Issue link: https://construction.trimble.com/en/resources/i/1520032
Page | 38 Recognizing Revenue (continued) > in contingencies and would not necessarily need to be excluded. Labor strikes and design errors are examples of signifi cant unexpected ineffi ciencies that would be excluded from the input method of revenue recognition on a performance obligation. As in current percentage of completion accounting, adjustments may be required during the performance of the contract to appropriately measure progress. Measures and estimates should be evaluated each period and any necessary adjustments to revenue should be refl ected on a cumulative catch-up basis. If it is determined that progress cannot be reliably and consistently measured, revenue should not be recognized until that measurement is possible. An exception to this rule is any contract where a loss will not be incurred, such as a cost-plus contract where the performance of the contract is expected to, at a minimum, result in the recovery of cost incurred. Revenue should be recognized up to cost incurred until the gross margin can be reasonably measured. If initially progress is determined to be unmeasurable, but subsequently becomes measurable, revenue should be recognized at that point in time based on the appropriate measure of progress. This is a signifi cant change from the current accounting under the completed contract method. It is acceptable under ASC 606 to follow a conservative accounting policy to recognize revenue equal to costs incurred until a predetermined threshold of completion has occurred. For example, recognition of revenue equal to costs until the contract is 20% complete. When negotiating contracts with customers, entities should consider the potential impacts of the contract terms on the measurement of performance obligation satisfaction. Specifi c outputs, milestones, and timing of transfer of control to the customer can directly impact the selection of an appropriate measurement of progress. If the terms of the contract indicate that progress cannot be reliably and consistently measured, revenue will be recognized at a point in time similar to the current practice of completed contract accounting.