NOTE 2 — RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

There are no recently issued accounting pronouncements that have not yet been adopted that we consider material to the Company’s consolidated financial statements except for the following new professional guidance related to revenue recognition and leases.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a final standard on revenue recognition, Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), in order to create a principles-based revenue recognition framework that may affect nearly every revenue-generating entity.

Central to the new framework is a five-step revenue recognition model that requires reporting entities to:

Identify the contract,

Identify the performance obligations of the contract,

Determine the transaction price of the contract,

Allocate the transaction price to the performance obligations, and

Recognize revenue.

Revenue is recognized when (or as) the performance obligations are satisfied. The new revenue recognition standard provides guidance to help reporting entities determine if a performance obligation is satisfied at a point in time or over time. Where a performance obligation is satisfied over time, the related revenue is also recognized over time.

The Company has substantially completed its evaluation of the impacts of ASU 2014-09, as amended, on its financial position, results of operations, cash flows, related disclosures and internal controls. The Company does not believe that application of the standard will have a significant impact on the revenue recognition patterns for its long-term construction-type contracts as compared to revenues recognized under the prior revenue recognition guidance. The Company expects that most of its future revenues will be recognized over time utilizing the cost-to-cost measure of progress as control of the asset is transferred to the project owner, which is similar to past practice.

Most of the Company’s long-term contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Historically, the Company has recognized adjustments in estimated profit on contracts, including those associated with contract modifications, using a cumulative catch-up method as now required by the new standard. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenues and profit in future periods of contract performance are recognized using the adjusted estimate. As required by both prior and new guidance, if at any time the estimate of contract profitability indicates an anticipated loss on a contract, the Company will recognize the total loss in the quarter it is identified.

In the Company’s future consolidated balance sheets, long-term contracts will be reported in a net contract asset position (contracts in process) or a net contract liability position (customer advances and deposits) on a contract-by-contract basis. Most significantly, adoption of the new standard will result in the inclusion of customer contract retainage amounts in contract assets. Historically, these amounts have been included in accounts receivable (see Note 6). Adoption may also result in other reclassifications among consolidated balance sheet accounts, but these reclassifications will not materially change the total amount of consolidated net assets as of any future balance sheet date. The Company also expects its revenue recognition disclosures to significantly expand due to new qualitative and quantitative requirements.

ASU 2014-09 and the series of related amending pronouncements issued by the FASB became effective for public companies for fiscal years beginning after December 15, 2017. As a result, the Company adopted the new standard effective February 1, 2018, and, pursuant to the allowable modified retrospective method, will record the cumulative effect of the adoption with an adjustment, net of any corresponding income tax amount, to retained earnings as of February 1, 2018. The Company expects that the adjustment amount will not be material.

Leases

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases, which amends the existing guidance and which will require recognition of operating leases with lease terms of more than twelve months on the balance sheet. For these leases, companies will record assets for the rights and liabilities for the obligations that are created by the leases. The pronouncement will require disclosures that provide qualitative and quantitative information for the lease assets and liabilities presented in the financial statements. Although the adoption of this pronouncement, which is effective for fiscal years beginning after December 15, 2018, will affect the Company’s consolidated financial statements, the Company has not yet determined the complete extent or significance of the changes.

Goodwill

In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment. Past guidance required a public entity to perform a two-step test to determine the amount, if any, of goodwill impairment. In Step 1, an entity compared the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeded its fair value, the entity performed Step 2 and compared the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit. An impairment loss equal to the amount by which the carrying amount of goodwill for the unit exceeded the implied fair value of that goodwill was recorded. However, under the past guidance, the implied fair value of goodwill was required to be determined in the same manner as the amount of goodwill recognized in a business combination. Accordingly, the fair value of the reporting unit was allocated to all of the assets and liabilities of that reporting unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire it. The new pronouncement removes the second step of the impairment test. An entity shall apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

As permitted, the Company adopted the new standard early, effective February 1, 2017, and used the new guidance in the performance of the annual goodwill impairment test performed for TRC as of November 1, 2017. The effect of the adoption of this new standard was not material to the Company’s consolidated financial statements.