Aerospace Partners, Inc manufactures communications and radar systems for the aerospace industry. Work is performed alone or in partnership with other contractors using the following contract types: fixed priced, fixed price with incentive, and cost plus fixed fee. Contract length varies by project but typically last for approximately three (3) years.
Use of Estimates
Preparation of financial statement to conform with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions which affect the amounts in the financial statements and related notes during reporting period. Though management does not believe this will be the case, actual results may differ materially from those estimates.
Cash and …show more content…
Cost of products sold also includes warehousing, freight, distribution, shipping and handling costs.
Loss Contingencies
Aerospace Partners is involved in several lawsuits that arise in the normal course of business. Aerospace Partners records a loss provision when it believes it is probable that a liability has been incurred and the associated amount can be reasonably estimated.
Inventory
Inventory consists of all equipment and parts required to build aerospace communication and radar systems. Inventory is stated at the lower of cost or net realizable value. Product related inventories are maintained using a first-in, first-out (FIFO) basis. The cost of spare parts and small components such as screws, nuts, bolts, etc. are maintained using the average cost method.
Property, Plant & Equipment
Property, plant and equipment are recorded at historical cost minus accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the asset. Expenditures for maintenance and repairs are expensed as incurred. As assets are disposed of, all cost and accumulated depreciation are removed from affected accounts and all gains or losses are reflected in income for that …show more content…
is party to various legal actions brought against it, some of which may ultimately result in settlements or decisions against the Aerospace Partners.
With the assistance of legal counsel, management has determined that it is “probable” that some of these actions will result in a loss to Aerospace Partners and that the loss amounts are measurable. The estimated liabilities for these cases are $1.4 million and $0.9 million as of December 31st, 2012, and 2013, respectively, and are included in “Other Liabilities” on the Balance Sheet. Since payments in these cases have been deemed probable and the potential liability has been estimated, $2.3 million has been accrued in the financial statements as of December 31st, 2012 and 2013.
Note 5: CHANGES IN ACCOUNTING PRINCIPLES OR ESTIMATES
During 2013, Aerospace Partners changed from the Completed-contract method to a Percentage of completion (PoC) method to evaluate work-in-progress when recording long-term contracts. Revenues for in-progress contracts are determined based on the cost incurred so far. This is a change in accounting estimates therefore no special entries are required for any prior
Use of Estimates
Preparation of financial statement to conform with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions which affect the amounts in the financial statements and related notes during reporting period. Though management does not believe this will be the case, actual results may differ materially from those estimates.
Cash and …show more content…
Cost of products sold also includes warehousing, freight, distribution, shipping and handling costs.
Loss Contingencies
Aerospace Partners is involved in several lawsuits that arise in the normal course of business. Aerospace Partners records a loss provision when it believes it is probable that a liability has been incurred and the associated amount can be reasonably estimated.
Inventory
Inventory consists of all equipment and parts required to build aerospace communication and radar systems. Inventory is stated at the lower of cost or net realizable value. Product related inventories are maintained using a first-in, first-out (FIFO) basis. The cost of spare parts and small components such as screws, nuts, bolts, etc. are maintained using the average cost method.
Property, Plant & Equipment
Property, plant and equipment are recorded at historical cost minus accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the asset. Expenditures for maintenance and repairs are expensed as incurred. As assets are disposed of, all cost and accumulated depreciation are removed from affected accounts and all gains or losses are reflected in income for that …show more content…
is party to various legal actions brought against it, some of which may ultimately result in settlements or decisions against the Aerospace Partners.
With the assistance of legal counsel, management has determined that it is “probable” that some of these actions will result in a loss to Aerospace Partners and that the loss amounts are measurable. The estimated liabilities for these cases are $1.4 million and $0.9 million as of December 31st, 2012, and 2013, respectively, and are included in “Other Liabilities” on the Balance Sheet. Since payments in these cases have been deemed probable and the potential liability has been estimated, $2.3 million has been accrued in the financial statements as of December 31st, 2012 and 2013.
Note 5: CHANGES IN ACCOUNTING PRINCIPLES OR ESTIMATES
During 2013, Aerospace Partners changed from the Completed-contract method to a Percentage of completion (PoC) method to evaluate work-in-progress when recording long-term contracts. Revenues for in-progress contracts are determined based on the cost incurred so far. This is a change in accounting estimates therefore no special entries are required for any prior