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Page | 52 OUR RECOMMENDATIONS Entities should carefully consider the method of adoption that is best in their situation, taking into account the concerns of sureties and other users of the fi nancial statements and the practical expedients available under both the modifi ed and full retrospective methods. Entities should recognize that both methods come with challenges. For example, the modifi ed retrospective method requires entities keep their books on both legacy and new GAAP, while the full retrospective method requires entities to use judgement on contract modifi cations at the transition date. The remaining recommendations below are based on the assumption that the modifi ed retrospective transition method is used. • The entity may apply a practical expedient with respect to contract modifi cations (change orders) and variable consideration that were applicable to contracts that were modifi ed before the beginning of the earliest period presented applying ASC 606 (generally January 1, 2019). The entity may aggregate the eff ects of all contract modifi cations applicable to the initial adoption when identifying the satisfi ed and unsatisfi ed performance obligations, determining the transaction price and allocating the transaction price to the satisfi ed and unsatisfi ed performance obligations. The use of this expedient must be disclosed and, if practical, a qualitative assessment of the estimated eff ect of the use of this expedient. • The entity must elect to apply the new guidance to either all contracts or only to contracts not completed at the date of initial application (January 1, 2019, assuming a December 31, 2019 year end). This election must be disclosed in the year of adoption. We see no reason to make any changes to contracts that have previously been reported as complete. We would recommend that the new guidance be applied only to contracts in process at the date of initial application. • Additionally, there are choices to be made for contracts with noncustomers. Refer to ASC 610- 20, Gains and Losses From the Derecognition of Nonfi nancial Assets. Transition Method (continued) >

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