Business Description

2. Basis of Presentation and Significant Accounting Policies Basis of Presentation The Company’s Consolidated Financial Statements include the accounts of GXO Logistics, Inc. and its majority-owned subsidiaries and variable interest entities where the Company is the primary beneficiary. The Company has eliminated intercompany accounts and transactions. Certain amounts reported for prior years have been reclassified to conform to the current year’s presentation. Use of Estimates The preparation of Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the use of estimates, judgments and assumptions that affect the reported amounts in the Consolidated Financial Statements and accompanying notes. The Company bases its estimates and judgments on historical information and on various other assumptions that it believes are reasonable under the circumstances. GAAP requires the Company to make estimates and judgments in several areas, including, but not limited to, those related to revenue recognition, income taxes, loss contingencies, defined benefit plans, valuation of long-lived assets including goodwill and intangible assets and their associated estimated useful lives, collectability of accounts receivable and the fair value of financial instruments. Actual results may vary from those estimates. Significant Accounting Policies Cash, Restricted Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less on the date of purchase to be cash equivalents. Restricted cash relates to deposits in connection with the ordinary conduct of business. Restricted cash is recorded in Other current assets and Other long-term assets on the Consolidated Balance Sheets. Accounts Receivable and Allowance for Credit Losses Accounts receivable represents the Company’s unconditional right to receive consideration from its customers. The Company records accounts receivable at the contractual amount and records an allowance for doubtful accounts for the amount it estimates it may not collect. In determining the allowance for doubtful accounts, the Company considers historical collection experience, the age of the accounts receivable balances, the credit quality and risk of its customers, any specific customer collection issues, current economic conditions and other factors that may impact its customers’ ability to pay. The Company writes off accounts receivable balances once the receivables are no longer deemed collectible. The roll forward of the allowance for doubtful accounts was as follows: Year Ended December 31, (In millions) 2025 2024 2023 Beginning balance $ 15 $ 11 $ 12 Provisions charged to expense 5 16 10 Write-offs, less recoveries, and foreign exchange translation (5) (12) (11) Ending balance $ 15 $ 15 $ 11 Property and Equipment Property and equipment, which includes assets recorded under finance leases, are stated at cost less accumulated depreciation or, in the case of property and equipment acquired in a business combination, at fair value at the date of acquisition. Maintenance and repair expenditures are charged to expenses as incurred. For internally developed computer software, all costs incurred during the planning and evaluation stages are expensed as incurred. Software development costs are capitalized once the preliminary project stage is complete, and it is probable that the project will be completed and the software will be used to perform the intended function. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the remaining lease term, whichever is shorter. Land and assets held within construction in progress are not depreciated. The estimated useful lives of property and equipment are described below: Estimated Useful Life Buildings 40 years Leasehold improvements Shorter of useful life or term of lease Warehouse equipment, fleet and other 3 to 15 years Technology and automated systems 3 to 15 years Computer equipment 1 to 5 years Internal-use software 1 to 5 years Leases The Company has entered into noncancelable operating and finance leases primarily for real estate and warehouse equipment. The Company determines whether an arrangement is a lease at inception and, if so, whether that lease meets the classification criteria for a finance or an operating lease at the commencement date.…