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LAPORTE CONSTRUCTION COMPANY, INC. <br />AND <br />NEW REGIME, LLC <br />NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS <br />NOVEMBER 30, 2022 AND 2021 <br /> <br /> <br />8 <br />Receivable <br />Receivables represent amounts billed to customers based on performance of contractual items. <br />Amounts billed, excluding retainage, are generally due 30 days after issuance of the invoice. <br />Retainage is generally due following substantial completion of the project, or earlier as project <br />milestones are met. Delinquent receivables are identified based on contractual terms and written <br />off based on credit evaluations and specific circumstances or the customer. <br />Management estimates an allowance for doubtful receivables based on an evaluation of historical <br />losses, current economic conditions and other factors unique to LaPorte’s customer base. <br />Revenue and Cost Recognition <br />LaPorte recognizes contract revenues for financial reporting purposes over time, as performance <br />obligations are satisfied, due to the continuous transfer of control to the customer. Construction <br />contracts are generally accounted for as a single unit of account (a single performance obligation) <br />and are not segmented between types of services. Progress toward completion of LaPorte’s <br />contracts is measured by the percentage of costs incurred to date to estimated total costs for <br />each contract. This method is used because management considers cost incurred to be the best <br />available measure of revenues earned on uncompleted contracts. <br />Because of the inherent uncertainties in estimating the percentage of contract revenues earned <br />and final contract revenues being subject to customer approval, it is at least reasonably possible <br />that LaPorte’s estimates of costs and revenues may significantly change in the near term. <br />Contracts may include additional consideration or penalties that depend on LaPorte’s <br />performance, and which would impact the revenue to which LaPorte is entitled. For performance <br />bonuses or contractual penalties based on objective criteria, such as meeting or failing to meet <br />specified construction deadlines, LaPorte estimates the amount of consideration to be earned or <br />penalty to be incurred based on historical experience for similar projects. If weather conditions, <br />lack of historical experience for similar projects, or other factors create uncertainty about the <br />amount to which LaPorte expects to be entitled, LaPorte recognized revenue at an amount that <br />will not result in a significant reversal of revenue when the uncertainty is resolved. Performance <br />contractual provisions for additional consideration based on subjective criteria are generally <br />recognized as revenue only upon customer approval. <br />Contract costs include all direct labor and benefits, material, subcontract, and equipment costs <br />related to contract performance. Indirect construction costs, such as fuel, depreciation, other <br />equipment costs, and general and administrative expenses are charged to expense as incurred. <br />Provisions for estimated losses on uncompleted contracts are made in the period in which such <br />losses are determined. Changes in estimated job profitability resulting from variable consideration <br />(such as incentives for completing a contract early or on time, penalties for not completing a <br />contract on time, claims for which LaPorte has enforceable rights, or contract