B2W Flipbooks

Page | 31 Uninstalled Materials (continued) > the contract because it would result in a signifi cant amount of margin being recorded in a single accounting period, such as when there is a single asset signifi cant to the overall contract that is installed at a single point in time. - Such an evaluation requires signifi cant judgment about which conclusion best depicts the entity's performance in the contract. • Carving uninstalled materials out of the revenue recognition process on a contract will result in WIP schedule presentation challenges to convey the computation to users of these statements. is signifi cant relative to the total expected goods, these costs do not depict the entity's performance in satisfying the performance obligation and should still be excluded from the cost-to-cost formula. • Is the contractor signifi cantly involved in the design and manufacturing of an item that is procured from a third party? If so, the production and receipt of such materials will likely represent progress towards satisfying the performance obligation but the contractor still must determine if costs are proportionate to such progress in determining whether to include in cost-to-cost formula. Practical Application Note: The language requires signifi cant involvement in design and manufacturing. While the contractor is often signifi cantly involved in design, they rarely are signifi cantly involved in manufacturing. It is believed that this exception will rarely be met in the construction industry where a third party produces the equipment or material. • How do you account for materials when installed? Do you add the costs and estimated costs to the cost-to-cost formula at this time? - In some cases, it may be appropriate to include the cost of the materials in the cost-to-cost calculation once the materials are installed when it would result in an insignifi cant amount of margin being recorded in any one accounting period, such as when a large amount of pipe, conduit or copper wire is installed over time. - In other cases, it may be appropriate to exclude costs from the cost-to-cost calculation for the entire duration of

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