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Revenue Recognition
 12 Months Ended
Sep. 30, 2020
Revenue Recognition  
Revenue Recognition

4.           Revenue Recognition

On October 1, 2018, the Company adopted ASC 606 on a modified retrospective basis, which amended the accounting standards for revenue recognition. As a result, the new guidance was applied retrospectively to contracts which were not completed as of October 1, 2018. Contracts completed prior to October 1, 2018 were accounted for using the guidance in effect at that time. The cumulative effect of applying the new guidance was recorded as a reduction to retained earnings at October 1, 2018 of $7.0 million, net of tax. Consistent with the modified retrospective transition approach, the comparative period was not adjusted to conform with current period presentation. The adjustment was primarily related to segmenting or combining contracts by performance obligations identified under the criteria of the new standard.

The new accounting guidance establishes principles for recognizing revenue upon the transfer of control of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The Company generally recognizes revenues over time as performance obligations are satisfied. The Company generally measures its progress to completion using an input measure of total costs incurred divided by total costs expected to be incurred. In the course of providing its services, the Company routinely subcontracts for services and incurs other direct costs on behalf of its clients. These costs are passed through to clients and, in accordance with GAAP, are included in the Company’s revenue and cost of revenue. These subcontractor and other direct costs for the years ended September 30, 2020, 2019 and 2018 were $7.1 billion, $7.4 billion and $7.7 billion, respectively.

Recognition of revenue and profit is dependent upon a number of factors, including the accuracy of a variety of estimates made at the balance sheet date, such as engineering progress, material quantities, the achievement of milestones, penalty provisions, labor productivity and cost estimates. Additionally, the Company is required to make estimates for the amount of consideration to be received, including bonuses, awards, incentive fees, claims, unpriced change orders, penalties, and liquidated damages. Variable consideration is included in the estimate of the transaction price only to the extent that a significant reversal would not be probable. Management continuously monitors factors that may affect the quality of its estimates, and material changes in estimates are disclosed accordingly. Costs attributable to claims are treated as costs of contract performance as incurred.

The following summarizes the Company’s major contract types:

Cost Reimbursable Contracts

Cost reimbursable contracts include cost-plus fixed fee, cost-plus fixed rate, and time-and-materials price contracts. Under cost-plus contracts, the Company charges clients for its costs, including both direct and indirect costs, plus a negotiated fee or rate. The Company recognizes revenue based on actual direct costs incurred and the applicable fixed rate or portion of the fixed fee earned as of the balance sheet date. Under time-and-materials price contracts, the Company negotiates hourly billing rates and charges its clients based on the actual time that it expends on a project. In addition, clients reimburse the Company for materials and other direct incidental expenditures incurred in connection with its performance under the contract. The Company may apply a practical expedient to recognize revenue in the amount in which it has the right to invoice if its right to consideration is equal to the value of performance completed to date.

Guaranteed Maximum Price Contracts (GMP)

GMP contracts share many of the same contract provisions as cost-plus and fixed-price contracts. As with cost-plus contracts, clients are provided a disclosure of all the project costs, and a lump sum or percentage fee is separately identified. The Company provides clients with a guaranteed price for the overall project (adjusted for change orders issued by clients) and a schedule including the expected completion date. Cost overruns or costs associated with project delays in completion could generally be the Company’s responsibility. For many of the Company’s commercial or residential GMP contracts, the final price is generally not established until the Company has subcontracted a substantial percentage of the trade contracts with terms consistent with the master contract, and it has negotiated additional contractual limitations, such as waivers of consequential damages as well as aggregate caps on liabilities and liquidated damages. Revenue is recognized for GMP contracts as project costs are incurred relative to total estimated project costs.

Fixed-Price Contracts

Fixed price contracts include both lump-sum and fixed-unit price contracts. Under lump-sum contracts, the Company performs all the work under the contract for a specified fee. Lump-sum contracts are typically subject to price adjustments if the scope of the project changes or unforeseen conditions arise. Under fixed-unit price contracts, the Company performs a number of units of work at an agreed price per unit with the total payment under the contract determined by the actual number of units delivered. Revenue is recognized for fixed-price contracts using the input method measured on a cost-to-cost basis.

The following tables present the Company’s revenues disaggregated by revenue sources:

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​

​

​

​

​

​

​

​

​

​

​

​

Fiscal Year Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

    

2020

    

2019

    

2018

​

​

(in millions)

Cost reimbursable

​

$

5,734.5

​

$

5,958.2

​

$

5,440.3

Guaranteed maximum price

​

​

3,896.8

 

​

3,962.6

 

​

4,673.9

Fixed price

​

​

3,608.7

 

​

3.721.7

 

​

3,764.1

Total revenue

​

$

13,240.0

​

$

13,642.5

​

$

13,878.3

​

​

​

​

​

​

​

​

​

​

​

​

​

Fiscal Year Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

    

2020

    

2019

    

2018

​

​

(in millions)

Americas

​

$

10,138.3

​

$

10,390.8

​

$

10,512.3

Europe, Middle East, Africa

​

​

1,620.3

 

​

1,752.1

 

​

1,816.2

Asia Pacific

 

​

1,481.4

 

​

1,499.6

 

​

1,549.8

Total revenue

​

$

13,240.0

​

$

13,642.5

​

$

13,878.3

​

As of September 30, 2020, the Company had allocated $18.9 billion of transaction price to unsatisfied or partially satisfied performance obligations, of which approximately 60% is expected to be satisfied within the next twelve months.  

Contract liabilities represent amounts billed to clients in excess of revenue recognized to date. The Company recognized revenue of $592.7 million and $595.7 million during the years ended September 30, 2020 and 2019, respectively, that was included in contract liabilities as of September 30, 2019 and 2018, respectively.

The Company’s timing of revenue recognition may not be consistent with its rights to bill and collect cash from its clients. Those rights are generally dependent upon advance billing terms, milestone billings based on the completion of certain phases of work or when services are performed. The Company’s accounts receivable represent amounts billed to clients that have yet to be collected and represent an unconditional right to cash from its clients. Contract assets represent the amount of contract revenue recognized but not yet billed pursuant to contract terms or accounts billed after the balance sheet date. Contract liabilities represent billings as of the balance sheet date, as allowed under the terms of a contract, but not yet recognized as contract revenue pursuant to the Company’s revenue recognition policy.  

Net accounts receivable consisted of the following:

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​

​

​

​

​

​

​

​

​

Fiscal Year Ended

​

    

September 30, 

    

September 30, 

​

​

2020

​

2019

​

​

(in millions)

Billed

​

$

2,419.6

​

$

2,368.2

Contract retentions

​

 

524.2

​

 

557.5

Total accounts receivable—gross

​

 

2,943.8

​

 

2,925.7

Allowance for doubtful accounts

​

 

(77.9)

​

 

(56.5)

Total accounts receivable—net

​

$

2,865.9

​

$

2,869.2

​

Substantially all contract assets as of September 30, 2020 and September 30, 2019 are expected to be billed and collected within twelve months, except for claims. Significant claims recorded in contract assets and other non-current assets were approximately $170 million and $110 million as of September 30, 2020 and September 30, 2019, respectively. The asset related to the Deactivation, Demolition, and Removal Project retained from the Purchaser discussed in Note 18 is presented in prepaid expense and other current assets from continuing operations in the Consolidated Balance Sheet. Contract retentions represent amounts invoiced to clients where payments have been withheld from progress payments until the contracted work has been completed and approved by the client. These retention agreements vary from project to project and could be outstanding for several months or years.

Allowances for doubtful accounts have been determined through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable as of the balance sheet date based on current and past experience.

No single client accounted for more than 10% of the Company’s outstanding receivables at September 30, 2020 and September 30, 2019.

The Company sold trade receivables to financial institutions, of which $166.6 million and $91.9 million were outstanding as of September 30, 2020 and September 30, 2019, respectively. The Company does not retain financial or legal obligations for these receivables that would result in material losses. The Company’s ongoing involvement is limited to the remittance of customer payments to the financial institutions with respect to the sold trade receivables.