Opening of Bids - Grand Trunk Railroad Water Main Replacement Greenlawn & 30th St Proj No 122-041 - Selge Construction CO., Inc

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Selge Construction Company, Inc. Notes to Financial Statements Note 1. Nature of Business and Significant Accounting Policies (Continued) The Company recognizes leases on its balance sheets as a right -of -use (ROU) asset representing the right to use an underlying asset and a lease liability representing the obligation to make lease payments over the lease term, measured on a discounted basis. Leases are classified as either finance leases or operating leases based on certain criteria. Classification of the lease affects the pattern of expense recognition in the income statement. The Company made an accounting policy election available under Topic 842 not to recognize ROU assets and lease liabilities for leases with a term of 12 months or less. For all other leases, ROU assets and lease liabilities are measured based on the present value of future lease payments over the lease term at the commencement date of the lease. To determine the present value of lease payments, the Company made an accounting policy election available to non-public companies to utilize a risk -free borrowing rate, which is aligned with the lease term at the lease commencement date. Future lease payments may include fixed rent escalation clauses or payments that depend on an index (such as the consumer price index), which is initially measured using the index or rate at lease commencement. Subsequent changes of an index and other periodic market -rate adjustments to base rent are recorded in variable lease expense in the period incurred. Residual value guarantees or payments for terminating the lease are included in the lease payments only when it is probable they will be incurred. Reclassification: Certain prior -year amounts have been reclassified to conform with current -year presentation. Such reclassifications had no effect on previously recorded net income. Subsequent events: The Company has evaluated subsequent events for recognition and disclosure through June 6, 2025, which is the date the Company's financial statements were available to be issued. Note 2. Revenue Recognition The Company primarily generates revenue from fixed -price contracts in the construction of underground sewer and water mains. The Company recognizes revenue over time using the percentage -of -completion method. The Company's contracts are generally considered to be a single performance obligation because the Company provides a significant service of integrating a complex set of tasks and components. Management has concluded performance obligations related to construction contracts are satisfied over time because the Company's performance typically creates or enhances an asset that the customer controls as the asset is created or enhanced. The Company recognizes revenue as performance obligations are satisfied and control of the promised good and/or service is transferred to the customer. The Company's performance obligations are satisfied with the transfer of control utilizing the cost -to -cost measure of progress. The cost of revenue includes all direct material, subcontracts, labor, and other miscellaneous direct costs. General and administrative costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs are charged to expense as incurred. Pre -contract costs are generally expensed as incurred. Changes in job performance and revisions in cost and profit estimates are reflected in the accounting period in which the facts requiring the revisions become known. At the time a loss on a contract becomes foreseeable, the entire amount of the estimated loss is accrued. Under the cost -to -cost approach, use of estimated costs to complete each performance obligation is a significant variable in the progress of determining and recognizing revenue and is a significant factor in the accounting for such performance obligations.