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OHL USA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 Note 2 - Summary of Significant Accountinq Policies (cont'd.) Income Taxes The Company provides for the tax effects of transactions reported in the consolidated financial statements. Income taxes consist of taxes currently due plus deferred taxes related primarily to the differences between the financial and tax bases of long-term construction contracts, property and equipment, net operating loss carryforwards, insurance reserves, related party interest expense, allowance for doubtful accounts, amortization of intangibles and goodwill, and foreign currency exchange. The accompanying provision for income taxes represents federal, state and local taxes. The deferred tax asset or liability, as applicable, represents the future tax return consequences of those differences, which will either be deductible or taxable when the asset or liability is recovered or settled. The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Pension and Profit Sharina Plans The Company maintains a profit sharing plan for all eligible employees with a minimum of one year of service. Employer contributions are determined by an annual resolution of the Board of Directors and cannot exceed 15% of eligible compensation. The Company also has a qualified 401(k) deferred compensation plan, which provides that eligible employees may defer payment of taxes on a portion of thei.- salary by making contributions to the plan through payroll deductions. The Company's contribution to these plans was approximately $3,638,000 for the year ended December 31, 2020, of which $2,996,000 is allocated to contract costs. Union employees are covered by collectivsly bargained employee benefit plans under which the Company makes contributions on a monthly basis based upon hours worked. New Accountina Pronouncements ASU No. 2016-03 In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU modifies the measurement of expected credit losses on certain financial instruments. The ASU broadens the information that an entity must consider in developing its expected credit loss estimate to include such factors as current market conditions. Under current guidance, recognition of the full amount of credit losses generally is delayed until the loss is probable of occurring. The amendments in ASU No. 2016-13 are effective for nonpublic entities for fiscal years beginning after December 15, 2022, and interim periods within that year, based on the update in ASU No. 2019-10 to defer the implementation date. The amendments in this ASU may be early -adopted. The Company has not yet determined if this ASU will have a material effect on its consolidated financial statements. 22