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

Net Income per Common Share Attributable to Costco

Net Income per Common Share

The computation of basic net income per share uses the weighted average number of shares that were outstanding during the period.

6 unchanged sentences

See Note 6 for additional information.

Recent Accounting Pronouncements Not Yet Adopted

Recent Accounting Pronouncements Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, which is intended to improve reportable segment disclosure requirements, primarily about significant segment expenses.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

In December 2023, the FASB issued ASU 2023-09, which focuses on income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted the ASU for the fiscal year ended August 31, 2025, on a retrospective basis for all prior periods presented in the financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, which requires public business entities on an annual basis to disclose specific categories in the income-tax rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and disclose certain information about income taxes paid.

The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

1 unchanged sentence

Retrospective application is permitted.

In November 2024, the FASB issued 2024-03, which requires disaggregated disclosures of certain costs and expenses on the income statement on an annual and interim basis.

The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The amendments should be applied on a prospective basis.

Retrospective application is permitted.

The Company is evaluating both standards.

2 unchanged sentences

Basis Unrealized

Losses, Net Recorded

Gains, Net Recorded

Available-for-sale:

10 unchanged sentences

Total short-term investments $ 1,239 $ ( 1 ) $ 1,238

Gross unrecognized holding gains and losses on available-for-sale securities were immaterial for the years ended September 1, 2024, and September 3, 2023.

Gross unrecognized holding gains and losses on available-for-sale securities were not material for the years ended August 31, 2025, and September 1, 2024.

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

9 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below presents information regarding the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the hierarchy reflecting the valuation techniques utilized to determine such fair value.

The following table presents information regarding the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the level within the hierarchy reflecting the valuation techniques utilized to determine such fair value:

Investment in government and agency securities $ 786 $ 688

1 unchanged sentence

Forward foreign-exchange contracts, in (liability) position (1)

( 14 ) ( 28 )

Total $ 778 $ 661

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

At September 1, 2024, and September 3, 2023, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis.

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

At August 31, 2025, and September 1, 2024, 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 2025 or 2024.

2 unchanged sentences

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

There were no material fair value adjustments to these items during 2024.

There were no material fair value adjustments to these items during 2025 and 2024.

Please see Note 1 for additional information.

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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.

In November 2023, the Company’s Japan subsidiary issued four Guaranteed Senior Notes, totaling approximately $ 500 , at fixed interest rates ranging from 1.400 % to 2.120 %.

In 2024, the Company’s Japan subsidiary issued four Guaranteed Senior Notes, totaling approximately $ 500 , at fixed interest rates ranging from 1.400 % to 2.120 %.

Interest is payable semi-annually, and maturity dates range from November 2033, to November 2043.

In July 2024, the Japanese subsidiary repaid $ 77 of its Guaranteed Senior Notes.

On May 18, 2024, the Company paid the $ 1,000 outstanding principal balance and interest on the 2.750 % Senior Notes using cash and cash equivalents and short-term investments.

In 2025, 2024, and 2023 the Japanese subsidiary repaid $ 103 , $ 77 , and $ 75 of its Guaranteed Senior Notes.

In 2024, the Company repaid the $ 1,000 outstanding principal balance on its 2.750 % Senior Notes.

At the end of 2025 and 2024, the fair value of the Company's long-term debt, including the current portion, was approximately $ 5,370 and $ 5,412 .

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3.000 % Senior Notes due May 2027

$ 1,000 $ 1,000

1.375 % Senior Notes due June 2027

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_____________

(1) Net of unamortized debt discounts and issuance costs.

(1) Net of unamortized debt discounts and issuance costs and included in other current liabilities in the accompanying consolidated balance sheets.

Maturities of long-term debt during the next five fiscal years and thereafter are as follows:

Note 5—Leases

The tables below present information regarding the Company's lease assets and liabilities.

Information regarding the Company's lease assets and liabilities were as follows:

Operating lease right-of-use assets $ 2,725 $ 2,617

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(2) Included in interest expense and merchandise costs in the consolidated statements of income.

Supplemental cash flow information related to leases was as follows:

Supplemental cash flow information related to leases were as follows:

2025 2024 2023

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Operating cash flows — operating leases $ 255 $ 274 $ 287

$ 274 $ 287 $ 277

Operating cash flows — finance leases

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Finance lease assets obtained in exchange for new or modified leases 131 200 100

As of September 1, 2024, future minimum payments during the next five fiscal years and thereafter are as follows:

As of August 31, 2025, future minimum payments during the next five fiscal years and thereafter are as follows:

Operating Leases (1)

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Note 7—Stock-Based Compensation

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).

The Company issues new shares of common stock upon vesting of RSUs.

The 2019 Incentive Plan authorizes the issuance of up to 15,885,000 RSUs.

The number of RSUs that may be granted under this Plan is subject to adjustments for changes in capital structure.

The Company issues new shares of common stock upon vesting and settlement of RSUs.

Shares for vested RSUs are generally delivered to participants annually, net of shares withheld for taxes.

As required by the 2019 Incentive Plan, in conjunction with the 2024 special dividend, the number of shares subject to outstanding RSUs was increased on the dividend record date to preserve their value.

They were adjusted by multiplying the number of outstanding shares by a factor of 1.018 , representing the ratio of the Nasdaq closing price of $ 674.62 on December 26, 2023, which was the last trading day immediately prior to the ex-dividend date, to the Nasdaq opening price of $ 662.70 on the ex-dividend date, December 27, 2023.

The outstanding RSUs increased by approximately 52,000 .

The adjustment did not result in additional stock-based compensation expense, as the fair value of the awards did not change.

As further required by the 2019 Incentive Plan, the maximum number of shares issuable under the plan was proportionally adjusted, which resulted in an additional 128,000 RSU shares available to be granted.

Summary of Restricted Stock Unit Activity

At the end of 2024, 7,278,000 shares were available to be granted as RSUs, and the following awards, adjusted for the effects of the special dividend, were outstanding:

At the end of 2025, 6,275,000 shares were available to be granted as RSUs, and the following awards were outstanding:

• 2,187,000 time-based RSUs, which vest upon continued employment or service over specified periods of time;

• 121,000 performance-based RSUs, of which 70,000 were granted to executive officers subject to the determination of the attainment of performance targets for 2025, which occurred in September 2025.

At that time, depending upon long-service terms, at least 33% of the units vested.

At that time, a portion vested as a result of executive officers who met accelerated vesting provisions.

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

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Forfeited ( 92 ) 567.87

Special cash dividend 52 N/A

Outstanding at the end of 2025 2,308 $ 597.00

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Total $ 2,719 25.1 % $ 2,373 24.4 % $ 2,195 25.9 %

The Company's effective tax rate in 2024 included discrete tax benefits of $ 94 related to the portion of the special dividend payable through the Company's 401(k) plan, a net non-recurring tax benefit of $ 63 related to a transfer pricing settlement and certain true-ups of tax reserves, and $ 45 of excess tax benefits related to stock compensation.

In 2023 and 2022, tax benefits of $ 54 and $ 94 were recognized related to stock compensation.

The Company's effective tax rate in 2025, 2024, and 2023 included tax benefits of $ 100 , $ 45 , and $ 54 , related to stock compensation.

In 2024, tax benefits also included $ 94 related to the portion of the special dividend payable through the Company's 401(k) plan and a net non-recurring tax benefit of $ 63 related to a transfer pricing settlement and certain true-ups of tax reserves.

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

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Gross decreases—tax positions in prior years ( 38 ) —

Gross decreases—settlements ( 1 ) —

Lapse of statute of limitations — ( 2 )

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Accrued interest and penalties recognized during 2025 and 2024, and accrued at the end of each respective period were immaterial.

The Company is currently under audit by several jurisdictions in the United States and abroad.

The Company is currently under audit by several jurisdictions in the U.S.

Some audits may conclude in the next 12 months, and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts.

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The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next 12 months.

The Company files income tax returns in the United States, various state and local jurisdictions, in Canada, and in several other foreign jurisdictions.

The Company files income tax returns in the U.S., various state and local jurisdictions, in Canada, and in several other foreign jurisdictions.

With few exceptions, the Company is no longer subject to U.S.

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2025 2024 2023

Net income attributable to Costco

$ 8,099 $ 7,367 $ 6,292

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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.

The Company has recorded an immaterial accrual with respect to some 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.

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Martin Reyes v.

Costco Wholesale Corporation, Sacramento County Superior Court (Case No.

23cv011351), removed to federal court, Case No.

Costco Wholesale Corporation, Sacramento County Superior Court (No.

23cv011351), removed to federal court, No.

2:24-cv-00300 (E.D.

3 unchanged sentences

the Company has denied the material allegations of the complaint and filed a motion to stay the action.

In October 2023, current and former employees filed suit against the Company asserting collective and class claims on behalf of all “Junior Managers” under the Fair Labor Standards Act and New York Labor Law, for failure to pay overtime compensation and for inaccurate wage statements under New York law.

Costco Wholesale Corp.

2:23-cv-07904;

On February 1, 2024, the Company served a motion to dismiss the inaccurate wage-statement claim.

On April 5, 2024, plaintiffs filed a motion for conditional certification under the Act, which the Company has opposed.

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.

Costco Wholesale Corp.

STK-CV-UOE-2021-0006024;

San Joaquin Superior Court).

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 plaintiff filed a separate representative action under the California Private Attorneys General Act, 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 May 2022, an employee filed an action under PAGA 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.

On October 31, 2023, a settlement was reached for an immaterial amount.

Preliminary approval of the settlement was given in July, and a hearing for final approval has been set for October.

In August 2024, an employee filed an action under PAGA against the Company, alleging claims for penalties for alleged violations of the California Labor Code regarding:

off-the-clock work, incorrect and untimely payment of wages, meal and rest periods, reimbursement of expenses, non-compliant wage statements, payment of final wages, incorrect rates for sick pay, meal and rest premiums and vacation

pay and reimbursement of expenses.

Costco (Case No.

The motion was granted on December 18, 2024.

In August 2024, an employee filed an action under PAGA against the Company, alleging claims for penalties for various alleged violations of the California Labor Code.

CV-24-006198;

Stanislaus County Superior Court).

The Company has not yet responded to the complaint.

An amended complaint was filed in November 2024.

In February 2025 the court granted the Company’s motion to strike portions of the complaint.

The plaintiff filed a further amended complaint;

the Company's motion to strike a portion of this complaint was granted on May 13, 2025.

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.

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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 filed in federal court outside the MDL by one county in Georgia are pending, and claims filed by certain cities and counties in New York are pending in state court, as are claims by certain county district attorneys in Pennsylvania.

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.

In October 2021 the Company received a notice that the Quebec Health Insurance Board had commenced an inquiry to determine whether the Company had given or received improper payments for drugs that are covered by the province's prescription drug program from drug wholesalers, generic drug manufacturers or the independent pharmacist who owns and operates the pharmacies located in the Company's Quebec locations.

The inquiry covers a period beginning January 1, 2017.

In August 2024 the Board made a demand of an immaterial amount.

The Company is a named defendant in four bodily injury actions relating to its sale of Real Water, an alkalized water previously sold at the Company and other retailers.

Costco Wholesale Corp.

et al., Case No.

A23-864391-B, District Court, Clark County, NV Wei, et al.

Costco Wholesale Corp.

A-22-856147-B, District Court, Clark County, NV Henry et al.

Costco Wholesale Corp.

et al., Case No.

A21844176-B, District Court, Clark County, NV Lampman et al.

Costco Wholesale Corp.

A-23-868638-C, District Court, Clark County, NV.

The plaintiffs allegedly sustained liver or other bodily damage as a result of consuming the product, and seek compensatory and punitive damages from all defendants, which include the manufacturer, distributors, testing equipment makers and retailers.

The Kaveh case is set for trial on March 17, 2025.

Wei and Henry have been consolidated with Brown.

AffinityLifestyles.com, Inc., et al., Case No.

A-21-831776-B, District Court, Clark County, NV.

The Company is not a named defendant in Brown.

Wei/Henry/Brown is set for trial starting October 7, 2024.

Between September 25, 2023, and October 31, 2023, five class action suits were filed against the Company alleging various privacy law violations stemming from pixel trackers on Costco.com:

Costco Wholesale Corp., Case No.

T23-1405, Contra Costa County Superior Court;

Costco Wholesale Corp., Case No.

Claims against the Company in federal court in Georgia and Florida have been dismissed.

The Company is defending all of the pending matters except for a small number that have been resolved for immaterial amounts.

Between September 25 and October 31, 2023, five class action suits were filed against the Company alleging privacy law violations stemming from pixel trackers on Costco.com:

Costco Wholesale Corp., No.

C23-02416, Contra Costa County Superior Court;

Costco Wholesale Corp., No.

2:23-cv-08808 (C.D.

Cal.), now consolidated with R.S.

Costco Wholesale Corp., Case No.

Costco Wholesale Corp., No.

2:23-cv-01628 (W.D.

Groves, et ano.

Costco Wholesale Corp., Case No.

Groves, et ano., v.

Costco Wholesale Corp., No.

2:23-cv-01662 (W.D.

Wash.), and Castillo v.

Costco Wholesale Corp., under Case No.

Costco Wholesale Corp., under No.

2:34-cv-01548 (W.D.

The Castillo plaintiffs filed a consolidated complaint on January 26, 2024, which seeks damages, equitable relief and attorneys’ fees under various statutes, including the Washington Consumer Protection Act, Washington Privacy Act, Washington Uniform Health Care Information Act, Electronic Communications Privacy Act, California Invasion of Privacy Act, and California Confidentiality of Medical Information Act.

The Castillo plaintiffs filed a consolidated complaint on January 26, 2024, which seeks damages, equitable relief and attorneys’ fees

under various statutes, including the Washington Consumer Protection Act, Washington Privacy Act, Washington Uniform Health Care Information Act, Electronic Communications Privacy Act, California Invasion of Privacy Act, and California Confidentiality of Medical Information Act.

The consolidated complaint also alleges breach of implied contract, invasion of privacy, conversion, and unjust enrichment.

The Company filed a motion to dismiss the Castillo complaint on March 11, 2024.

In Birdwell, the Company filed a motion to dismiss and demurrer on January 22, 2024.

On May 5, 2024, the Birdwell Court granted the demurrer with leave to amend and requested additional briefing on whether the case should be stayed in favor of Castillo.

In November 2024 the court denied the motion to dismiss in substantial part.

On May 16, 2024, the parties stipulated to stay Birdwell pending resolution of Castillo.

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3:24-cv-03714 (N.D.

On February 14, 2025, the court granted the motion.

An amended complaint was filed;

defendants' motion to dismiss this complaint was denied on May 14, 2025.

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

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In May 2024 the Company received a Notice of Intent to File Administrative Complaint for Violations of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) from the U.S.

Environmental Protection Agency.

Environmental Protection Agency (EPA).

The EPA is seeking administrative fines for importation, sale and distribution of misbranded devices and unregistered products the government asserts are pesticides under FIFRA.

An agreement has been reached to settle the matter for an immaterial amount.

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, 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.

The material accounting policies of the segments are as described in Note 1 .

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

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

United States Canada Other

International Total

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

The chief operating decision maker (CODM) is the Company's Chief Executive Officer, President and Director.

The CODM utilizes operating income, as reported in the consolidated statement of income, along with internal management reports, in evaluating performance and allocating resources.

The following table provides the revenue, significant expenses, and operating income for the Company's reportable segments:

2025 2024 2023

United States

Total revenue $ 200,046 $ 184,143 $ 176,630

Merchandise costs 174,021 160,573 154,858

Selling, general and administrative expenses 19,147 17,353 16,380

Operating income $ 6,878 $ 6,217 $ 5,392

Total revenue $ 36,923 $ 34,874 $ 33,056

Merchandise costs 32,204 30,543 29,019

Selling, general and administrative expenses 2,870 2,683 2,589

Operating income $ 1,849 $ 1,648 $ 1,448

Other International

Total revenue $ 38,266 $ 35,436 $ 32,604

Merchandise costs 33,661 31,242 28,709

Selling, general and administrative expenses 2,949 2,774 2,621

Operating income $ 1,656 $ 1,420 $ 1,274

Total revenue $ 275,235 $ 254,453 $ 242,290

Merchandise costs 239,886 222,358 212,586

Selling, general and administrative expenses 24,966 22,810 21,590

Operating income 10,383 9,285 8,114

Other income (1)

Income before income taxes $ 10,818 $ 9,740 $ 8,487

(1) Other income consists of interest expense and interest income and other, net.

The following table provides depreciation and amortization and other asset related information for the Company's reportable segments:

2025 2024 2023

United States

Depreciation and amortization $ 1,895 $ 1,730 $ 1,599

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Total assets 54,862 48,816 49,189

Total revenue $ 176,630 $ 33,056 $ 32,604 $ 242,290

Operating income 5,392 1,448 1,274 8,114

Depreciation and amortization $ 196 $ 192 $ 183

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Total assets 7,304 6,915 6,420

Total revenue $ 165,294 $ 31,675 $ 29,985 $ 226,954

Operating income 5,268 1,346 1,179 7,793

Other International

Depreciation and amortization $ 335 $ 315 $ 295

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Total assets 14,933 14,100 13,385

Depreciation and amortization $ 2,426 $ 2,237 $ 2,077

Additions to property and equipment 5,498 4,710 4,323

Property and equipment, net 31,909 29,032 26,684

Total assets 77,099 69,831 68,994

Disaggregated Revenue

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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