Accounting policies

9 Months Ended

May 31, 2025

Accounting Policies [Abstract]

Accounting policies

Accounting policies

Basis of presentation

The Consolidated Condensed Financial Statements of Walgreens Boots Alliance, Inc. and its subsidiaries (“Walgreens Boots Alliance” or the “Company”) included herein have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

The Consolidated Condensed Financial Statements include all subsidiaries in which the Company holds a controlling interest and certain variable interest entities (“VIEs”) for which the Company is the primary beneficiary. The Company uses the equity method of accounting for equity investments in less than majority-owned companies if the investment provides the ability to exercise significant influence. All intercompany transactions have been eliminated.

The Consolidated Condensed Financial Statements included herein are unaudited. These unaudited Consolidated Condensed Financial Statements should be read in conjunction with the audited financial statements and the notes thereto included in the Walgreens Boots Alliance Annual Report on Form 10-K for the fiscal year ended August 31, 2024.

The preparation of financial statements in accordance with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. The Company bases its estimates on the information available at the time, its experiences and various other assumptions believed to be reasonable under the circumstances. Adjustments may be made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Actual results may differ.

In the opinion of management, the unaudited Consolidated Condensed Financial Statements for the interim periods presented include all adjustments necessary to present a fair statement of the results for such interim periods. Adverse global macroeconomic conditions, the impact of opioid-related claims and litigation settlements, the influence of certain holidays, seasonality, foreign currency rates, changes in vendor, payor and customer relationships and terms, strategic transactions including acquisitions and dispositions, asset impairments, changes in laws and regulations in the markets in which the Company operates and other factors on the Company’s operations and net earnings for any period may not be comparable to the same period in previous years. Our operating results have historically varied on a quarterly basis and may continue to fluctuate significantly in the future. For instance, our businesses are seasonal in nature, with the second fiscal quarter (December, January and February), which falls during the holiday season, typically generating a higher proportion of retail sales and earnings than other fiscal quarters.

Certain amounts in the Consolidated Condensed Financial Statements and accompanying notes may not sum due to rounding. Percentages have been calculated using unrounded amounts for all periods presented.

Plan of Merger

On March 6, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Blazing Star Parent, LLC, a Delaware limited liability company (“Parent”), Blazing Star Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), and certain other affiliates of Parent (collectively with Parent and Merger Sub, the “Parent Entities”). Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving as a wholly owned subsidiary of Parent. At the effective time of the Merger (the “Effective Time”), each share of the Company’s common stock, except treasury stock, shares held by Parent or its affiliates and shares as to which appraisal rights have been properly exercised, will convert into the right to receive $11.45 in cash without interest, and one Divested Asset Proceed Right (“DAP Right”). Each DAP Right will entitle its holder to receive 70% of the net proceeds from any monetization of the Company’s equity or debt interests in Village Practice Management Company Holdings, LLC and its subsidiaries, up to $3.00 per DAP Right, subject to the terms and conditions of the Divested Asset Proceed Rights Agreement. The Merger Agreement included a 35-day “go-shop” period beginning on March 6 that allowed the Company, among other things and subject to certain conditions, to solicit alternative acquisition proposals. No parties submitted a superior proposal prior to the expiration of the “go-shop” period, which expired on April 10, 2025.

The parties intend to complete certain pre-closing transactions at an initial closing that will take place on the business day immediately prior to the closing of the Merger (the “Initial Closing”). The Initial Closing is conditioned on certain conditions, including (i) the adoption of the Merger Agreement by (a) the holders of a majority of the outstanding common stock of the Company and (b) the holders of a majority of the outstanding shares of the Company’s common stock cast by the unaffiliated Company stockholders at the special meeting of the Company’s stockholders (the “Special Meeting”), which is scheduled for July 11, 2025, at 8:30 a.m. Central Time, (ii) certain regulatory approvals and filings (including the expiration of any waiting periods in respect thereof), and (iii) other customary conditions. Stefano Pessina, Executive Chairman of the Board of Directors of the Company, who controls approximately 17% of the Company’s common stock, has agreed to vote in favor of the adoption of the Merger Agreement, subject to the terms and conditions of the Voting Agreement, and to reinvest his proceeds from the Merger plus an additional cash investment into certain entities to be formed by affiliates of Parent in connection with the Merger. The closing of the Merger will occur on the business day immediately following the Initial Closing, which is currently expected to occur in the third or fourth quarter of calendar year 2025.

The Merger Agreement contains certain customary termination rights, including if the Merger is not completed by March 6, 2026 (extendable to June 6, 2026 and further under certain conditions) and by mutual written consent, among others. Upon termination of the Merger Agreement under specified circumstances, Parent may be required to pay the Company a termination fee equal to $560 million. Upon termination of the Merger Agreement under specified circumstances, the Company may be required to pay Parent (or one or more of its designees) a termination fee of either $158 million or $316 million or the documented out-of-pocket expenses of the Parent Entities and their affiliates, up to a maximum amount of $30 million.

New accounting pronouncements

Adoption of new accounting pronouncements

Leases — Common Control Arrangements

In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-01, Leases (Topic 842) — Common Control Arrangements. The ASU amends the accounting for leasehold improvements in common control arrangements by requiring a lessee in a common control lease arrangement to amortize leasehold improvements that it owns over the improvements’ useful life to the common control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. Further, a lessee that no longer controls the use of the underlying asset will derecognize the remaining carrying amount of the improvements through an adjustment to equity, reflecting the transfer of the asset to the lessor under common control. This ASU is effective for fiscal years beginning after December 15, 2023 (fiscal 2025), including interim periods within those fiscal years. The Company adopted this ASU effective September 1, 2024, and the adoption did not materially impact the Company’s results of operations, cash flows or financial position.

Segment Reporting — Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures. This ASU is expected to improve disclosures related to an entity’s reportable segments and provide additional, more detailed information about a reportable segment’s expenses. The ASU also aligns interim segment reporting disclosure requirements with annual segment reporting disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2023 (fiscal 2025) and interim periods within fiscal years beginning after December 15, 2024 (fiscal 2026). The amendments in this ASU must be applied on a retrospective basis to all prior periods presented in the financial statements and early adoption is permitted. The Company adopted this ASU effective September 1, 2024. While the standard requires additional disclosures related to the Company’s reportable segments in its fiscal 2025 annual reporting, adoption of the standard did not have any impact on the Company’s consolidated results of operations, cash flows, financial position, or the Company’s fiscal 2025 interim disclosures.

New accounting pronouncements not yet adopted

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures. This ASU is expected to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities on an annual basis to disclose specific categories in the rate reconciliation, additional information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 (fiscal 2026). The amendments in this ASU are required to be applied on a prospective basis and retrospective adoption is permitted. The Company is currently evaluating the effect of adopting this new accounting guidance and will update disclosures, as applicable, beginning in fiscal 2026.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense disaggregation disclosures (Topic 220) — Disaggregation of Income Statement Expenses. This ASU is expected to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. This ASU requires public business entities to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items in the notes to the financial statements. Public business entities are required to apply the guidance prospectively and may elect to apply it retrospectively. This ASU is effective for fiscal years beginning after December 15, 2026 (fiscal 2028) and interim periods within fiscal years beginning after December 15, 2027 (fiscal 2029), as clarified by ASU 2025-01, Income Statement —Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40). The Company is currently evaluating the effect of adopting this new accounting guidance.