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OHL USA, INC. AND SUBSIDIARIES <br />NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br />DECEMBER 31, 2020 <br />Note 2 - Summary of Significant Accounting Policies (cont'd.) <br />Revenue and Cost Recognition (cont'd.) <br />Changes in Contract Performance <br />Changes in job performance, job conditions and estimated profitability, including those arising <br />from settlements, may result in revisions to costs and income and are recognized in the period <br />in which the revisions are determined. The Company recognizes adjustments in estimated <br />profit on contracts under the cumulative catch-up method. Under this method, the impact of <br />the adjustment on profit recorded to date is recognized in the period the adjustment is <br />identified. Revenue and profit in future periods of contract performance are recognized using <br />the adjusted estimate. Because of the inherent uncertainty in estimating the costs to complete <br />on contracts in process, it is at least reasonably possible that the estimates used will change <br />in the near term. <br />Economic Factors <br />Type of customers - The Company performs contracts with governmental agencies, <br />public sector works, hospitality, educational, residential, and industrial agencies. <br />Geographical location of customers - The customers and contracts are mainly from the <br />States of New York, California, Texas, Illinois, and Florida. <br />Type of contracts - Construction work is performed under unit -price and fixed-price <br />contracts. These contracts are undertaken by the Company or in partnership with <br />other contractors through joint ventures. The length of the contracts varies but <br />typically ranges from one to four years. <br />Foreign Currency Transactions <br />A change in exchange rates between the functional currency and the currency in which a <br />transaction is denominated increases or decreases the expected amount of functional <br />currency cash flows upon settlement of the transaction. That increase or decrease in expected <br />functional currency cash flows is a foreign currency transaction gain or loss that is included in <br />net income or loss for the period in which the exchange rate changes. At each balance sheet <br />date, recorded balances that are denominated in a currency other than the functional currency <br />of the recording entity shall be adjusted to reflect the current exchange rate. <br />16 <br />