Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2025

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

In this Form 10-K, unless the context otherwise requires, references in these notes to consolidated financial statements to “Kaiser Aluminum Corporation,” “Kaiser,” “we,” “us,” “our,” “the Company” and “our Company” refer collectively to Kaiser Aluminum Corporation and its subsidiaries.

Organization and Nature of Operations. Kaiser Aluminum Corporation specializes in the production of semi-fabricated specialty aluminum mill products, such as aluminum plate and sheet, bare and coated coil and extruded and drawn products, for the following end market applications: (i) Aero/HS Products; (ii) Packaging; (iii) GE Products; and (iv) Automotive Extrusions. Our business is organized into one operating segment. See Note 17 for additional information regarding our business, product and geographical area information and concentration of risk.

Principles of Consolidation and Basis of Presentation. Our consolidated financial statements include the accounts of our wholly owned subsidiaries and are prepared in accordance with GAAP and the rules and regulations of the SEC. Intercompany balances and transactions are eliminated. We have reclassified certain items in prior periods to conform to current classifications.

Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of our consolidated financial position and results of operations.

Fair Value Measurements. We apply the GAAP fair value hierarchy to measure certain assets and liabilities. Classification within the hierarchy is based on the lowest level input significant to the fair value measurement. We use valuation techniques that prioritize observable inputs and consider counterparty risk. Transfers between levels are assessed based on changes in inputs.

Recurring fair value measurements include derivative instruments (see Note 8) and equity investments related to our deferred compensation plan (see Note 5). Additionally, we measure at fair value once each year at December 31 the plan assets of our defined benefit pension and postretirement and postemployment plans, including the Salaried VEBA (see Note 5). In determining the fair value of the plan assets, we utilize the results of valuations supplied by the investment advisors responsible for managing the assets of each plan, which we independently review for reasonableness.

We believe that the fair values of our financial assets (accounts receivable, contract assets, current assets, accounts payable, and accrued liabilities) approximate their respective carrying values due to their short maturities and nominal credit risk. Most non-financial assets, such as inventories and long-lived assets, are not measured at fair value on a recurring basis. However, fair value may be assessed if impairment or other triggering events occur. See “Property, Plant and Equipment, Net” and “Goodwill and Intangible Assets” below for a discussion of impairment charges on long-lived physical assets. See Note 9 for the fair value of our Long-term debt, net.

Government Grants. We occasionally receive grants from state and local governments. Grants are recognized when we have reasonable assurance that we will meet the grant conditions and the funds will be received. Grants related to property, plant, and equipment reduce the carrying amount of the related asset. Grants intended to reimburse expenses already incurred or provide immediate financial support are recognized as income in the period they become receivable. The following table presents the total government assistance recognized during the year ended December 31, 2025 (in millions of dollars):


Grantor	Grant	Amount		Duration	Classification
Indiana Economic Development Corporation	IN EDGE Tax Credit	$	1.7	2021 - 2030	Cost of products sold, excluding depreciation and amortization
Total		$	1.7

To be eligible to receive and keep the full amount of the IN EDGE Tax Credit, we must achieve: (i) minimum cumulative expenditures towards capital expenditures and (ii) a minimum number of full-time employees.

Cash and Cash Equivalents. We consider short-term, highly liquid investments with original maturities of 90 days or less to be cash equivalents. Our cash equivalents primarily consist of money market deposit accounts.

Restricted Cash. We maintain certain cash deposits that are pledged or held as collateral for workers’ compensation and other agreements. These amounts are classified as restricted cash (see Note 16). Restricted funds may be released to us or additional amounts may be required to be pledged in the future.

Trade Receivables and Allowance for Credit Losses. Trade receivables primarily consist of amounts billed to customers for products sold, with payment terms generally between 30 to 90 days. We record an allowance for credit losses based on historical collection experience, current conditions, and reasonable forecasts. Factors considered include customer credit quality, aging of receivables, bankruptcy filings, and overall economic conditions. Specific allowances are recorded when we identify a customer’s inability or unwillingness to pay. Accounts are written off when deemed uncollectible, and any recoveries are recorded as a reduction of bad debt expense in the period received. In 2025, we wrote off $0.7 million of trade receivables. Write-offs in 2024 and 2023 were immaterial to our consolidated financial statements.

We have arrangements that allow us to sell certain customer trade receivables to those customers’ financial institutions without recourse. These sales are made at our discretion when the cost is lower than servicing the receivables with existing debt. After the sale, we retain no rights or obligations and do not service the receivables. Accordingly, these transactions are accounted for as sales (see Note 13).

Inventories. Inventories are stated at the lower of cost or net realizable value. Inventory costs include materials, labor, and manufacturing overhead. Abnormal costs, such as idle facility expenses, freight, handling, and spoilage, are expensed as incurred. See Note 2 for inventory components. Other inventories, consisting of operating supplies, are valued using the FIFO method.

Effective January 1, 2025, the Company changed its inventory valuation methodology for finished products, work-in-process, and raw materials from LIFO to WAC. This change is preferable because it improves the comparability of the Company’s operational results between periods by removing LIFO income or charge in a period resulting from LIFO valuation and changes to historical LIFO layers, better reflects the physical flow of goods, and simplifies the financial close process by utilizing the WAC valuation methodology for all internal and external reporting purposes. The effects of this change have been retrospectively applied to all prior periods presented. See Note 18 for additional details.

Replacement Parts. Replacement parts consist of equipment spare parts, which are valued using the FIFO method. Replacement parts are recorded within Prepaid expenses and other current assets or Other assets depending on whether the utilization of the replacement parts is expected to occur within the next 12 months.

Property, Plant and Equipment, Net. Property, plant and equipment, net, is recorded at cost and includes construction in progress (see Note 2). Interest on qualifying construction projects is capitalized (see Note 9).

Depreciation is computed using the straight-line method over estimated useful lives. Depreciable finance lease assets and leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term. Depreciation expense is included in Depreciation and amortization within our Statements of Consolidated Income. The estimated useful lives are as follows:


		Range (in years)
Land improvements		1-25
Buildings and leasehold improvements		2-45
Machinery and equipment		1-22
Depreciable finance lease assets		2-120

We review property, plant and equipment for impairment when events indicate the carrying amount may not be recoverable, using undiscounted cash flows to assess recoverability. We regularly assess whether events and circumstances with the potential to trigger impairment have occurred and rely on a number of factors, including operating results, business plans, economic projections, and anticipated future cash flow, to make such assessments. We use an estimate of the future undiscounted cash flows of the related asset or asset group over the estimated remaining life of such asset or asset group in measuring whether the asset or asset group is recoverable.

There were no impairment charges in 2025 or 2023. In 2024, we recorded a $0.4 million impairment on land classified as held for sale. Asset impairment charges are included in Other operating charges, net, in our Statements of Consolidated Income.

Assets are classified as held for sale when actively marketed and expected to sell within 12 months. These assets are measured at the lower of carrying amount or fair value less costs to sell.

Goodwill and Intangible Assets. Goodwill is tested for impairment annually in the fourth quarter or when events indicate potential impairment. We may perform a qualitative assessment or a quantitative test. In 2025, we completed a qualitative assessment and concluded that it is not more likely than not that the fair value of any reporting unit was below its carrying amount.

Intangible assets are initially recorded at fair value using an income approach and amortized over their estimated useful lives. We review intangible assets for impairment when circumstances indicate the carrying amount may not be recoverable. See Note 4 for discussion on goodwill and intangible assets.

Leases. We determine if an agreement contains a lease at inception. We have operating and finance leases for equipment and real estate, generally with fixed payments. Lease liabilities include options to extend or terminate when it is reasonably certain we will exercise them. Short-term leases (12 months or less) are not recorded on our Consolidated Balance Sheets. Because most leases do not provide an implicit rate, we use an incremental borrowing rate based on factors such as lease term, asset value, and our credit profile. We exclude non-lease components from lease liabilities and recognize variable lease payments as incurred. Operating lease expense is recognized on a straight-line basis over the lease term. Some equipment leases include return conditions, which we account for as residual value guarantees when probable. Our lease agreements do not contain material restrictive covenants.

Derivative Financial Instruments. We use derivative instruments to manage commodity price, energy cost, and foreign currency risks. We do not use derivatives for trading or speculative purposes. Derivatives are recorded at fair value on our Consolidated Balance Sheets. Those settling within one year are included in Prepaid expenses and other current assets or Other accrued liabilities. Derivatives settling after one year are included in Other assets or Long-term liabilities. Cash flows related to derivative instruments are classified in the Statements of Consolidated Cash Flows based on the nature of the underlying hedged item. See Note 8 for additional information.

Self-Insurance of Workers’ Compensation and Employee Healthcare Liabilities. We self-insure most workers’ compensation and employee healthcare costs and maintain insurance to limit exposure to large individual claims. Workers’ compensation liabilities include estimates for incurred but not reported claims and the ultimate cost of reported claims, based on historical experience and actuarial analysis. Accrued healthcare liabilities represent estimated unpaid medical and prescription costs provided by our plan administrators. These amounts were $7.9 million and $7.8 million at December 31, 2025 and December 31, 2024, respectively.

Debt Issuance and Deferred Financing Costs. Costs related to debt arrangements are capitalized and amortized over the term of the related borrowing. Amortization is included in Interest expense in our Statements of Consolidated Income. Unamortized debt issuance costs for Senior Notes are presented within Long-term debt, net on our Consolidated Balance Sheets. Unamortized deferred financing costs for the Revolving Credit Facility are presented in Other assets on our Consolidated Balance Sheets. When debt is extinguished, any remaining unamortized debt issuance or deferred financing costs are charged to Other income, net. For amendments or refinancings of the Revolving Credit Facility, such costs are written off only when the transaction is accounted for as an extinguishment; otherwise, the existing costs continue to be amortized over the term of the modified facility in accordance with ASC 470-50 (see Note 9).

Conditional Asset Retirement Obligations (“CAROs”). We have CAROs at certain manufacturing facilities, primarily related to (i) legal obligations for asbestos removal and disposal and (ii) future lease terminations. Most CAROs relate to asbestos that is contained within walls, floors, roofs, piping, or equipment insulation at older facilities. These costs would be incurred if the facilities undergo major renovation or demolition. We estimate the incremental removal and disposal costs, discount them to present value using a credit-adjusted, risk-free rate, and apply probability weighting when the timing of settlement is uncertain. See Note 10 for additional information.

Environmental Contingencies. We record environmental loss contingencies when they are probable and reasonably estimable (see Note 10). Accruals for remediation costs are generally recognized no later than the completion of the remedial feasibility study and are adjusted as new information becomes available. Future remediation costs are not discounted to their present value. Accrued environmental costs are included in Other accrued liabilities or Long-term liabilities, as appropriate (see Note 2). Environmental expenses for operating locations are included in COGS, while expenses for non-operating locations are included in SG&A and R&D in our Statements of Consolidated Income.

Revenue Recognition. We recognize revenue as we satisfy performance obligations and transfer control of products to our customers. For products that have an alternative use and/or for which we do not have an enforceable right to payment (including a reasonable profit) during the production process, we recognize revenue at a point in time. For revenue recognized at a point in time, transfer of control usually occurs upon shipment or upon customer receipt of the product, depending on shipping terms. For certain products with no alternative use and where we have an enforceable right to payment (including a reasonable profit), revenue is recognized over time. For contracts recognized over time, control transfer occurs incrementally during our production process as progress is made on fulfilling the performance obligation. We use the input method of determining our progress, capturing direct costs beginning at the point that billet or cast ingot is introduced into production at either the extrusion phase or the rolling phase, respectively. We believe the input method more accurately reflects the transfer of control as it represents the best information available of work completed to date for which we have an enforceable right to payment. For products in production, we recognize revenue using estimates of the cost incurred to date plus a reasonable margin. As the duration of our contracts for accounting purposes is typically less than one year, we do not present quantitative information about the aggregate transaction price allocated to unsatisfied performance obligations at the end of the reporting period.

Contracts are generally short-term and based on customer purchase orders, although purchase orders may reference a longer term “blanket purchase order” or a “terms and conditions” agreement, both of which may span multiple years. We adjust revenue for variable consideration such as metal price adjustments, volume rebates, and sales discounts, estimated based on forecasted order data and historical payment trends for specific customers. Accounts receivable is recorded when our right to payment becomes unconditional. We do not adjust for financing components as payment terms are generally less than one year.

Contract assets represent amounts for work performed but not yet billed, including amounts related to finished goods in transit at period end.

Incremental Costs of Obtaining a Contract. We expense the costs of obtaining a contract as incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. If the expected benefit exceeds one year, the costs are recorded as an asset to Other assets on our Consolidated Balance Sheets and amortized over the term of the contract.

Shipping and Handling Activities. We account for shipping and handling activities that occur after the customer has obtained control of a product as fulfillment activities (i.e., an expense) rather than as a promised service (i.e., a revenue element).

Advertising Costs. Advertising costs, which are included in SG&A and R&D, are expensed as incurred. Advertising costs for 2025, 2024, and 2023 were $0.3 million, $0.4 million, and $0.1 million, respectively.

Research and Development Costs. Research and development costs, which are included in SG&A and R&D, are expensed as incurred. Research and development costs, inclusive of personnel costs, for 2025, 2024, and 2023 were $10.7 million, $12.0 million and $11.1 million, respectively.

Stock-Based Compensation. We grant stock-based compensation to executives, certain employees, and non-employee directors in the form of service-based and performance-based awards. Compensation cost is measured at grant-date fair value and recognized over the service period, generally on a straight-line basis. Forfeitures are accounted for as they occur. Service-based awards are valued using the market price of our common stock on the grant date. Performance-based awards are valued based on the type of performance condition. Market-based awards, such as those tied to total shareholder return, are valued using a Monte Carlo model. Non-market performance-based awards are valued using our stock price at grant. Holders of performance-based awards receive a one-time dividend equivalent payment when vested shares are issued. Expense for market-based awards is recognized if the service condition is met, regardless of market performance. For non-market awards, expense is adjusted quarterly based on the most probable outcome. See Note 7 for additional details.

Adoption of New Accounting Pronouncements

Income Taxes. In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Improvements to Income Tax Disclosures. The guidance is primarily intended to improve income tax disclosure requirements by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation and (ii) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and is required to be applied prospectively with the option of retrospective application. We adopted ASU 2023-09 effective December 31, 2025 using a retrospective approach. See Note 14 for the required disclosures related to our adoption of ASU 2023-09. This standard update did not affect our operating results.

Credit Losses for Accounts Receivable and Contract Assets. In July 2025, the FASB issued ASU No. 2025-05 (“ASU 2025-05”), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides entities with a practical expedient to simplify the estimation of expected credit losses by assuming that the current conditions as of the balance sheet date will not change for the remaining life of the asset. We adopted ASU 2025-05 effective December 31, 2025 using a prospective approach. The adoption of this ASU did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Issued But Not Yet Adopted

Disclosure Improvements. In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-06 (“ASU 2023-06”), Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The guidance amends GAAP to reflect updates and simplifications to certain disclosure requirements referred to the FASB by the SEC. The amendments in ASU 2023-06 will become effective on the date which the SEC’s removal of the related disclosure becomes effective. If by June 30, 2027, the SEC does not remove the related disclosure, the pending amendment will be removed from ASC 2023-06 and it will not be effective. Adoption of ASU 2023-06 is expected to modify the disclosure and presentation requirements only and is not expected to have a material impact on our consolidated financial statements.

Disaggregation of Income Statement Expenses. In November 2024, the FASB issued ASU No. 2024-03 (“ASU 2024-03”), Disaggregation of Income Statement Expenses. The guidance requires additional, disaggregated disclosure about certain income statement expense line items. The amendments in ASU 2024-03 are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted, and is required to be applied prospectively with the option of retrospective application. We plan to adopt the provisions of ASU 2024-03 prospectively in the fourth quarter of fiscal 2027 and continue to evaluate the disclosure requirements related to the new standard.

Accounting for Internal-Use Software. In September 2025, the FASB issued ASU No. 2025-06 (“ASU 2025-06”), Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which improves the operability of the guidance by removing all references to software development stages so that the guidance is neutral to different software development methods. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027 and interim reporting periods within those annual reporting periods, with early adoption permitted as of the beginning of the annual reporting period. The amendments may be applied by using a prospective transition approach, a retrospective transition approach, or a modified transition approach based on the status of the project and whether software costs were capitalized before the date of adoption. We are currently evaluating the impact of this pronouncement on our consolidated financial statements.

Hedge Accounting Improvements. In November 2025, the FASB issued ASU No. 2025-09 (“ASU 2025-09”), Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The guidance introduces targeted refinements intended to improve the operability of hedge accounting and better align financial reporting with risk management activities, including greater flexibility in hedge designation and clarifications for certain instruments. ASU 2025-09 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We are currently evaluating the impact of this pronouncement on our consolidated financial statements.

Government Grants. In December 2025, the FASB issued ASU No. 2025-10 (“ASU 2025-10”), Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, to establish authoritative guidance on the accounting for government grants received by business entities. ASU 2025-10 is effective for fiscal years beginning after December 15, 2028, with early adoption permitted, and is required to be applied using a modified prospective, modified retrospective, or full retrospective transition method. We are currently evaluating the impact of this pronouncement on our consolidated financial statements.

Interim Reporting Narrow-Scope Improvements. In December 2025, the FASB issued ASU No. 2025-11 (“ASU 2025-11”), Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the scope, form and content, and required disclosures in interim financial statements prepared under GAAP. ASU 2025-11 enhances guidance for entities that issue condensed interim statements and reinstates a principles-based requirement to disclose material events since the last annual period. ASU 2025-11 is effective for interim periods in fiscal years beginning after December 15, 2027, with early adoption permitted and retrospective application optional. We are currently evaluating the impact of this standard on our consolidated financial statements.