Babcock & Wilcox Enterprises, Inc.

For a summary of the critical accounting policies and estimates that we use in the preparation of our unaudited Condensed Consolidated Financial Statements, see "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no significant changes to our policies during the nine months ended September 30, 2026 from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

During the nine months ended September 30, 2026, our accounting for equity-linked instruments, specifically warrants, became a critical accounting estimate due to the significance of these instruments and the related changes in fair value, together with the use of significant unobservable inputs in their valuation.

Fair Value of Warrants

We evaluate the terms of warrants and similar equity-linked instruments to determine whether the instruments should be classified as liabilities or equity. This evaluation requires judgment and is based on the specific contractual terms of each warrant and the applicable accounting guidance. Warrants classified as liabilities are initially recorded at fair value and remeasured at fair value at each reporting date, with changes in fair value recognized in earnings. Warrants classified as equity are initially recorded at fair value and are not subsequently remeasured.

Fair value measurements of warrants may be categorized within Level 3 of the fair value hierarchy when the valuation incorporates significant unobservable inputs, principally expected stock-price volatility. We estimate the fair value of these warrants using the Black-Scholes model, when appropriate, which incorporates assumptions including the Company's stock price, the exercise price of the warrant, the remaining contractual term, expected stock-price volatility and the risk-free interest rate. The selection of an appropriate valuation methodology and assumptions requires judgment and may differ depending on the terms and characteristics of the applicable warrant.