B2W Flipbooks

Page | 35 Uninstalled Materials (continued) > IMPLEMENTATION EXAMPLES Practical Application Note: If the procurement and installation of the equipment is a separate performance obligation, a portion of the transaction price would be allocated to the procurement and installation of the specialized equipment. If the transfer of control of the equipment is signifi cantly before the installation services then revenue related to the procurement of the equipment would be recognized at a zero profi t and the remaining transaction price of the performance obligation would be recognized under percentage of completion method as installation occurs. INTERNAL PROCEDURES REQUIRED OF CONTRACTORS TO COMPLY WITH THE NEW STANDARD RELATED TO UNINSTALLED MATERIALS • Company has written policy on criteria for accounting for materials as inventory, uninstalled materials, or job cost. • Company assesses typical contract terms and local law (consulting legal counsel as appropriate) to determine the moment that control of materials pass to customers. • Company has an accounting policy that establishes whether uninstalled equipment or materials are "signifi cant to the total expected costs." Note that this measurement is not a materiality measure. • Company has internal controls to identify and account for items such as inventory, uninstalled materials (i.e., control has passed to customer), or job cost. • System/procedures are in place to segregate estimated uninstalled materials from total estimated costs and from the transaction price. Note that once this is done, it continues to be accounted for on this basis for the life of the contract unless including the costs as installed has an immaterial eff ect on margin earned to date. • Project management is trained on identifying (GAAP basis) uninstalled materials and a process is in place to quantify these at each reporting date. • Project management is trained on identifying procurement policies that will procure materials signifi cantly before installation. Best practices will suggest that operations adopt practices that minimize long lead-time procurement except in critical supply situations.

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