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Revenue recognition | 6 Months Ended
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Jul. 31, 2018
Revenue from Contract with Customer [Abstract] |
Revenue recognition | Revenue recognition On February 1, 2018, the Company adopted Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers," ("Topic 606") using the modified retrospective method applied to contracts that were not completed as of that date. Under this methodology the effect, if any, of initially applying the new revenue standard is recorded as an adjustment to the opening balance of retained earnings while periods prior to the adoption date are not adjusted and continue to be reported in accordance with the accounting policies in effect for those periods. The Company conducted a complete and thorough analysis of each single element of the five-step model of Topic 606 and concluded that there is no material impact to the Company upon the adoption of the new standard. As a result, there was no cumulative adjustment required to the opening balances of retained earnings, contract assets, or contract liabilities as of February 1, 2018. Revenue from contracts with customers: The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which ensures the contract has commercial substance and that collectability is reasonably assured. The Company’s standard revenue transactions are classified in to two main categories:
1) | Systems - which include all bundled products in which Perma-Pipe designs, engineers, and manufactures pre-insulated piping systems, insulates subsea flowline pipe or subsea oil production equipment. Additionally, this systems classification also includes coating applied to pipes and structures which are provided by the customer.
2) | Products - which include cables, leak detection products, heat trace products sold under the PermAlert brand name, material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract.
The Systems revenue class has generally accounted for more than 90% of the Company’s total revenue and is recognized over time. The remaining revenue (Product class) is recognized when goods are shipped or services are performed. A breakdown of the Company's revenues by revenue class for the three and six months ended 2018 and 2017 are as follows:
| Three Months Ended July 31, | Six Months Ended July 31,
| 2018 | 2017 | 2018 | 2017
| Sales | % to Total | Sales | % to Total | Sales | % to Total | Sales | % to Total
Products | 2,578 |  | 8 | % | 1,995 |  | 7 | % | 5,007 |  | 8 | % | 3,326 |  | 7 | %
Specialty Piping Systems and Coating |  |  |  |  |  |  |  |
Revenue recognized under input method | 9,807 |  | 30 | % | 14,138 |  | 53 | % | 20,909 |  | 34 | % | 23,254 |  | 46 | %
Revenue recognized under output method | 19,940 |  | 62 | % | 10,719 |  | 40 | % | 35,298 |  | 58 | % | 23,773 |  | 47 | %
Total | 32,325 |  | 100 | % | 26,852 |  | 100 | % | 61,214 |  | 100 | % | 50,353 |  | 100 | %
Most of the Company’s revenue is recognized over time as the manufacturing process progresses because one of the following conditions exist:
1) | the customer owns the material that is being insulated or coated, so the customer controls the asset and thus the work-in-process; or
2) | the customer controls the work-in-process due to the custom nature of the pre-insulated, fabricated system being manufactured as evidenced by the Company’s right to payment for work performed to date plus seller’s profit margin for products that have no alternative use for the Company.
The U.S. operating entities measure revenue by the costs incurred to date relative to the estimated costs to satisfy the contract using the percentage-of-completion method (an input method). Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the percentage-of-completion method is the most faithful depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer. Costs include all material, labor, and direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when projects costs are incurred. All other operating entities measure revenue by the direct measurement of the outputs produced relative to the remaining goods promised under the contract (output method). Due to the types of end customers, generally these contracts require formal inspection protocols or specific export documentation for units produced or produced and shipped, therefore, the output method is the most faithful depiction of the Company’s performance. Depending on the conditions of the contract, revenue may be recognized based on units produced, inspected and held by the Company prior to shipment or on units produced, inspected and shipped. Contract modifications that occur prior to the start of the manufacturing process will supersede the original contract and revenue is recognized using the modified contract value. Contract modifications that occur during the manufacturing process (changes in scope of work, job performance, material costs, and/or final contract settlements) are recognized in the period in which the revisions are known. Provisions for losses on uncompleted contracts are made in contract liabilities account in the period such losses are identified. Contract assets and liabilities: Contract assets represent revenue recognized in excess of amounts billed (unbilled receivables) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Contract liabilities represent billings in excess of costs (unearned revenue) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Both customer billings and the satisfaction (or partial satisfaction) of the performance obligation(s) occur throughout the manufacturing process and impacts the period end balances in these accounts. The Company anticipates that substantially all costs incurred for uncompleted contracts as of July 31, 2018 will be billed and collected within one year. The following tables set forth the activity in contract assets and liabilities. The Company expects to recognize the remaining balance within one year.
| Contract Assets
Balance January 31, 2018 |  | $1,502 |
Costs and gross profit recognized during the period for uncompleted contracts from the prior period | (1,085 | )
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period | 1,417 |
Closing Balance at April 30, 2018 | 1,834 |
Costs and gross profit recognized during the period for uncompleted contracts from the prior period | (1,395 | )
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period | 1,575 |
Closing Balance at July 31, 2018 |  | $2,014 |
| Contract Liabilities
Balance January 31, 2018 |  | $1,967 |
Revenue recognized during the period for uncompleted contracts from the prior period | (1,810 | )
New contracts entered into that are uncompleted at the end of the current period | 413 |
Closing Balance at April 30, 2018 | 570 |
Revenue recognized during the period for uncompleted contracts from the prior period | (422 | )
New contracts entered into that are uncompleted at the end of the current period | 398 |
Closing Balance at July 31, 2018 |  | $546 |
Practical expedients: Costs to obtain a contract are not considered project costs as they are not usually incremental, nor does job duration span more than one year. The Company applies practical expedient for these types of costs and as such expensed in the period incurred. As the Company's contracts are less than one year, the Company has applied the practical expedient regarding disclosure of the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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