B2W Flipbooks

Page | 30 ISSUES / CHALLENGES REGARDING IMPLEMENTATION • An evaluation of the facts and circumstances is required for determination of whether such costs should be excluded from an input method should be performed at onset and throughout duration of contract. • A contractor must consider whether materials procured are distinct. Since most materials can be readily used by the contractor on other construction projects without incurring signifi cant costs to modify the items, materials are not distinct and should be considered for inclusion as an uninstalled material. Practical Application Note: The contractor must evaluate all factors relative to the determination of whether the materials are distinct as discussed in ASC 606-10-25-19 through 22. ASC 606-10-25-19 states: A good or service that is promised to a customer is distinct if both of the following criteria are met: a). The customer can benefi t from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct). b). The entity's promise to transfer the good or service to the customer is separately identifi able from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). See ASC 601-10-25-20 through 22 for additional clarifi cation on determining whether materials are distinct. • Is this literature only applicable to inventoriable or non-inventoriable, highly customized materials? - Many contracts include standard materials such as steel, concrete and copper wire as well as components that require high level of customization to fi t the requirements of the asset, such as a turbine generator or specifi cally designed and fabricated pipe. Standard materials are frequently not unique to the contract and can be used on other construction contracts. If unexpected delays occur, contractor may determine that the customer has not obtained control of these goods and should carve out such costs from the cost-to-cost method as inventory as they can likely use these materials for other projects without incurring signifi cant costs. However, an evaluation should be performed to determine when the control of these materials transfered to the customer as control may transfer prior to installation. It would be inappropriate for the contractor to recognize the goods as inventory once the customer obtains control of the goods. For example, a security interest in the materials may pass to the owner through billing of these materials or delivery to the job site. In this instance, it may be appropriate to include such costs under the cost-to cost input method or to recognize revenue equal to related costs. If the customer obtains control of the goods signifi cantly before installation and the cost of the transferred goods Uninstalled Materials (continued) >

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