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Significant Accounting Policies | 12 Months Ended
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Sep. 29, 2017
New Accounting Pronouncements And Changes In Accounting Principles [Abstract] |
Significant Accounting Policies | 2. Significant Accounting Policies Revenue Accounting for Contracts and Use of Joint Ventures We recognize revenue earned on our technical professional and field services projects under the percentage-of-completion method described in ASC 605-35, Construction-Type and Production-Type Contracts. In general, we recognize revenues at the time we provide services. Pre-contract costs are generally expensed as incurred. Contracts are generally segmented between types of services, such as project services and construction, and accordingly, gross margin related to each activity is recognized as those separate services are rendered. For multiple contracts with a single customer we account for each contract separately. The percentage-of-completion method of accounting is applied by comparing contract costs incurred to date to the total estimated costs at completion. On cost-reimbursable contracts, the cost of materials and subcontracts are generally excluded from the calculation of the measure of progress towards completion to provide a more meaningful allocation of income. Contract losses are provided for in their entirety in the period they become known, without regard to the percentage-of-completion. Unapproved change orders are included in the contract price to the extent it is probable that such change orders will result in additional contract revenue and the amount of such additional revenue can be reliably estimated. Claims meeting these recognition criteria are included in revenues only to the extent of the related costs incurred. Certain cost-reimbursable contracts include incentive-fee arrangements. These incentive fees can be based on a variety of factors but the most common are the achievement of target completion dates, target costs, and/or other performance criteria. Failure to meet these targets can result in unrealized incentive fees. We recognize incentive fees based on expected results using the percentage-of-completion method of accounting. As the contract progresses and more information becomes available, the estimate of the anticipated incentive fee that will be earned is revised as necessary. We bill incentive fees based on the terms and conditions of the individual contracts. In certain situations, we are allowed to bill a portion of the incentive fees over the performance period of the contract. In other situations, we are allowed to bill incentive fees only after the target criterion has been achieved. Incentive fees which have been recognized but not billed are included in receivables in the accompanying Consolidated Balance Sheets. Certain cost-reimbursable contracts with government customers as well as certain commercial clients provide that contract costs are subject to audit and adjustment. In this situation, revenues are recorded at the time services are performed based upon the amounts we expect to realize upon completion of the contracts. Revenues are not recognized for non-recoverable costs. In those situations where an audit indicates that we may have billed a client for costs not allowable under the terms of the contract, we estimate the amount of such nonbillable costs and adjust our revenues accordingly. When we are directly responsible for subcontractor labor or third-party materials and equipment, we reflect the costs of such items in both revenues and costs (and we refer to such costs as “pass-through” costs). On those projects where the client elects to pay for such items directly and we have no associated responsibility for such items, these amounts are not reflected in either revenues or costs. The following table sets forth pass-through costs included in revenues in the accompanying Consolidated Statements of Earnings (in millions):
For the Year Ended
September 29, 2017 |  |  | September 30, 2016 |  |  | October 2, 2015 |
$ | 2,539.3 |  |  | $ | 2,489.9 |  |  | $ | 2,602.6 |
As is common to the industry, we execute certain contracts jointly with third parties through various forms of joint ventures and consortiums. Although the joint ventures own and hold the contracts with the clients, the services required by the contracts are typically performed by us and our joint venture partners, or by other subcontractors under subcontracting agreements with the joint ventures. The assets of our joint ventures, therefore, consist almost entirely of cash and receivables (representing amounts due from clients), and the liabilities of our joint ventures consist almost entirely of amounts due to the joint venture partners (for services provided by the partners to the joint ventures under their individual subcontracts) and other subcontractors. In general, at any given time, the equity of our joint ventures represents the undistributed profits earned on contracts the joint ventures hold with clients. Very few of our joint ventures have employees. None of our joint ventures have third-party debt or credit facilities. Under U.S. GAAP, our share of profits and losses associated with the contracts held by the joint ventures is reflected in our Consolidated Financial Statements. Certain of our joint ventures meet the definition of a VIE. In evaluating our VIEs for possible consolidation, we perform a qualitative analysis to determine whether or not we have a “controlling financial interest” in the VIE as defined by U.S. GAAP. We consolidate only those VIEs over which we have a controlling financial interest and are the primary beneficiary. For the Company’s unconsolidated joint ventures, we use either the equity method of accounting or proportional consolidation. There were no changes in facts and circumstances during the period that caused the Company to reassess the method of accounting for its VIEs. Fair Value Measurements The net carrying amounts of cash and cash equivalents, trade receivables and payables, and notes payable approximate Fair Value due to the short-term nature of these instruments. Similarly, we believe the carrying value of long-term debt also approximates Fair Value based on the interest rates and scheduled maturities applicable to the outstanding borrowings. Certain other assets and liabilities, such as forward contracts and an interest rate swap agreement we purchased as cash-flow hedges discussed in Note 11 — Commitments and Contingencies and Derivative Financial Instruments are required to be carried in our Consolidated Financial Statements at Fair Value. The Fair Value of the Company’s reporting units (used for purposes of determining whether there is an indication of possible impairment of the carrying value of goodwill) is determined using both an income approach and a market approach. Both approaches require us to make certain estimates and judgments. Under the income approach, Fair Value is determined by using the discounted cash flows of our reporting units. Under the market approach, the Fair Values of our reporting units are determined by reference to guideline companies that are reasonably comparable to our reporting units; the Fair Values are estimated based on the valuation multiples of the invested capital associated with the guideline companies. In assessing whether there is an indication that the carrying value of goodwill has been impaired, we utilize the results of both valuation techniques and consider the range of Fair Values indicated. The range of values (both ends of the range) for each reporting unit exceeded the respective book values by 27% to 110%. With respect to equity-based compensation (i.e., share-based payments), we estimate the Fair Value of stock options granted to employees and directors using the Black-Scholes option-pricing model. Like all option-pricing models, the Black-Scholes model requires the use of subjective assumptions including (i) the expected volatility of the market price of the underlying stock, and (ii) the expected term of the award, among others. Accordingly, changes in assumptions and any subsequent adjustments to those assumptions can cause different Fair Values to be assigned to our future stock option awards. For restricted stock units containing service, market and performance conditions, compensation expense is based on the Fair Value of such units using a Monte Carlo simulation. The Fair Values of the assets owned by the various pension plans that the Company sponsors are determined based on the type of asset, consistent with U.S. GAAP. Equity securities are valued by using market observable data such as quoted prices. Publicly traded corporate equity securities are valued at the last reported sale price on the last business day of the year. Securities not traded on the last business day are valued at the last reported bid price. Debt securities are valued at the last reported sale price on the last business day applicable. Real estate consists primarily of common or collective trusts, with underlying investments in real estate. These investments are valued using the best information available, including quoted market price, market prices for similar assets when available, internal cash flow estimates discounted at an appropriate interest rate, or independent appraisals, as appropriate. Management values insurance contracts, investments in infrastructure/raw goods, and hedge funds using actuarial assumptions and certain values reported by fund managers. The methodologies described above and elsewhere in these Notes to Consolidated Financial Statements may produce a Fair Value measure that may not be indicative of net realizable value or reflective of future Fair Values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the Fair Value of certain financial instruments could result in a different Fair Value measurement. Cash Equivalents We consider all highly liquid investments with original maturities of less than three months to be cash equivalents. Cash equivalents at September 29, 2017 and September 30, 2016 consisted primarily of money market mutual funds and overnight bank deposits. Receivables and Billings in Excess of Costs Receivables include billed receivables, unbilled receivables, and retentions receivable. Billed receivables represent amounts invoiced to clients in accordance with the terms of our client contracts. They are recorded in our financial statements when they are issued. Unbilled receivables and retentions receivable represent reimbursable costs and amounts earned and reimbursable under contracts in progress as of the respective balance sheet dates. Such amounts become billable according to the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project. We anticipate that substantially all of such unbilled amounts will be billed and collected over the next fiscal year. Certain contracts allow us to issue invoices to clients in advance of providing services. Billings in excess of costs represent billings to, and cash collected from, clients in advance of work performed. We anticipate that substantially all such amounts will be earned over the next twelve months. Property, Equipment, and Improvements Property, equipment and improvements are carried at cost, and are shown net of accumulated depreciation and amortization in the accompanying Consolidated Balance Sheets. Depreciation and amortization is computed primarily by using the straight-line method over the estimated useful lives of the assets. The cost of leasehold improvements is amortized using the straight-line method over the lesser of the estimated useful life of the asset or the remaining term of the related lease. Estimated useful lives range from 20 to 40 years for buildings, from 3 to 10 years for equipment and from 4 to 10 years for leasehold improvements. Goodwill and Other Intangible Assets Goodwill represents the excess of the cost of an acquired business over the Fair Value of the net tangible and intangible assets acquired. Goodwill and intangible assets with indefinite lives are not amortized; instead, on an annual basis as of the end of the third quarter of each fiscal year we test goodwill and intangible assets with indefinite lives for possible impairment. Interim testing for impairment is performed if indicators of potential impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on the current reporting structure. During the second quarter of fiscal 2016, we reorganized our operations around four global lines of business, which also serve as our operating segments: Petroleum & Chemicals, Buildings & Infrastructure, Aerospace & Technology, and Industrial. We determined that this new organization would better support the needs of managing each unique set of customers that fall within each segment. As a result of the new organization, we subsequently realigned our internal reporting structures to enable our Chief Executive Officer, who is also our Chief Operating Decision Maker, to evaluate the performance of each of these segments and make appropriate resource allocations among each of the segments. For purposes of our goodwill impairment testing, we have determined that our operating segments are also our reporting units based on management’s conclusion that the components comprising each of our operating segments share similar economic characteristics and meet the aggregation criteria in accordance with ASC 350. When testing goodwill for impairment quantitatively, the Company first compares the fair value of each reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, a second step is performed to measure the amount of potential impairment. In the second step, the Company compared the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit's goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized. During 2017, we completed our annual goodwill impairment test and quantitatively determined that none of the goodwill was impaired. The Company recorded $119.3 million of goodwill during 2017 in conjunction with the acquisitions of Aquenta Consulting Pty Ltd. and Blue Canopy LLC. Goodwill for each of the Company's segments is presented in Note 15. We have determined that the fair value of our reporting units substantially exceeded their respective carrying values for the Consolidated Balance Sheets presented. The following table presents the components of our goodwill by reporting unit appearing in the accompanying Consolidated Balance Sheets at September 29, 2017 (in thousands):
|  | September 29, 2017 |
Aerospace & Technology |  | $ | 1,025,780 |
Buildings & Infrastructure |  |  | 751,407 |
Industrial |  |  | 561,785 |
Petroleum & Chemicals |  |  | 670,854 |
Total Goodwill |  | $ | 3,009,826 |
During the preparation of the Form 10-Q for the first fiscal quarter of 2017, the Company determined that its prior financial statements contained immaterial misstatements related to incorrect translation of the Company’s non-U.S. goodwill balances from local currency to the U.S. Dollar reporting currency. It was determined that the Company had incorrectly used historical translation rates for the U.S. Dollar in place at the time of the Company’s recording of its foreign goodwill balances rather than using current translation rates at each balance sheet date in accordance with U.S. GAAP. The error dated back to the time of our initial reporting of non-US goodwill balances in the late 1990s and affected our historical quarterly and annual reporting periods through the first fiscal quarter of 2017. As a result, goodwill and accumulated other comprehensive income in the Company’s September 30, 2016 consolidated balance sheet (which have not been adjusted) were each overstated by $209.9 million and were corrected in the first fiscal quarter of 2017 foreign currency translation adjustment. Consequently, the correction was a direct component of the overall translation adjustment amount of $140.5 million that was reported for fiscal 2017. These adjustments had no impact on the Company’s Consolidated Statements of Earnings or Cash Flows. Also, other comprehensive income for the year ended September 30, 2016 was overstated by $33.8 million as a result of these misstatements. The following table provides certain information related to the Company’s acquired intangible assets in the accompanying Consolidated Balance Sheets at September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):
|  | Customer Relationships, Contracts, and Backlog |  |  | Developed Technology |  |  | Trade Names |  |  | Patents |  |  | Other |  |  | Total |
Balances, September 26, 2014 |  | $ | 408,041 |  |  | $ | 17,378 |  |  | $ | 14,148 |  |  | $ | — |  |  | $ | 625 |  |  | $ | 440,192 |
Acquisitions |  |  | (4,315 | ) |  |  | — |  |  |  | (1,292 | ) |  |  | — |  |  |  | 300 |  |  |  | (5,307 | )
Amortization |  |  | (39,967 | ) |  |  | (1,533 | ) |  |  | (4,172 | ) |  |  | — |  |  |  | (277 | ) |  |  | (45,949 | )
Foreign currency translation |  |  | (34,418 | ) |  |  | — |  |  |  | (1,085 | ) |  |  | — |  |  |  | (14 | ) |  |  | (35,517 | )
Balances, October 2, 2015 |  |  | 329,341 |  |  |  | 15,845 |  |  |  | 7,599 |  |  |  | — |  |  |  | 634 |  |  |  | 353,419 |
Acquisitions |  |  | 7,286 |  |  |  | — |  |  |  | 859 |  |  |  | 10,027 |  |  |  | — |  |  |  | 18,172 |
Amortization |  |  | (38,595 | ) |  |  | (1,534 | ) |  |  | (3,819 | ) |  |  | — |  |  |  | (454 | ) |  |  | (44,402 | )
Foreign currency translation |  |  | 9,605 |  |  |  | — |  |  |  | 147 |  |  |  | — |  |  |  | (19 | ) |  |  | 9,733 |
Balances, September 30, 2016 |  |  | 307,637 |  |  |  | 14,311 |  |  |  | 4,786 |  |  |  | 10,027 |  |  |  | 161 |  |  |  | 336,922 |
Acquisitions |  |  | 29,803 |  |  |  | 1,685 |  |  |  | 4,417 |  |  |  | — |  |  |  | — |  |  |  | 35,905 |
Amortization |  |  | (39,679 | ) |  |  | (1,534 | ) |  |  | (2,549 | ) |  |  | (400 | ) |  |  | (50 | ) |  |  | (44,212 | )
Foreign currency translation |  |  | 3,707 |  |  |  | — |  |  |  | 45 |  |  |  | 553 |  |  |  | — |  |  |  | 4,305 |
Balances, September 29, 2017 |  | $ | 301,468 |  |  |  | 14,462 |  |  |  | 6,699 |  |  |  | 10,180 |  |  |  | 111 |  |  |  | 332,920 |
Weighted Average Amortization Period (years) |  | 7.9 |  |  | 7.7 |  |  | 4.4 |  |  | 24 |  |  | 2.2 |  |  | 8.3 |
The weighted average amortization period includes the effects of foreign currency translation. The above table excludes the values assigned to those intangible assets embedded in the Company’s equity method investment in AWE Management Ltd. (“AWE”) and Guimar Engenharia LTDA ("Guimar"). Those amounts are included in the carrying value of the Company’s investment in AWE and Guimar. The amount of amortization expense we estimate we will record during each of the next five fiscal years relating to intangible assets existing at September 29, 2017, including those associated with AWE and Guimar, is: fiscal 2018 - $49.7 million; fiscal 2019 - $48.3 million; fiscal 2020 - $46.1 million; fiscal 2021 - $40.9 million; and fiscal 2022 - $39.5 million. Foreign Currencies In preparing our Consolidated Financial Statements, it is necessary to translate the financial statements of our subsidiaries operating outside the U.S., which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. In accordance with U.S. GAAP, revenues and expenses of operations outside the U.S. are translated into U.S. dollars using weighted-average exchange rates for the applicable periods being translated while the assets and liabilities of operations outside the U.S. are generally translated into U.S. dollars using period-end exchange rates. The net effect of foreign currency translation adjustments is included in stockholders’ equity as a component of accumulated other comprehensive income (loss) in the accompanying Consolidated Balance Sheets. Share-Based Payments We measure the value of services received from employees and directors in exchange for an award of an equity instrument based on the grant-date Fair Value of the award. The computed value is recognized as a non-cash cost on a straight-line basis over the period the individual provides services, which is typically the vesting period of the award with the exception of awards containing an internal performance measure which is recognized on a straight-line basis over the vesting period subject to the probability of meeting the performance requirements and adjusted for the number of shares expected to be earned. The cost of these awards is recorded in selling, general and administrative expense in the accompanying Consolidated Statements of Earnings. The following table presents our stock-based compensation expense for the various types of awards made by the Company as included in the Consolidated Statements of Earnings for the years ended September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):
|  | For the Years Ended |
Award Type |  | September 29, 2017 |  |  | September 30, 2016 |  |  | October 2, 2015 |
Restricted Stock and Restricted Stock Units (excluding Market and Performance Awards) |  | $ | 26,393 |  |  | $ | 21,156 |  |  | $ | 20,779 |
Stock Options |  |  | 4,338 |  |  |  | 7,165 |  |  |  | 10,683 |
Market and Performance Awards |  |  | 8,033 |  |  |  | 4,049 |  |  |  | 9,950 |
Total Expense |  | $ | 38,764 |  |  | $ | 32,370 |  |  | $ | 41,412 |
The Company has two incentive plans whereby eligible employees and directors of Jacobs may be granted stock options, restricted stock, and/or restricted stock units. Stock Options —Substantially all of the stock options granted during the previous years were awarded on the same date for all employees and directors (although the date is different for employees and directors). For fiscal year 2017, there were no stock options granted to either employees or directors. The following table presents the assumptions used in the Black-Scholes option-pricing model for awards made to employees and directors for the years ended September 30, 2016 and October 2, 2015:
|  | Awards Made to Employees |  |  | Awards Made to Directors |
|  | September 30, 2016 |  |  | October 2, 2015 |  |  | September 30, 2016 |  |  | October 2, 2015 |
Dividend yield |  |  | — | % |  |  | — | % |  |  | — | % |  |  | — | %
Expected volatility |  |  | 27.77 | % |  |  | 27.00 | % |  |  | 29.21 | % |  |  | 29.28 | %
Risk-free interest rate |  |  | 1.82 | % |  |  | 1.67 | % |  |  | 1.44 | % |  |  | 1.63 | %
Expected term of options (in years) |  | 5.82 |  |  |  | 5.82 |  |  | 5.82 |  |  |  | 5.82 |
Market and Performance Awards — The Company granted restricted stock units containing service, performance, and market conditions (“PSUs”). PSUs are earned over a three-year performance period if the specified performance metrics are met. During fiscal 2015, the Company only granted PSUs based on net earnings growth (“Net Earnings Growth Based PSUs”). For fiscal 2016, half of the PSUs granted were based on relative total stockholder return (“Relative TSR Based PSUs”) and the other half of the PSUs were based on earnings per share (“EPS Based PSUs”). For fiscal 2017, half of the PSUs granted were EPS Based PSUs and the other half were based on return on invested capital (“ROIC Based PSUs”). 2014 and 2015 Awards The number of Net Earnings Growth Based PSUs awarded in fiscal years 2014 and 2015 which may ultimately vest is equal to the sum of the following: (1) an amount, not less than zero, equal to one-third of the target Net Earnings Growth Based PSUs multiplied by the Net Earnings Growth Performance Multiplier (or, "NEGPM", as shown in the table below) determined based upon the growth in the Company's Adjusted Net Earnings (as defined in the applicable award agreements under the Stock Incentive Plan) over the period starting on the first day of the Company's third quarter of fiscal 2014 (in the case of Net Earnings Growth Based PSUs issued in fiscal 2014), or fiscal 2015 (in the case of Net Earnings Growth Based PSUs issued in fiscal 2015) and ending on the last day of the Company's second quarter of fiscal 2015 and fiscal 2016, respectively; plus, (2) an amount, not less than zero, equal to (A) two-thirds of the target Net Earnings Growth Based PSUs multiplied by the NEGPM determined based upon the average growth in the Company's Adjusted Net Earnings over the period starting on the first day of the Company's third quarter of fiscal 2014 (in the case of Net Earnings Growth Based PSUs issued in fiscal 2014), or fiscal 2015 (in the case of Net Earnings Growth Based PSUs issued in fiscal 2015) and ending on the last day of the Company's second quarter of fiscal 2016 and fiscal 2017, respectively, minus (B) the amount determined pursuant to (1) above; plus, (3) an amount, not less than zero, equal to (A) the target Net Earnings Growth Based PSUs multiplied by the NEGPM determined based upon the average growth in the Company's Adjusted Net Earnings over the period starting on the first day of the Company's third quarter of fiscal 2014 (in the case of Net Earnings Growth Based PSUs issued in fiscal 2014), or fiscal 2015 (in the case of Net Earnings Growth Based PSUs issued in fiscal 2015) and ending on the last day of the Company's second quarter of fiscal 2017 and fiscal 2018, respectively, minus (B) the amount determined pursuant to (1) and (2) above. If the Company's average growth in Adjusted Net Earnings over the applicable fiscal years during the respective performance periods is between 5% and 10%, 10% and 15%, or 15% and 20%, the Net Earnings Growth Performance Multiplier will be determined using straight line interpolation based on the actual average growth in the Company's Adjusted Net Earnings. The following table presents the basis on which the Net Earnings Growth Based PSUs are determined:
Average Adjusted Net Earnings Growth |  |  | Net Earnings Growth Performance Multiplier |
Less than 5% |  |  |  | 0 | %
| 5% |  |  |  | 50 | %
| 10% |  |  |  | 100 | %
| 15% |  |  |  | 150 | %
| 20% |  |  |  | 200 | %
Unless stated otherwise, the Net Earnings Growth Based PSUs are valued based on the closing price of the Company's common stock as reported in the NYSE Composite Price History on their respective grant dates. 2016 Awards EPS Based PSUs For the EPS Based PSUs issued in fiscal 2016, the number of restricted stock units to be issued on the vesting date of November 19, 2018 is based on the Company’s adjusted EPS growth over fiscal 2016, 2017 and 2018. The number of restricted stock units to be issued equals the sum of: (i) an amount, not less than zero, equal to one-third of the target number of restricted stock units multiplied by an EPS Performance Multiplier (as defined below) for that period determined based upon the growth in the Company’s adjusted EPS (“EPS Growth Rate”) from fiscal 2015 to fiscal 2016; (ii) an amount, not less than zero, equal to two-thirds of the target number of restricted stock units multiplied by an EPS Performance Multiplier determined based upon the Compound Annual EPS Growth Rate (as defined below) for fiscal 2017 as compared to fiscal 2015, minus the amount of shares earned pursuant to clause (i); and (iii) an amount, not less than zero, equal to the target number of restricted stock units multiplied by an EPS Performance Multiplier determined based upon the Compound Annual EPS Growth Rate for fiscal 2018 as compared to fiscal 2015, minus the amount of shares earned pursuant to clauses (i) and (ii). The “Compound Annual EPS Growth Rate” for purposes of clauses (ii) and (iii) above means the growth rate, which when multiplied two times fiscal 2015 adjusted EPS (in the case of clause (ii)) or three times fiscal 2015 adjusted EPS (in the case of clause (iii)) results in a number equal to actual fiscal 2017 adjusted EPS and fiscal 2018 adjusted EPS, respectively. The “EPS Performance Multiplier” is determined by reference to the following table based upon the Company’s EPS Growth Rate or Compound Annual EPS Growth Rate over the relevant fiscal periods. The Human Resource and Compensation Committee of the Board of Directors of the Company set these metrics based on the Company’s plan at the start of the fiscal year.
EPS Growth Rate or Compound Annual EPS Growth Rate |  |  | EPS Performance Multiplier |
Less than 4% |  |  |  | 0 | %
| 4% |  |  |  | 50 | %
| 7.5% |  |  |  | 100 | %
| 15% |  |  |  | 150 | %
| 20% or greater |  |  |  | 200 | %
If the EPS Growth Rate or Compound Annual EPS Growth Rate falls between 4% and 7.5%, 7.5% and 15%, or 15% and 20%, the EPS Performance Multiplier is determined using linear interpolation based on the actual growth in adjusted EPS. Unless stated otherwise, the EPS Based PSUs are valued based on the closing price of the Company's common stock as reported in the NYSE Composite Price History on their respective grant dates. Relative TSR Based PSUs The number of Relative TSR Based PSUs which may ultimately vest is equal to the target Relative TSR Based PSUs multiplied by the TSR Performance Multiplier. The TSR Performance Multiplier is determined by comparing the Company's total stockholder return to the total stockholder return of each of the companies in a specified industry peer group over the three year period immediately following the award date. For purposes of computing total stockholder return, the beginning stock price is the average closing stock price over the 30 calendar day period ending on the award date ("Performance Period"), and the ending stock price is the average closing price over the 30 calendar day period ending on the last day of the Performance Period. Any dividend payments made over the Performance Period are deemed re-invested on the ex-dividend date in additional shares of the applicable company. The following table presents the basis on which the Relative TSR Based PSUs are determined:
Company TSR Percentile Rank |  | TSR Performance Multiplier |
Below 30th percentile |  |  | 0 | %
30th percentile |  |  | 50 | %
50th percentile |  |  | 100 | %
70th percentile or above |  |  | 150 | %
If the Company's total stockholder return over the Performance Period falls between any of the brackets described above, the TSR Performance Multiplier will be determined using straight line interpolation based on the actual percentile ranking. Substantially all of the TSR Based PSUs awarded during fiscal year 2016 were awarded on the same date. For fiscal year 2017 and 2015, no TSR Based PSUs were awarded. The following table presents the assumptions used to value the TSR Based PSUs for the years ended September 29, 2017, September 30, 2016 and October 2, 2015:
|  | For the Years Ended |
|  | September 29, 2017 |  |  | September 30, 2016 |  |  | October 2, 2015 |
Dividend yield |  |  | — | % |  |  | — | % |  |  | — | %
Expected volatility |  |  | — | % |  |  | 25.06 | % |  |  | — | %
Risk-free interest rate |  |  | — | % |  |  | 1.21 | % |  |  | — | %
Expected term (in years) |  |  | — |  |  |  | 3 |  |  |  | — |
2017 Awards For the EPS Based PSUs issued in fiscal 2017, the number of restricted stock units to be issued on the vesting date of November 16, 2019 is based on the Company’s adjusted EPS growth over fiscal 2017, 2018 and 2019. The number of restricted stock units to be issued equals the sum of: (i) an amount, not less than zero, equal to one-third of the target number of restricted stock units multiplied by an EPS Performance Multiplier (as shown in the table below) for that period determined based upon the growth in the Company’s adjusted EPS (“EPS Growth Rate”) from fiscal 2016 to fiscal 2017; (ii) an amount, not less than zero, equal to two-thirds of the target number of restricted stock units multiplied by an EPS Performance Multiplier determined based upon the average EPS Growth Rate in fiscal years 2017 and 2018 as compared to fiscal 2016, minus the amount of shares earned pursuant to clause (i); and (iii) an amount, not less than zero, equal to the target number of restricted stock units multiplied by an EPS Performance Multiplier determined based upon the average EPS Growth Rate in fiscal years 2017, 2018 and 2019 as compared to fiscal 2016, minus the amount of shares earned pursuant to clauses (i) and (ii). The “EPS Performance Multiplier” is determined by reference to the following table based upon the average growth in the Company’s adjusted EPS over the indicated fiscal periods. The Human Resource and Compensation Committee of the Board of Directors of the Company set these metrics based on the Company’s plan at the start of the fiscal year. Average EPS Growth Rate from fiscal 2016 to fiscal 2017
Average EPS Growth Rate |  |  | EPS Performance Multiplier |
Less than 0% |  |  |  | 0 |
| 2.3% |  |  |  | 100 | %
| 4.3% |  |  |  | 200 | %
Average EPS Growth Rate from fiscal 2016 to fiscal 2018
Average EPS Growth Rate |  |  | EPS Performance Multiplier |
Less than 2.1% |  |  |  | 0 |
| 4.1% |  |  |  | 100 | %
6.1% |  |  |  | 200 | %
Average EPS Growth Rate from fiscal 2016 to fiscal 2019
Average EPS Growth Rate |  |  | EPS Performance Multiplier |
Less than 3.6% |  |  |  | 0 |
| 5.6% |  |  |  | 100 | %
7.6% |  |  |  | 200 | %
If the average EPS Growth Rate falls between the percentages referenced in the tables above, the EPS Performance Multiplier will be determined using linear interpolation based on the actual average EPS Growth Rate. Unless stated otherwise, the EPS Based PSUs are valued based on the closing price of the Company's common stock as reported in the NYSE Composite Price History on their respective grant dates. For the ROIC Based PSUs issued in fiscal 2017, the number of restricted stock units to be issued on the vesting date of November 16, 2019 is based on the Company’s average annual return on invested capital (“ROIC”) from fiscal 2017 to fiscal 2019. The number of restricted stock units to be issued equals the target number of restricted stock units multiplied by an ROIC Performance Multiplier (as shown in the table below) determined based upon the Company’s average annual ROIC from fiscal 2017 to fiscal 2019.
Average ROIC – Fiscal 2017 - 2019 |  |  | ROIC Performance Multiplier |
Less than 8.9% |  |  |  | 0 | %
| 8.9% |  |  |  | 50 | %
| 9.9% |  |  |  | 100 | %
| 10.9% |  |  |  | 200 | %
If the average annual ROIC falls between 8.9% and 9.9% and 10.9%, the ROIC Performance Multiplier will be determined using linear interpolation based on the actual average ROIC. Concentrations of Credit Risk Our cash balances and cash equivalents are maintained in accounts held by major banks and financial institutions located in North America, South America, Europe, the Middle East, India, Australia, Africa, and Asia. In the normal course of business, and consistent with industry practices, we grant credit to our clients without requiring collateral. Concentrations of credit risk is the risk that, if we extend a significant amount of credit to clients in a specific geographic area or industry, we may experience disproportionately high levels of default if those clients are adversely affected by factors particular to their geographic area or industry. Concentrations of credit risk relative to trade receivables are limited due to our diverse client base, which includes the U.S. federal government and multi-national corporations operating in a broad range of industries and geographic areas. Additionally, in order to mitigate credit risk, we continually evaluate the credit worthiness of our major commercial clients. Use of Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires us to employ estimates and make assumptions that affect the reported amounts of certain assets and liabilities; the revenues and expenses reported for the periods covered by the financial statements; and certain amounts disclosed in these Notes to the Consolidated Financial Statements. Although such estimates and assumptions are based on management’s most recent assessment of the underlying facts and circumstances utilizing the most current information available and past experience, actual results could differ significantly from those estimates and assumptions. Our estimates, judgments, and assumptions are evaluated periodically and adjusted accordingly. Earlier in these Notes to Consolidated Financial Statements we discussed three significant accounting policies that rely on the application of estimates and assumptions: revenue recognition for long-term construction contracts; the process for testing goodwill for possible impairment; and the accounting for share-based payments to employees and directors. The following is a discussion of certain other significant accounting policies that rely on the use of estimates: Accounting for Pensions — We use certain assumptions and estimates in order to calculate periodic pension cost and the value of the assets and liabilities of our pension plans. These assumptions involve discount rates, investment returns, and projected salary increases, among others. Changes in the actuarial assumptions may have a material effect on the plans’ liabilities and the projected pension expense. Accounting for Income Taxes — We determine our consolidated income tax expense using the asset and liability method prescribed by U.S. GAAP. Under this method, deferred tax assets and liabilities are recognized for the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Such deferred tax assets and liabilities are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. If and when we determine that a deferred tax asset will not be realized for its full amount, we will recognize and record a valuation allowance with a corresponding charge to earnings. Judgment is required in determining our worldwide provision for income taxes. In the normal course of business, we may engage in numerous transactions every day for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in taxable income or deducted as an expense) is uncertain. Additionally, we file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit and investigation by the Internal Revenue Service, most states in the U.S., and by various government agencies representing many jurisdictions outside the U.S. Contractual Guarantees, Litigation, Investigations, and Insurance — In the normal course of business we are subject to certain contractual guarantees and litigation. We record in the Consolidated Balance Sheets amounts representing our estimated liability relating to such guarantees, litigation, and insurance claims. We perform an analysis to determine the level of reserves to establish for both insurance-related claims that are known and have been asserted against us as well as for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our Consolidated Statements of Earnings. In addition, as a contractor providing services to various agencies of the U.S. federal government, we are subject to many levels of audits, investigations, and claims by, or on behalf of, the U.S. federal government with respect to contract performance, pricing, costs, cost allocations, and procurement practices. We adjust revenues based upon the amounts we expect to realize considering the effects of any client audits or governmental investigations. Accounting for Business Combinations — U.S. GAAP requires that the purchase price paid for business combinations accounted for using the acquisition method be allocated to the assets and liabilities acquired based on their respective Fair Values. Determining the Fair Value of contract assets and liabilities acquired often requires estimates and judgments regarding, among other things, the estimated cost to complete such contracts. The Company must also make certain estimates and judgments relating to other assets and liabilities acquired as well as any identifiable intangible assets acquired. During the fourth fiscal quarter of 2017, the Company acquired Blue Canopy LLC. During the second fiscal quarter of 2017, the Company acquired Aquenta Consulting Pty Ltd. During the first fiscal quarter of 2016, the Company acquired J.L. Patterson & Associates. These acquisitions were not material to the Company’s consolidated results for fiscal 2017 or 2016. On May 19, 2017, the Company entered into an agreement with Saudi Aramco to form a 50/50 Saudi Arabia-based joint venture company to provide professional program and construction management (“PMCM”) services for social infrastructure projects throughout Saudi Arabia and across the Middle East and North Africa. The venture commenced start-up operations in fourth quarter fiscal 2017. Initial funding commitments from each of the partners include $6.5 million in capital contributions and $7.0 million in partner loans which are expected to be executed during fiscal 2018. The partners have also committed up to an additional $7.0 million each for future loans to the joint venture. New Accounting Pronouncements Revenue Recognition From time to time, the Financial Accounting Standards Board (“FASB”) issues accounting standards updates (each being an “ASU”) to its Accounting Standards Codification (“ASC”), which constitutes the primary source of U.S. GAAP. The Company regularly monitors ASUs as they are issued and considers their applicability to its business. All ASUs applicable to the Company are adopted by the due date and in the manner prescribed by the FASB. In May 2014, the FASB issued ASU No. 2014-09— Revenue from Contracts with Customers. The new guidance provided by ASU 2014-09 is intended to remove inconsistencies and perceived weaknesses in the existing revenue requirements, provide a more robust framework for addressing revenue issues, improve comparability, provide more useful information and simplify the preparation of financial statements. ASU 2014-09 was initially effective for annual and interim reporting periods beginning after December 15, 2016. On July 9, 2015, the FASB approved a one-year deferral of the effective date of this standard. The revised effective date for the standard is for annual reporting periods beginning after December 15, 2017 and interim periods therein. The FASB also approved changes allowing for early adoption of the standard as of the original effective date. The Company’s adoption activities will be performed over three phases: (i) assessment, (ii) design, and (iii) implementation. Our assessment phase is predominantly complete. The following are the potential significant differences identified during the assessment phase: Performance Obligations Under current U.S. GAAP the Company typically considers engineering and construction services as separate performance obligations. Under ASU 2014-09, the Company has determined that, in most instances, it is likely that engineering and construction services will be required to be combined into a single performance obligation. In these instances, this will likely change the timing and pattern of revenue recognition. Contract Modifications In many instances, the Company enters into contracts for construction services subsequent to entering in to engineering services contracts. Under ASU 2014-09, the construction services contract may be deemed to modify the engineering contract, or may be required to be combined with the engineering contract. This modification or combination of contracts may result in a cumulative catch-up adjustment, which will have an immediate impact on the Company’s results of operations in the period the contract combination or modification occurs. In addition, it will change the timing and pattern of revenue recognition after the period the contracts have been combined or modified. The Company currently intends to adopt the new standard using the Modified Retrospective application. This standard could have a significant impact on the Company’s Consolidated Financial Statements and an administrative impact on its operations and will depend on the magnitude of the items discussed above. The Company will continue to evaluate the impact through the design and implementation phases. Lease Accounting In February 2016, the FASB issued ASU 2016-02—Leases. ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. ASU 2016-02 is effective for public entity financial statements for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is evaluating the impact of the new guidance on its consolidated financial statements. This standard could have a significant administrative impact on its operations, and the Company will further assess the impact through its implementation program. Employee Share-Based Payment Accounting In March 2016, the FASB issued ASU 2016-09—Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is evaluating the impact of the new guidance on its consolidated financial statements and plans to adopt in fiscal 2018.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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