Contract Assets and Liabilities
Billing practices are governed by the contract terms of each project based upon achievement
of milestones or pre-agreed schedules. Billings do not necessarily correlate with revenue
recognized using a time-elapsed method of revenue recognition. Contract assets include
unbilled amounts typically resulting from revenue under long-term contracts when the time-
elapsed method of revenue recognition is utilized and revenue recognized exceeds the
amount billed to the customer, and right to payment is not unconditional. Contract liabilities
consist of deferred revenue.
Contract assets and liabilities are reported in a net position on a contract-by-contract basis at
the end of each reporting period. The Company classifies deferred revenue as current or
noncurrent based on the timing of when revenue is expected to be recognized. The current
portion of deferred revenue is included in current liabilities in the Balance Sheets.
Practical Expedients
The Company generally expenses pre-contract costs when incurred because the amortization
period would have been one year or less.
Income Taxes
Income taxes are recorded using the accrual method and the provision for federal and state
income taxes is based on income reported in the consolidated financial statements, adjusted
for items not recognized for income tax purposes. Provisions for deferred income taxes
are recognized for accelerated depreciation and other temporary differences. A valuation
allowance is provided to offset any net deferred tax assets if, based upon available evidence,
it is more likely than not that some or all of the deferred tax assets will not be realized.
Investment tax credits previously realized for income tax purposes are amortized for financial
statement purposes over the life of the property, giving rise to the credit.
Adoption of New Accounting Standards
Effective January 1, 2021, the Company adopted FASB Accounting Standards Update (ASU)
2017-12, “Derivatives and Hedging (Topic 815), Targeted improvements to Accounting for
Hedging Activities,” which made changes to align risk management activities and financial
reporting by permitting hedge accounting for risk components in hedging relationships
involving nonfinancial risk and interest rate risk, modified certain recognition and
presentation of the effects of hedging instruments, and provided other simplifications of
hedge accounting guidance. All transition requirements and elections are applied to existing
hedging relationships on the date of adoption. For a cash flow hedge existing at the date of
adoption, the Company applied this guidance through a cumulative-effect adjustment related
to eliminating the separate measurement of ineffectiveness to accumulated other
comprehensive income with a corresponding adjustment to the opening balance of retained
earnings as of the beginning of the fiscal year that the Company adopts the amendments in
this ASU and prospectively for presentation and disclosure guidance. There was no prior year
effect to the financial statements as a result of adoption.
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