| Basis of Presentation and Principles of Consolidation | 1. Basis
of Presentation and Principles of Consolidation Houston Wire &
Cable Company (the “Company”), through its wholly owned subsidiaries, provides industrial products including electrical
wire and cable and fasteners to the U.S. market through fifteen twelve The consolidated
financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared following
accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article
10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation of the results of these interim periods have been included. The results of operations for
the interim periods are not necessarily indicative of the results that may be expected for the full year. All significant intercompany
balances and transactions have been eliminated. The
preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. The most significant estimates are those relating to
the allowance for doubtful accounts, the refund liability, the inventory obsolescence reserve, vendor rebates, the realization
of deferred tax assets and the valuation of goodwill and indefinite-lived assets. Actual results could differ materially from
the estimates and assumptions used for the preparation of the financial statements. For
further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2020, as amended, filed with the SEC. Risks and Uncertainties The Company is subject
to additional risks and uncertainties due to the COVID-19 pandemic. While we have seen an improvement in market conditions in the
first quarter 2021, governmental and other actions taken in response to the pandemic could have an adverse effect on the demand
for the Company’s products and on its results of operations. There is still a risk to capital markets from of the pandemic.
Additionally, economies worldwide have been negatively impacted by the COVID-19 pandemic, and it is still possible that the impact
could cause an extended local and/or global economic recession. Such economic disruption could have a material adverse effect on
our business if companies in many industries curtail and reduce capital and overall spending. Policymakers around the globe have
responded with fiscal policy actions to support specific industries and their economies as a whole. While the overall effectiveness
of these actions appears to be working currently in our markets, it remains uncertain if this will continue. The long-term severity
of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not
limited to, the duration and severity of the pandemic worldwide and the extent and severity of the impact on the Company’s
customers and vendors, all of which are uncertain and cannot be predicted. The Company’s future results of operations could
be materially adversely affected by delays in payments of outstanding receivables, supply chain disruptions, uncertain or reduced
demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges
faced by its customers. As of the date of issuance of these financial statements, the worst of the effects of the COVID-19 pandemic
on the Company’s financial condition, liquidity, and results of operations appear to be behind it; however, things could
still change as the pandemic is not over. Recently
Adopted Accounting Standards The
Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) is the sole
source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an
Accounting Standard Update (“ASU”) to communicate changes to the codification. The Company considers the applicability
and impact of all ASUs. The following are ASUs that were recently adopted by the Company. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes. This ASU is part of the Simplification Initiative and simplifies the accounting for income taxes by removing certain
exceptions to the general principles of ASC Topic 740 “Income Taxes.” In addition, the amendment improves consistent
application of and simplifies GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. This update is
effective for the Company beginning in the first quarter of 2021. The Company has evaluated the new guidance and the adoption did
not have a material impact on its financial statements. Recent
Accounting Pronouncements In
November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This
ASU, among other narrow-scope improvements, clarifies guidance around how to report expected recoveries. This ASU permits organizations
to record expected recoveries on assets purchased with credit deterioration. In addition to other narrow technical improvements,
the ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale
debt securities. The effective date and transition methodology are the same as in ASU 2016-13, Financial Instruments – Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB deferred the effective date of this ASU for
smaller reporting companies (“SRC”) to fiscal years beginning after December 15, 2022. As of March 31, 2021, the Company
qualifies as a SRC and will adopt this ASU in the first quarter of 2023. |
