Company: GWW
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0000277135-25-000010
Chunk: 41

Company: W.W. GRAINGER, INC.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 7
Chunk 41
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 and other goods and services. Purchase obligations are made in the normal course of business to meet operating needs and are primarily noncancelable.
Leases
The Company has lease arrangements for certain properties, buildings and equipment (including branches, warehouses, DCs and office space). As of December 31, 2024, the Company had fixed operating lease payment obligations of $437 million, with $91 million payable within 12 months.
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Critical Accounting Estimates
The preparation of Grainger’s Consolidated Financial Statements and accompanying notes are in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make assumptions and estimates that affect the reported amounts. The Company considers an accounting policy to be a critical estimate if: (1) it involves assumptions that are uncertain when judgment was applied, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on Grainger’s consolidated financial position and results. While the Company believes the assumptions and estimates used are reasonable, the Company’s management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances. Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s Consolidated Financial Statements.
Inventories
Company inventories primarily consist of merchandise purchased for resale and are valued at the lower of cost or market value. The majority of the Company’s inventory is accounted for using the last-in, first-out (LIFO) method. Market value is based on an analysis of inventory trends including, but not limited to, reviews of inventory levels, sales and cost information and on-hand quantities relative to the sales history for the product and shelf-life. The Company's methodology for estimating whether adjustments are necessary is continually evaluated for factors including significant changes in product demand, liquidation or disposition history values and market conditions such as inflation and other acquisition costs, including freight and duties. If business or economic conditions change, estimates and assumptions may be adjusted as deemed appropriate. 
Goodwill
The Company evaluates goodwill for impairment annually during the fourth quarter and more frequently if impairment indicators exist. The fair value of reporting units is calculated primarily using the discounted cash flow method and utilizing value indicators from a market approach to evaluate the reasonableness of the resulting fair values. 
The estimates used to calculate the fair values of reporting units involve