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Revenue Accounting for Contracts and Adoption of ASC Topic 606 | 12 Months Ended
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Sep. 27, 2019
Revenue from Contract with Customer [Abstract] |
Revenue Accounting for Contracts and Adoption of ASC Top 606 | Revenue Accounting for Contracts and Adoption of ASC Topic 606 On September 29, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers, including the subsequent ASUs that amended and clarified the related guidance. The Company adopted ASC Topic 606 using the modified retrospective method, and accordingly the new guidance was applied retrospectively to contracts that were not completed or substantially completed as of September 29, 2018 (the date of initial application). As a result, the Company recorded a cumulative effect adjustment of $37.2 million which is net of $10.3 million of tax. The entry decreased retained earnings related to continuing operations by $21.2 million (net of tax) and retained earnings related to discontinued operations by $16.0 million (net of tax) as of September 29, 2018. Additionally, the following cumulative effect adjustments were recorded: Continuing operations
• | An increase to Deferred Income Tax Assets included within miscellaneous assets of $5.4 million;
• | An increase to Contract liabilities of $15.2 million;
• | A decrease to Receivables of $11.4 million;
Discontinued operations
• | An increase to Current liabilities held for sale of $0.6 million;
• | A decrease to Current assets held for sale of $15.4 million;
The decrease in retained earnings primarily resulted from a change in the manner in which the Company determines the performance obligations for its projects. Prior to the adoption of ASC 606, the Company typically segmented contracts that contained multiple services by service type - for instance, engineering, procurement and construction services - for purposes of revenue and margin recognition. Under ASC 606, multiple-service contracts where the Company is responsible for providing a single deliverable (e.g. a constructed asset) will be treated as a single performance obligation for purposes of revenue recognition and thus no longer will be segmented if the individual service types are not identified as distinct performance obligations under the contract. Typically, this will occur when the Company is contracted to perform both engineering and construction on a project. The following table presents how the adoption of ASC Topic 606 affected certain line items in the Consolidated Statements of Earnings:
| Year Ended
| September 27, 2019
(in thousands) | Recognition Under Previous Guidance |  | Impact of the Adoption of ASC Topic 606 |  | Recognition Under ASC Topic 606
Revenues | $ | 12,714,710 |  |  | $ | 23,158 |  |  | $ | 12,737,868 |
Direct costs of contracts | (10,260,840 | ) |  | — |  |  | (10,260,840 | )
Gross profit | 2,453,870 |  |  | 23,158 |  |  | 2,477,028 |
Selling, general and administrative expenses | (2,072,177 | ) |  | — |  |  | (2,072,177 | )
Operating Profit | 381,693 |  |  | 23,158 |  |  | 404,851 |
Earnings from Continuing Operations Before Taxes | 327,801 |  |  | 23,158 |  |  | 350,959 |
Income tax expense for Continuing Operations | (32,308 | ) |  | (4,646 | ) |  | (36,954 | )
Net Earnings of the Group from Continuing Operations | 295,493 |  |  | 18,512 |  |  | 314,005 |
Net Earnings of the Group from Discontinued Operations | 554,464 |  |  | 4,750 |  |  | 559,214 |
Net Earnings of the Group | 849,957 |  |  | 23,262 |  |  | 873,219 |
Net Earnings Attributable to Jacobs from Continuing Operations | 272,448 |  |  | 18,512 |  |  | 290,960 |
Net Earnings Attributable to Jacobs from Discontinued Operations | 552,269 |  |  | 4,750 |  |  | 557,019 |
Net Earnings Attributable to Jacobs | $ | 824,717 |  |  | $ | 23,262 |  |  | $ | 847,979 |
The following table presents how the adoption of ASC Topic 606 affected certain line items in the Consolidated Balance Sheets:
| September 27, 2019
(in thousands) | Recognition Under Previous Guidance |  | Impact of the Adoption of ASC Topic 606 |  | Recognition Under ASC Topic 606
Receivables and contract assets (previously presented as Receivables) | $ | 2,839,813 |  |  | $ | 396 |  |  | $ | 2,840,209 |
Current assets held for sale | $ | 952 |  |  | $ | — |  |  | $ | 952 |
Miscellaneous noncurrent assets | $ | 917,448 |  |  | $ | 754 |  |  | $ | 918,202 |
Contract Liabilities (previously presented as Billings in excess of costs) | $ | 410,464 |  |  | $ | 3,744 |  |  | $ | 414,208 |
Current liabilities held for sale | $ | 2,573 |  |  | $ | — |  |  | $ | 2,573 |
Disaggregation of Revenues Our revenues are principally derived from contracts to provide a diverse range of technical, professional, and construction services to a large number of industrial, commercial, and governmental clients. Our contracts are with many different customers in numerous industries. Refer to Note 19- Segment Information for additional information on how we disaggregate our revenues by reportable segment and for a disaggregation of our revenue by geographic area. Contract Liabilities Contract liabilities represent amounts billed to clients in excess of revenue recognized to date. Amounts classified as “Billings in excess of costs” on the Consolidated Balance Sheets of our 2018 Form 10-K have been renamed to “Contract liabilities” on the Consolidated Balance Sheets. The increase in contract liabilities was a result of normal business activity and not materially impacted by any other factors. Revenue recognized for the year ended September 27, 2019 that was included in the contract liability balance on September 28, 2018 was $350.3 million. Remaining Performance Obligations The Company’s remaining performance obligations as of September 27, 2019 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. The Company had approximately $13.4 billion in remaining performance obligations as of September 27, 2019. The Company expects to recognize 48.0% of our remaining performance obligations within the next twelve months and the remaining 52.0% thereafter. Although remaining performance obligations reflect business that is considered to be firm, cancellations, scope adjustments, foreign currency exchange fluctuations or deferrals may occur that impact their volume or the expected timing of their recognition. Remaining performance obligations are adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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