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Opening of Bids - 2022 Curb and Sidewalk Construction, Round II Proj No. 122-044 - Selge Construction Co., Inc.
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Opening of Bids - 2022 Curb and Sidewalk Construction, Round II Proj No. 122-044 - Selge Construction Co., Inc.
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12/13/2022 3:05:55 PM
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Board of Public Works
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Projects
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12/13/2022
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Selge Construction Company, Inc. <br />Notes to Financial Statements <br />Note 1. Nature of Business and Significant Accounting Policies (Continued) <br />Pending accounting pronouncement: In February 2016, the FASB issued ASU 2016-02, Leases <br />(Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the <br />new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet <br />for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, <br />with classification affecting the pattern of expense recognition in the statement of income. The new <br />standard is effective for fiscal years beginning after December 15, 2021, including interim periods within <br />those fiscal years. The Company is currently evaluating the impact the new standard will have on its <br />financial statements. <br />Subsequent events: The Company has evaluated subsequent events for recognition and disclosure <br />through May 20, 2022, which is the date the Company's financial statements were available to be issued. <br />Note 2. Revenue Recognition <br />The Company primarily generates revenue from fixed-price contracts in the construction of underground <br />sewer and water mains. The Company recognizes revenue over time using the percentage -of -completion <br />method. The Company's contracts are generally considered to be a single performance obligation <br />because the Company provides a significant service of integrating a complex set of tasks and <br />components. Management has concluded performance obligations related to construction contracts are <br />satisfied over time because the Company's performance typically creates or enhances an asset that the <br />customer controls as the asset is created or enhanced. The Company recognizes revenue as <br />performance obligations are satisfied and control of the promised good and/or service is transferred to the <br />customer. <br />The Company's performance obligations are satisfied with the transfer of control utilizing the cost -to -cost <br />measure of progress. The cost of revenue include all direct material, subcontracts, labor, and other <br />miscellaneous direct costs. General and administrative costs and those indirect costs related to contract <br />performance, such as indirect labor, supplies, tools, repairs and depreciation costs are charged to <br />expense as incurred. Pre -contract costs are generally expensed as incurred. <br />Changes in job performance and revisions in cost and profit estimates are reflected in the accounting <br />period in which the facts requiring the revisions become known. At the time a loss on a contract becomes <br />foreseeable, the entire amount of the estimated loss is accrued. Under the cost -to -cost approach, use of <br />estimated costs to complete each performance obligation is a significant variable in the progress of <br />determining and recognizing revenue and is a significant factor in the accounting for such performance <br />obligations. <br />The Company also performs work under cost -plus -fee contracts that are small short-term projects, and <br />uses point in time revenue recognition, which is based upon completion and billing for the project. These <br />projects are based on cost plus margin. <br />The Company's remaining performance obligations (hereafter referred to as backlog) represent the <br />unrecognized revenue on the open fixed-price contracts as of February 28, 2022. The Company's <br />backlog as of February 28, 2022, is approximately $24,424,000. <br />The transaction price for the Company's contracts may include variable consideration, which includes <br />increases in transaction price for approved or unapproved change orders and incentives. Change orders <br />and incentives are generally not distinct from the existing contract due to the significant integration <br />provided in the context of the contract and are accounted for as a modification of the existing contract and <br />performance obligation. The Company estimates variable consideration for a performance obligation at <br />the most likely amount that the Company expects to be entitled. <br />0 <br />
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