Financial board updates revenue recognition standard
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which replaced most of the existing guidance with an overriding principle and five-step model. Companies now are instructed to identify contracts with customers; identify performance obligations; determine transaction prices; allocate transaction prices; and recognize revenue.
The updated standard allows revenue to be recognized over time if the following criteria are met:
Roofing contractors should perform general analyses of their contracts to evaluate whether they meet the criteria to recognize revenue over time. If one or more of the criteria are not met, the revenue will be recognized at the time the performance obligation is completed.
The revenue recognition standard also makes accounting for change orders more complex. Change orders currently are recognized in revenue when it is probable they will be approved and the amounts can be estimated. Under the updated standard, accounting for change orders will depend on the types of modifications. A change order will be recognized as a separate contract if it adds goods or services for additional consideration that reflect their standalone selling prices. If a change order does not add distinct goods or services, the contract modification will be accounted for on a combined basis with the original contract. Because most construction contracts are unique, change orders will need to be evaluated to determine whether they are part of an existing contract or will be treated as new contracts.
In addition, contractors who have calculated the percentage complete using the cost-to-cost method will find the updated standard has excluded certain costs from the calculation. Contractors must be diligent when determining which costs or labor hours should be included in the calculation of percentage complete.
Public entities will be required to apply the updated revenue standard to annual reporting periods after Dec. 15, 2017, including interim reporting periods. Nonpublic entities will be required to apply the standard after Dec. 15, 2018, and interim reporting periods within annual reporting periods beginning after Dec. 15, 2019.
Construction industry finance executives can prepare for the updated revenue recognition standard's effective date by evaluating the standard's expected effect on their companies' revenue recognition; determining whether all the information needed to implement the updated standard currently is being captured by their companies' finance or IT systems; and communicating to company stakeholders the standard's potential impact before the standard takes effect.
ABC Supply acquires L&W Supply
ABC Supply Co. Inc., Beloit, Wis., has announced it will acquire Chicago-based USG Corp.'s building product distribution business L&W Supply Corp., Chicago, for $670 million.
L&W Supply is a distributor of gypsum wallboard and suspended ceiling tiles with 136 distribution branches in the U.S. The acquisition of L&W Supply will allow ABC Supply to expand its product offerings into the interiors of buildings.
"We are thrilled to welcome the associates, customers and suppliers of L&W Supply into the ABC family," says Keith Rozolis, president and CEO of ABC Supply. "As a world-class distributor of interior building materials, L&W reinforces ABC's leadership position in building materials distribution and helps set the stage for our next phase of growth."
The acquisition allows USG to reduce debt and achieve its target leverage ratio; accelerate high return investments in its gypsum and ceilings businesses through advanced manufacturing initiatives; and position the company to consider future capital returns to shareholders.
"The sale of L&W Supply is transformative for USG, enabling us to right-size our balance sheet and accelerate profitable growth," says James S. Metcalf, chairman, president and CEO of USG. "This transaction sharpens our focus on manufacturing and innovation and creates a new strategic relationship with ABC Supply."
NRCA and allies create RF radiation awareness program
NRCA; the United Union of Roofers, Waterproofers and Allied Workers; and the Center for Construction Research and Training have made available a radiofrequency (RF) radiation awareness program. The program was created as part of a five-year effort funded by the National Institute for Occupational Safety and Health to produce useful, timely safety programs for the roofing industry.
The RF Radiation Awareness Program for the Construction Industry is intended to increase contractors' awareness of potential RF radiation risks and teach them how to identify sources of RF radiation and steps to follow to work safely around the hazard. Users can access a safety video, presentation, hazard alert card, RF Radiation Awareness Toolbox Talk and a RF Radiation Awareness Guide for the Construction Industry. The hazard alert card and toolbox talk also are available in Spanish.
For more information and to access the RF radiation awareness program, visit www.cpwr.com/research/rf-radiation-awareness.
Roofing contractors face penalties for safety violations
The Occupational Safety and Health Administration (OSHA) has cited Barringer Brothers Roofing, Swansea, Ill.; D.R. Horton Inc., Fort Worth, Texas; Garcia Carpentry LLC, Winter Garden, Fla.; and The Roof Kings LLC, Quincy, Mass., for safety violations after inspectors observed employees working under unsafe conditions at the companies' job sites between February and August 2016, according to www.osha.gov. The companies are not NRCA members.
After inspectors observed five employees working at a height of 13 feet without adequate fall protection, OSHA issued two willful citations, two repeated citations and six serious safety violations to Robert Barringer III, owner of Barringer Brothers Roofing, May 18 for not ensuring workers were properly protected from falls. Inspectors also noted other hazards, including employees using nail guns without eye protection, the absence of a competent person to provide regular job-site inspections and a lack of fire extinguishers. Proposed penalties total $89,100.
Barringer has been cited by OSHA 19 times under various company names and currently is in default on $267,000 in federal penalties. In April 2016, OSHA placed Barringer in its Severe Violator Enforcement Program, which focuses on recalcitrant employers that endanger workers by committing willful, repeat or failure-to-abate violations, after citing fall hazards on three separate job sites. Barringer has not responded to the April citations.
In August, OSHA inspectors observed Garcia Carpentry employees installing roof sheathing without fall protection. On Aug. 15, the agency issued one repeated citation to D.R. Horton for failing to ensure subcontractor employees were protected with a fall-protection system when working from heights up to 25 feet. The agency also issued one repeated citation for the same violation to Garcia Carpentry, as well as one repeated citation for using a ladder improperly and two serious safety violations for permitting employees to work without wearing hard hats and operate powered nail guns without eye protection. Proposed penalties total $107,785.
The Roof Kings also received OSHA citations after inspectors found the company exposed its employees to life-threatening falls during a three-day period as they worked on a church. The agency issued three willful citations, one repeated citation and nine serious safety violations to The Roof Kings Aug. 1 after investigators observed employees working on a steep-slope roof without adequate fall protection in February. The employees were exposed to additional fall hazards stemming from an unsecured fall-protection anchor; a fall-protection lanyard that would allow an employee to fall more than 6 feet; an improperly angled extension ladder; and using a materials hoist improperly as a ladder. Proposed penalties total $124,960.
Barringer Brothers Roofing, D.R. Horton, Garcia Carpentry and The Roof Kings have 15 business days from receipt of their citations and penalties to comply, request a conference with OSHA's area director or contest the findings before the independent Occupational Safety and Health Review Commission.
Callback: In Briefings, July issue, it was incorrectly stated one result of OMG Roofing Products employees' kaizens was a 66 percent decrease in drain assembly output. The correct result was a 66 percent increase in drain assembly output. Professional Roofing regrets the error.