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OHL USA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 Note 2 - Summary of Siqnificant Accounting Policies Revenue and Cost Recoqnition The Company recognized its revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers ("ASC 606'x. The guidance affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. ASC 606 provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should apply the following five-step process to recognize revenue: (1) Identify the contract with a customer; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to the performance obligations in the contract; and (5) Recognize revenue when (or as) the entity satisfies a performance obligation. Construction Contracts Revenues on construction contracts are recognized over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. The customer typically controls the asset under construction, as evidenced either by contractual termination clauses or by the Company's rights to payment for work performed on the asset under construction that does not have an alternative use to the Company. The Company's construction contracts are generally accounted for as a single performance obligation, since the Company is providing a significant service of integrating components into a single project. The Company recognizes revenue with an "input method" using the percentage of completion method, whereby progress towards completion is recognized according to the percentage of incurred costs to estimated total costs. This method best depicts the transfer of control to the customer, which occurs as the Company incurs costs on its contracts. Incurred costs represent work performed, which corresponds with and thereby best depicts the transfer of control to the customer. Because the Company almost always acts as a principal in the construction contracts, gross revenues are recognized. The Company is considered the principal because the Company controls the contractually specified goods and services before they are transferred to the customer. Revenues on uninstalled materials are recognized when control is transferred to the customer. Under certain circumstances (e.g., transfe} of control occurs significantly before services are provided, the cost of the material is significant), revenue on certain uninstalled third -party materials is recognized when the cost is incurred; however, profit is not recognized until the material is ultimately installed in the project. 12