| Basis of Presentation and Summary of Significant Accounting Policies | 1. Basis of Presentation and Summary of Significant Accounting Policies Cardinal Health, Inc. is a global healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices. We provide pharmaceuticals and medical products and cost-effective solutions that enhance supply chain efficiency. References to “we,” “our,” "us," and similar pronouns in these consolidated financial statements are to Cardinal Health, Inc. and its majority-owned or controlled subsidiaries, unless the context otherwise requires. Our fiscal year ends on June 30. References to fiscal 2024, 2023 and 2022 in these consolidated financial statements are to the fiscal years ended June 30, 2024, 2023 and 2022, respectively. Basis of Presentation Our consolidated financial statements include the accounts of all majority-owned or consolidated subsidiaries, and all significant intercompany transactions and amounts have been eliminated. The results of businesses acquired or disposed of are included in the consolidated financial statements from the date of the acquisition or up to the date of disposal, respectively. Certain prior year amounts have been reclassified to conform to the current year presentation. Revision of Prior Period Consolidated Financial Statements In connection with the preparation of our Consolidated Financial Statements for fiscal 2024, we identified an accounting error related to revenue recognition from third party payors within the at- Home Solutions operating segment. In accordance with ASC 250 – Accounting Changes and Error Corrections and Staff Accounting Bulletins No. 99 – Materiality and No. 108 – Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the materiality of the error and determined that the impacts were not material, individually or in the aggregate, to our previously issued Consolidated Financial Statements for any of the prior quarters or annual periods in which they occurred, but that correcting the error in the current period would be material to our results of operations for fiscal 2024. We have revised our prior period financial statements to correct this error, as well as other unrelated immaterial errors, including an adjustment to an uncertain tax position. These revisions impacted each quarter of fiscal 2022, 2023 and 2024. These other immaterial errors were previously corrected in the periods they were identified; however, they are now reflected in the periods they originated. Revisions to our previously reported disclosures have been reflected in this Note; No t e 3 , "Divestitures"; Note 5 , “Goodwill and Other Intangible Assets”; No te 6 , "Leases"; Note 8 , "Commitments, Contingent Liabilities and Litigation"; No te 9 , "Income Taxes"; No te 12 , "Shareholders' Equity/(Deficit)”; Note 13 , "Earnings Per Share"; and Note 1 4 “Segment Information." A summary of the revisions to the previously reported financial statements is provided below and in Note 16 , “Revision of Previously Issued Interim Financial Statements (Unaudited)”. The following tables set forth our revisions to the consolidated statements of earnings/(loss) for fiscal 2023 and 2022. Fiscal 2023 Fiscal 2022 (in millions, except per common share amounts) As Reported Adjustment As Revised As Reported Adjustment As Revised Revenue $ 205,012 $ (33) $ 204,979 $ 181,364 $ (38) $ 181,326 Cost of products sold 198,123 (18) 198,105 174,819 23 174,842 Gross margin 6,889 (15) 6,874 6,545 (61) 6,484 Distribution, selling, general and administrative expenses 4,834 (34) 4,800 4,557 (45) 4,512 Impairments and (gain)/loss on disposal of assets, net 1,250 (4) 1,246 2,050 10 2,060 Litigation (recoveries)/charges, net (302) (2) (304) 109 (15) 94 Operating earnings/(loss) 727 25 752 (596) (11) (607) Other (income)/expense, net (4) 9 5 16 6 22 Interest expense, net 93 (9) 84 149 (2) 147 Earnings/(loss) before income taxes 638 25 663 (769) (15) (784) Provision for/(benefit from) income taxes 376 (44) 332 163 (10) 153 Net earnings/(loss) 262 69 331 (932) (5) (937) Net earnings/(loss) attributable to Cardinal Health, Inc. 261 69 330 (933) (5) (938) Earnings/(loss) per common share attributable to Cardinal Health, Inc. Basic $ 1.00 $ 0.27 $ 1.27 $ (3.35) $ (0.02) $ (3.37) Diluted 1.00 0.26 1.26 (3.35) (0.02) (3.37) The following tables set forth our revisions to the consolidated statements of comprehensive income/(loss) for fiscal 2023 and 2022. Fiscal 2023 Fiscal 2022 (in millions) As Reported Adjustment As Revised As Reported Adjustment As Revised Net earnings/(loss) $ 262 $ 69 $ 331 $ (932) $ (5) $ (937) Total comprehensive income/(loss), net of tax 225 69 294 (1,012) (5) (1,017) Total comprehensive income/(loss) attributable to Cardinal Health, Inc. 224 69 293 (1,013) (5) (1,018) The following tables set forth our revisions to the consolidated balance sheets for fiscal 2023. June 30, 2023 (in millions) As Reported Adjustment As Revised Cash and equivalents $ 4,043 $ 33 $ 4,076 Trade receivables, net 11,344 (236) 11,108 Inventories, net 15,940 179 16,119 Prepaid expenses and other 2,362 (68) 2,294 Assets held for sale 144 (4) 140 Total current assets 33,833 (96) 33,737 Property and equipment, net 2,462 (1) 2,461 Goodwill and other intangibles, net 6,081 4 6,085 Other assets 1,041 25 1,066 Total assets 43,417 (68) 43,349 Accounts payable 29,813 121 29,934 Other accrued liabilities 3,059 (87) 2,972 Total current liabilities 33,706 34 33,740 Deferred income taxes and other liabilities 8,653 4 8,657 Common shares, without par value 2,747 (1) 2,746 Accumulated deficit (534) (108) (642) Common shares in treasury, at cost: 83 million shares and 76 million shares at June 30, 2024 and 2023, respectively (4,914) 3 (4,911) Total Cardinal Health, Inc. shareholders' deficit (2,852) (106) (2,958) Total shareholders’ deficit (2,851) (106) (2,957) Total liabilities and shareholders’ deficit 43,417 (68) 43,349 The following tables set forth our revisions to the consolidated statements of shareholders' equity/(deficit) for fiscal 2023 and 2022. Common Shares Retained Earnings/(Accumulated Deficit) Treasury Shares Total Shareholders' Deficit (in millions) As Reported Adjustment As Revised As Reported Adjustment As Revised As Reported Adjustment As Revised As Reported Adjustment As Revised Balance at June 30, 2021 $ 2,806 $ — $ 2,806 $ 1,205 $ (172) $ 1,033 $ (2,186) $ 1 $ (2,185) $ 1,794 $ (171) $ 1,623 Net earnings — — — (933) (5) (938) — — — (932) (5) (937) Employee stock plans activity, net of shares withheld for employee taxes 7 — 7 — — — 58 (1) 57 65 (1) 64 Other — — — — 1 1 — — — (1) 1 — Balance at June 30, 2022 2,813 — 2,813 (280) (176) (456) (3,128) — (3,128) (706) (176) (882) Net earnings — — — 261 69 330 — — — 262 69 331 Employee stock plans activity, net of shares withheld for employee taxes (66) 99 33 — — — 121 3 124 55 102 157 Share repurchase program activity — (100) (100) — — — (1,907) — (1,907) (1,907) (100) (2,007) Other — — — — (1) (1) — — — — (1) (1) Balance at June 30, 2023 2,747 (1) 2,746 (534) (108) (642) (4,914) 3 (4,911) (2,851) (106) (2,957) The following tables set forth our revisions to the consolidated statements of cash flows for fiscal 2023 and 2022. Fiscal 2023 Fiscal 2022 (in millions) As Reported Adjustment As Revised As Reported Adjustment As Revised Cash flows from operating activities: Net earnings/(loss) $ 262 $ 69 $ 331 $ (932) $ (5) $ (937) Adjustments to reconcile net earnings/(loss) to net cash provided by operating activities: Impairments and (gain)/loss on disposal of assets, net 1,250 (4) 1,246 2,050 10 2,060 Provision for/(benefit from) deferred income taxes (31) (9) (40) 7 7 14 Provision for bad debts 99 (44) 55 68 (45) 23 Change in operating assets and liabilities, net of effects from acquisitions and divestitures: Increase in trade receivables (947) (3) (950) (1,526) 121 (1,405) Increase in inventories (340) (72) (412) (1,071) (133) (1,204) Increase in accounts payable 2,718 98 2,816 3,428 127 3,555 Other accrued liabilities and operating items, net (967) (30) (997) 293 (29) 264 Net cash provided by operating activities 2,839 5 2,844 3,122 53 3,175 Net increase/(decrease) in cash and equivalents (674) 5 (669) 1,310 53 1,363 Cash and equivalents at beginning of period 4,717 28 4,745 3,407 (25) 3,382 Cash and equivalents at end of period 4,043 33 4,076 4,717 28 4,745 Use of Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates, judgments and assumptions are used in the accounting and disclosure related to, among other items, allowance for doubtful accounts, inventory valuation and reserves, goodwill and other intangible asset impairment, vendor reserves, loss contingencies (including product liability and self-insurance accruals) and income taxes. Actual amounts may differ from these estimated amounts. Updated Segment Reporting Structure Effective January 1, 2024, we operated under an updated organizational structure and re-aligned our reporting structure under two reportable segments: Pharmaceutical and Specialty Solutions segment and Global Medical Products and Distribution ("GMPD") segment. The remaining operating segments, Nuclear and Precision Health Solutions, at-Home Solutions and OptiFreight ® Logistics, are not significant enough to require separate reportable disclosures and are included in Other. The Pharmaceutical and Specialty Solutions reportable segment consists of all businesses formerly within our Pharmaceutical segment, excluding Nuclear and Precision Health Solutions. The Global Medical Products and Distribution reportable segment consists of all businesses formerly within our Medical segment, excluding at-Home Solutions and OptiFreight ® Logistics. Our previously reported segment results have been recast to conform to this re-aligned reporting structure and reflect changes in the elimination of inter-segment revenue and allocated corporate technology and shared function expenses, which are driven by the reporting structure change. See Note 14 for segment results under the new reporting structure. Cash Equivalents We consider liquid investments purchased with an initial effective maturity of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value. Receivables and Allowance for Doubtful Accounts Trade receivables are reported at their estimated collectible amounts and presented net of an allowance for doubtful accounts of $233 million and $240 million at June 30, 2024 and 2023, respectively. In addition to credit losses, the allowance also includes reserves related to customer disputes and late fees billed to customers, which are recognized within our consolidated statements of earnings/(loss) as reductions of revenue. An account is considered past due on the first day after its due date. In accordance with contract terms, we generally have the ability to charge customers service fees or higher prices if an account is considered past due. We regularly monitor past due accounts and establish appropriate reserves to cover potential losses, and consider historical experience, pricing discrepancies, the current economic environment, customer credit ratings or bankruptcies and reasonable and supportable forecasts to develop our allowance for credit losses. We review these factors quarterly to determine if any adjustments are needed to the allowance. We write off any amounts deemed uncollectible against the established allowance for doubtful accounts. We provide financing to various customers. Such financing arrangements range from 1 year to 5 years at interest rates that are generally subject to fluctuation. Interest income on these arrangements is recognized as it is earned. The financings may be collateralized, guaranteed by third parties or unsecured. Finance notes, net and related accrued interest were $43 million (current portion $14 million) and $56 million (current portion $9 million) at June 30, 2024 and 2023, respectively, and are included in other assets (current portion is included in prepaid expenses and other) in the consolidated balance sheets. Finance notes receivable allowance for doubtful accounts were $3 million and $6 million at June 30, 2024 and 2023, respectively. We estimate an allowance for these financing receivables based on historical collection rates and the creditworthiness of the customer. We write off any amounts deemed uncollectible against the established allowance for doubtful accounts. Concentrations of Credit Risk We maintain cash depository accounts with major banks, and we invest in high quality, short-term liquid instruments, and in marketable securities. Our short-term liquid instruments mature within three months and we have not historically incurred any related losses. Our trade receivables and finance notes and related accrued interest are exposed to a concentration of credit risk with certain large customers and with customers in the retail and healthcare sectors. Credit risk can be affected by changes in reimbursement and other economic pressures impacting the healthcare industry. With respect to customers in the retail and healthcare sectors, such credit risk is limited due to supporting collateral and the diversity of the customer base, including its wide geographic dispersion. We perform regular credit evaluations of our customers’ financial conditions and maintain reserves for losses through the established allowance for doubtful accounts. Historically, such losses have been within our expectations. Refer to the "Receivables and Allowance for Doubtful Accounts" section within this Note for additional information on the accounting treatment of reserves for allowance for doubtful accounts. Major Customers CVS Health Corporation ("CVS Health") and OptumRx are our only customers that individually accounted for at least 10 percent of revenue and/or gross trade receivables in fiscal 2024. These customers were primarily serviced through our Pharmaceutical and Specialty Solutions segment. Our pharmaceutical distribution contracts with OptumRx expired at the end of June 2024. The following table summarizes historical percent of revenue and gross trade receivables from CVS Health and OptumRx: Percent of Revenue Percent of Gross Trade Receivables at June 30 2024 2023 2022 2024 2023 CVS Health 24 % 25 % 25 % 22 % 23 % OptumRx 17 % 16 % 16 % 6 % 6 % We have entered into agreements with group purchasing organizations (“GPOs”) which act as purchasing agents that negotiate vendor contracts on behalf of their members. Vizient, Inc. and Premier, Inc. are our two largest GPO member relationships in terms of revenue. Sales to members of these two GPOs collectively accounted for 16 percent, 15 percent and 19 percent of revenue for fiscal 2024, 2023 and 2022, respectively. Our trade receivable balances are with individual members of the GPO, and therefore no significant concentration of credit risk exists with these types of arrangements. Inventories A portion of our inventories (50 percent and 54 percent at June 30, 2024 and 2023, respectively) are valued at the lower of cost, using the last-in, first-out ("LIFO") method, or market. These inventories are included within the core pharmaceutical distribution facilities of our Pharmaceutical and Specialty Solutions segment (“distribution facilities”) and are primarily merchandise inventories. The LIFO method presumes that the most recent inventory purchases are the first items sold, so LIFO helps us better match current costs and revenue. We believe that the average cost method of inventory valuation provides a reasonable approximation of the current cost of replacing inventory within the distribution facilities. As such, the LIFO reserve is the difference between (a) inventory at the lower of LIFO cost or market and (b) inventory at replacement cost determined using the average cost method of inventory valuation. At June 30, 2024 and 2023, respectively, inventories valued at LIFO cost were $749 million and $476 million higher than the average cost value. We do not record inventories in excess of replacement cost. As such, we did not write-up the value of our inventory from average cost to LIFO cost at June 30, 2024 or 2023. Our remaining inventory, including inventory in our GMPD segment and certain inventory in our Pharmaceutical and Specialty Solutions segment, that is not valued at the lower of LIFO cost or market is stated at the lower of cost, using the first-in, first-out method, or net realizable value. Net realizable value is defined as the estimated selling prices and estimated sales demand in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. We reserve for inventory obsolescence using estimates based on historical experience, historical and projected sales trends, specific categories of inventory, age and expiration dates of on-hand inventory and manufacturer return policies. Inventories presented in the consolidated balance sheets are net of reserves for excess and obsolete inventory which were $149 million and $139 million at June 30, 2024 and 2023, respectively. Cash Discounts Manufacturer cash discounts are recorded as a component of inventory cost and recognized as a reduction of cost of products sold as inventory is sold. Property and Equipment Property and equipment are carried at cost less accumulated depreciation. Property and equipment held for sale are recorded at the lower of cost less accumulated depreciation before the decision to dispose of the asset was made or fair value less cost to sell. When certain events or changes in operating conditions occur, an impairment assessment may be performed on the recoverability of the carrying amounts. We capitalize project costs relating to computer software developed or obtained for internal use when the activities related to the project reach the application stage. Costs that are associated with the preliminary stage activities, training, maintenance and all other post-implementation stage activities are expensed as they are incurred. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, including finance lease assets which are depreciated over the terms of their respective leases. We generally use the following range of useful lives for our property and equipment categories: buildings and improvements—3 to 39 years; machinery and equipment—3 to 20 years; capitalized software held for internal use—3 to 7 years; and furniture and fixtures—3 to 7 years. We recorded depreciation and amortization of capitalized software of $470 million, $441 million and $412 million for fiscal 2024, 2023 and 2022, respectively. The following table presents the components of property and equipment, net at June 30: (in millions) 2024 2023 Land, building and improvements $ 1,879 $ 1,789 Machinery and equipment 2,367 2,190 Capitalized software held for internal use 1,744 1,690 Furniture and fixtures 128 125 Construction in progress 577 516 Total property and equipment, at cost 6,695 6,310 Accumulated depreciation and amortization (4,166) (3,849) Property and equipment, net $ 2,529 $ 2,461 Repairs and maintenance expenditures are expensed as incurred. Interest on long-term projects is capitalized using a rate that approximates the weighted-average interest rate on long-term obligations, which was 5 percent at June 30, 2024. The amount of capitalized interest was immaterial for all periods presented. Business Combinations The assets acquired and liabilities assumed in a business combination, including identifiable intangible assets, are recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of the identifiable net assets acquired is recorded as goodwill. We base the fair values of identifiable intangible assets on detailed valuations that require management to make significant judgments, estimates and assumptions. Critical estimates and assumptions include: expected future cash flows for customer relationships, trade names, developed technology and other identifiable intangible assets; discount rates that reflect the risk factors associated with future cash flows; and estimates of useful lives. When an acquisition involves contingent consideration, we recognize a liability equal to the fair value of the contingent consideration obligation at the acquisition date. The estimate of fair value of a contingent consideration obligation requires subjective assumptions to be made regarding future business results, discount rates, discount periods and probabilities assigned to various potential business result scenarios. See Note 2 for additional information regarding our acquisitions. Goodwill and Other Intangible Assets Purchased goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually or when indicators of impairment exist. Purchased goodwill is tested for impairment at least annually. Qualitative factors are first assessed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. There is an option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. We have elected to bypass the qualitative assessment for our annual goodwill impairment test in the current year. The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount. Goodwill impairment testing involves judgment, including the identification of reporting units, qualitative evaluation of events and circumstances to determine if it is more likely than not that an impairment exists, and, if necessary, the estimation of the fair value of the applicable reporting unit. Effective January 1, 2024, we implemented a new enterprise operating and segment reporting structure. Refer to the "Updated Segment Reporting Structure" section within this Note for additional information. This change in segment structure resulted in changes to the composition of our former Medical operating segment excluding at-Home Solutions reporting unit ("Medical Unit"). Effective January 1, 2024, our reporting units are: Pharmaceutical and Specialty Solutions, GMPD, Nuclear and Precision Health Solutions, at-Home Solutions and OptiFreight ® Logistics. GMPD and OptiFreight ® Logistics comprised our former Medical Unit. Fair value can be determined using market, income or cost-based approaches. Our determination of estimated fair value of the reporting units is based on a combination of the income-based and market-based approaches. Under the income-based approach, we use a discounted cash flow model in which cash flows anticipated over several future periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate risk-adjusted rate of return. We use our internal forecasts to estimate future cash flows, which we believe are consistent with those of a market participant, and include an estimate of long-term growth rates based on our most recent views of the long-term outlook for each reporting unit. Actual results may differ materially from those used in our forecasts. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective reporting units and in our internally-developed forecasts. During fiscal 2024, discount rates used in our reporting unit valuations ranged from 10 to 11.5 percent. Under the market-based guideline public company method, we determine fair value by comparing our reporting units to similar businesses or guideline companies whose securities are actively traded in public markets. We also use the guideline transaction method to determine fair value based on pricing multiples derived from the sale of companies that are similar to our reporting units. To further confirm fair value, we compare the aggregate fair value of our reporting units to our total market capitalization. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including forecasted operating results. The use of alternate estimates and assumptions or changes in the industry or peer groups could materially affect the determination of fair value for each reporting unit and potentially result in goodwill impairment. In fiscal 2024, 2023 and 2022, we performed annual impairment testing and concluded that there were no impairments of goodwill for Pharmaceutical and Specialty Solutions, Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight ® Logistics. However, there was a decline in the at-Home Solutions' estimated fair value resulting in the fair value exceeding the carrying amount by less than 1 percent during our fiscal 2024 annual impairment test. The decrease in at-Home Solutions' estimated fair value was primarily due to changes in operating expense estimates to better reflect the fair value from an external perspective. The fair values of the other three reporting units substantially exceeded their carrying amounts. As discussed further in Note 5 , during fiscal 2024, 2023 and 2022, we recognized goodwill impairment charges of $675 million, $1.2 billion and $2.1 billion, respectively, related to GMPD. These impairment charges are included in impairments and (gain)/loss on disposal of assets, net in our consolidated statements of earnings/(loss). See Note 9 for additional information regarding tax benefits related to these goodwill impairment charges. GMPD's goodwill balance was fully impaired as of March 31, 2024, therefore, no impairment test was required for this reporting unit during our fiscal 2024 annual impairment testing. The impairment test for indefinite-lived intangibles other than goodwill involves first assessing qualitative factors to determine if it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If so, then a quantitative test is performed to compare the estimated fair value of the indefinite-lived intangible asset to the respective asset's carrying amount. Our qualitative evaluation requires the use of estimates and significant judgments and considers the weight of evidence and significance of all identified events and circumstances and most relevant drivers of fair value, both positive and negative, in determining whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. Intangible assets with finite lives, primarily customer relationships; trademarks, trade names and patents; and developed technology, are amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets over their estimated useful lives. We review intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of the future forecasted undiscounted cash flows expected to be generated by the asset group. Actual results may differ materially from those used in our forecasts. Assets Held for Sale We classify assets and liabilities (the “disposal group”) as held for sale when management commits to a plan to sell the disposal group in its present condition and at a price that is reasonable in relation to its current fair value. We also consider whether an active program to locate a buyer has been initiated and if it is probable that the sale will occur within one year without significant changes to the plan to sell. Upon classification of the disposal group as held for sale, we test the assets for impairment and cease related depreciation and amortization. On May 24, 2024, we signed an agreement to sell the West Campus Dublin, Ohio office space. The transaction is subject to certain contingencies. At June 30, 2024, we met the criteria for the related assets to be classified as held for sale. No loss was recognized during fiscal 2024 due to the expected net proceeds exceeding the carrying value of the related assets. On June 5, 2023, we signed a definitive agreement to contribute our Outcomes™ business to Transaction Data Systems ("TDS"), a portfolio company of BlackRock Long Term Private Capital and GTCR, in exchange for a 16 percent equity interest in the combined entity. Upon signing the agreement, we met the criteria for the related assets and liabilities of the Outcomes™ business to be classified as held for sale. The transaction closed on July 10, 2023. See Note 3 for additional information. Investments Investments in non-marketable equity securities are accounted for under the fair value, equity or net asset value method of accounting and are included in other assets in the consolidated balance sheets. For equity securities without a readily determinable fair value, we use the fair value measurement alternative and measure the securities at cost less impairment, if any, including adjustments for observable price changes in orderly transactions for an identical or similar investment of the same issuer. For investments in which we can exercise significant influence but do not control, we use the equity method of accounting. Our share of the earnings and losses are recorded in other (income)/expense, net in the consolidated statements of earnings/(loss). We monitor our investments for impairment by considering factors such as the operating performance of the investment and current economic and market conditions. Leases Our leases are primarily for corporate offices, distribution facilities, vehicles and equipment. We determine if an arrangement is a lease at its inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. Operating lease right-of-use assets and corresponding operating lease liabilities are recognized in our consolidated balance sheets at lease commencement date based on the present value of lease payments over the lease term. Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable. Our lease agreements contain lease components and non-lease components. For all asset classes, we have elected to account for both of these components as a single lease component. We also, from time to time, sublease portions of our real estate property, resulting in sublease income. Sublease income and the related assets and cash flows are not material to the consolidated financial statements at or for the fiscal years ended June 30, 2024, 2023 and 2022. We apply a practical expedient for short-term leases whereby we do not recognize a lease liability and right-of-use asset for leases with a term of less than 12 months. Short-term lease expense recognized in fiscal 2024, 2023 and 2022 was immaterial. Our leases have remaining lease terms from less than 1 year up to approximately 18 years. Our lease terms may include options to extend or terminate the lease when it is reasonably certain and there is a significant economic incentive to exercise that option. See Note 6 for additional information regarding leases. Vendor Reserves In the ordinary course of business, our vendors may dispute deductions taken against payments otherwise due to them or assert other disputes. These disputes are researched and resolved based upon the findings of the research performed. At any given time, there are outstandi |
