REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

3 Months Ended

12 Months Ended

Jun. 30, 2022

Mar. 31, 2022

Dec. 31, 2021

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

NOTE 14. REVISION OF PRIOR-PERIOD FINANCIAL STATEMENTS

During the three months ended March 31, 2022, the Company identified and corrected an $87 million over-accrual in its accrued contract costs balance that related to a majority-owned, consolidated joint venture in our Principal Markets segment. This over-accrual was predominantly built up over the pre-Separation periods of January 1, 2012, to November 3, 2021, resulting in overstatements of cost of services and accrued contract costs, and corresponding understatements of pretax and net income. The Company concluded that such impacts were not material to any prior annual or interim period. The Company further determined that the correction of the over-accrual within the transition period ended March 31, 2022 would be significant to the three-month results.

As a result, we recorded an immaterial revision to portions of our 2021 Annual Report (see the Form 8-K/A) and are recording immaterial revisions to prior interim periods in this Quarterly Report as well as our subsequent Quarterly Reports on Form 10-Q.

A summary of the impact of the revision to the accompanying prior-period consolidated financial statements is presented in the tables below.

	Three Months Ended June 30, 2021
Consolidated Income Statement (Dollars in millions)	As Previously Reported		Adjustments		As Revised
Cost of services	$	4,167	$	(5)	$	4,162
Total costs and expenses		5,070		(5)		5,065
Income (loss) before income taxes		(319)		5		(313)
Provision for income taxes		74		1		76
Net income (loss)		(393)		4		(389)

	Three Months Ended June 30, 2021
Consolidated Statement of Comprehensive Income (Loss) (Dollars in millions)	As Previously Reported		Adjustments		As Revised
Net income (loss)	$	(393)	$	4	$	(389)
Foreign currency translation adjustments		19		(2)		17
Other comprehensive income (loss), before tax		24		(2)		22
Other comprehensive income (loss), net of tax		23		(2)		21
Total comprehensive income (loss)		(370)		2		(368)

	At June 30, 2021
Consolidated Balance Sheet (Dollars in millions)	As Previously Reported		Adjustments		As Revised
Accrued contract costs	$	489	$	(76)	$	413
Total current liabilities		3,752		(76)		3,676
Other liabilities		278		19		297
Total liabilities		6,190		(57)		6,134
Net Parent investment		5,985		55		6,040
Accumulated other comprehensive income/(loss)		(1,163)		2		(1,161)
Total Net Parent investment		4,822		57		4,879
Total equity		4,875		57		4,932

	Three Months Ended June 30, 2021
Consolidated Statement of Cash Flows (Dollars in millions)	As Previously Reported		Adjustments		As Revised
Cash flows from operating activities:
Net income (loss)	$	(393)	$	4	$	(389)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Taxes (including items settled with Parent)		105		1		106
Other assets and other liabilities		(38)		(5)		(43)

	At June 30, 2021
Consolidated Statement of Equity (Dollars in millions)	As Previously Reported		Adjustments		As Revised
Net Parent investment	$	5,985	$	55	$	6,040
Accumulated other comprehensive income/(loss)		(1,163)		2		(1,161)
Total Net Parent investment		4,822		57		4,879
Total equity		4,875		57		4,932

NOTE 14. REVISION OF PRIOR-PERIOD FINANCIAL STATEMENTS

During the quarter ended March 31, 2022, the Company identified and corrected an $87 million over-accrual in its accrued contract costs balance that related to a majority-owned, consolidated joint venture in our Principal Markets segment. This over-accrual was principally built up over the pre-Separation periods of January 1, 2012, to November 3, 2021, resulting in overstatements of cost of services and accrued contract costs. The Company concluded that such impacts were not material to any prior annual or interim period. We further determined that the correction of the over-accrual within the transition period would be significant to the three-month results, and as a result it will be corrected as an immaterial revision to our 2021 Annual Report in a separate Form 8-K filing subsequent to the release of this Transition Report and will be reflected as a revision to prior interim periods in our subsequent Quarterly Reports on Form 10-Q. Because the majority of the over-accrual originated prior to 2019, we decreased the opening balance of accrued contract costs as of January 1, 2019, by $57 million and increased the opening balance of equity by $43 million, net of the tax effect of $14 million.

A summary of the impact of the revision to the accompanying prior-period consolidated balance sheet and consolidated statement of equity is presented in the tables below. The impacts to the consolidated statements of operations, comprehensive income (loss) and cash flow for the period ended March 31, 2021, are considered immaterial.

	At December 31, 2021
Consolidated Balance Sheet ($ in millions)	As Previously Reported		Adjustments		As Revised
Accrued contract costs	$	585	$	(87)	$	498
Total current liabilities		4,544		(87)		4,457
Other liabilities		501		22		522
Total liabilities		10,511		(65)		10,446
Common stock, par value $0.01 per share, and additional paid-in capital (1,000.0 shares authorized, 224.2 shares issued)		4,218		66		4,284
Accumulated other comprehensive income/(loss)		(1,143)		(1)		(1,143)
Total stockholders’ equity before non-controlling interests		2,700		65		2,765
Total equity		2,702		65		2,767

	At March 31, 2021
Consolidated Statement of Equity ($ in millions)	As Previously Reported		Adjustments		As Revised
Net parent investment	$	5,976	$	51	$	6,027
Accumulated other comprehensive income (loss)		(1,186)		4		(1,182)
Total equity		4,848		54		4,902

	At January 1, 2021
Consolidated Statement of Equity ($ in millions)	As Previously Reported		Adjustments		As Revised
Net parent investment	$	5,972	$	51	$	6,023
Accumulated other comprehensive income (loss)		(1,100)		4		(1,096)
Total equity		4,931		54		4,985

NOTE 19. REVISION OF PRIOR-PERIOD FINANCIAL STATEMENTS

During the quarter ended March 31, 2022, the Company identified an $87 million over-accrual in its accrued contract costs balance that related to a majority-owned, consolidated joint venture in our Principal Markets segment. This over-accrual was principally built up over the pre-Separation periods of January 1, 2012 to November 3, 2021, resulting in overstatements of cost of services and accrued contract costs. The Company concluded that such impacts were not material to any prior annual or interim period. The Company further determined that the correction of the over-accrual within the transition period ended March 31, 2022 would be significant to the three-month results, and as a result, it will be revised as an immaterial correction to portions of our consolidated financial statements and as immaterial corrections to prior interim periods in our subsequent Quarterly Reports on Form 10-Q. Because the majority of the over-accrual originated prior to 2019, we reduced the opening balance of accrued contract costs as of January 1, 2019, by $57 million and increased the equity balance by $43 million, which reflects the reduction in accrued contract costs net of taxes. For the periods of January 1, 2019 through December 31, 2021, accrued contract costs and cost of services were further reduced by $30 million in aggregate, which is partially offset by increased tax expense of $8 million. We have also revised impacted amounts within the accompanying notes to the consolidated financial statements, as applicable. The revisions to the accompanying consolidated financial statements are as follows:

		Year Ended December 31, 2021
Consolidated Income Statement and Statement of Comprehensive Income ($ in millions, except per share amounts)		As Previously Reported		Adjustments		As Revised
Cost of services	$	16,570	$	(20)	$	16,550
Total costs and expenses		20,580		(20)		20,560
Income (loss) before income taxes		(1,922)		20		(1,903)
Provision for income taxes		397		5		402
Net income (loss)		(2,319)		15		(2,304)
Foreign currency translation adjustments		198		(5)		194
Other comprehensive income (loss), before tax		329		(5)		324
Other comprehensive income (loss), net of tax		296		(4)		292
Total comprehensive income (loss)		(2,023)		11		(2,013)
Basic earnings (loss) per share	$	(10.35)	$	0.07	$	(10.28)
Diluted earnings (loss) per share	$	(10.35)	$	0.07	$	(10.28)

		Year Ended December 31, 2020
Consolidated Income Statement and Statement of Comprehensive Income ($ in millions, except per share amounts)		As Previously Reported		Adjustments		As Revised
Cost of services	$	17,143	$	(5)	$	17,137
Total costs and expenses		21,118		(5)		21,112
Income (loss) before income taxes		(1,766)		5		(1,760)
Provision for income taxes		246		1		247
Net income (loss)		(2,011)		4		(2,007)
Foreign currency translation adjustments		125		4		129
Other comprehensive income (loss), before tax		119		4		123
Other comprehensive income (loss), net of tax		121		4		125
Total comprehensive income (loss)		(1,891)		7		(1,883)
Basic earnings (loss) per share	$	(8.97)	$	0.02	$	(8.96)
Diluted earnings (loss) per share	$	(8.97)	$	0.02	$	(8.96)

		Year Ended December 31, 2019
Consolidated Income Statement and Statement of Comprehensive Income ($ in millions, except per share amounts)		As Previously Reported		Adjustments		As Revised
Cost of services	$	17,682	$	(6)	$	17,676
Total costs and expenses		20,858		(6)		20,852
Income (loss) before income taxes		(579)		6		(573)
Provision for income taxes		364		1		366
Net income (loss)		(943)		4		(939)
Foreign currency translation adjustments		12		(1)		11
Other comprehensive income (loss), before tax		(45)		(1)		(46)
Other comprehensive income (loss), net of tax		(27)		(1)		(28)
Total comprehensive income (loss)		(970)		3		(967)
Basic earnings (loss) per share	$	(4.21)	$	0.02	$	(4.19)
Diluted earnings (loss) per share	$	(4.21)	$	0.02	$	(4.19)

		At December 31, 2021
Consolidated Balance Sheet and Equity Statement ($ in millions)		As Previously Reported		Adjustments		As Revised
Accrued contract costs	$	585	$	(87)	$	498
Total current liabilities		4,544		(87)		4,457
Other liabilities		501		22		522
Total liabilities		10,511		(65)		10,446
Common stock, par value $0.01 per share, and additional paid-in capital (1,000.0 shares authorized, 224.2 shares issued)		4,218		66		4,284
Accumulated other comprehensive income (loss)		(1,143)		(1)		(1,143)
Total stockholders’ equity before noncontrolling interests		2,700		65		2,765
Total equity		2,702		65		2,767

		At December 31, 2020
Consolidated Balance Sheet and Equity Statement ($ in millions)		As Previously Reported		Adjustments		As Revised
Accrued contract costs	$	512	$	(72)	$	440
Total current liabilities		3,910		(72)		3,838
Other liabilities		282		18		300
Total liabilities		6,274		(54)		6,220
Net Parent investment		5,972		51		6,023
Accumulated other comprehensive income (loss)		(1,100)		4		(1,096)
Total stockholders’ equity before noncontrolling interests		4,873		54		4,927
Total equity		4,931		54		4,985

		At December 31, 2019
Consolidated Equity Statement ($ in millions)		As Previously Reported		Adjustments		As Revised
Net Parent investment	$	7,112	$	47	$	7,159
Accumulated other comprehensive income (loss)		(1,220)		(1)		(1,221)
Total stockholders’ equity before noncontrolling interests		5,892		46		5,938
Total equity		5,948		46		5,994

		At January 1, 2019
Consolidated Equity Statement ($ in millions)		As Previously Reported		Adjustments		As Revised
Net Parent investment	$	7,457	$	43	$	7,499
Total equity		6,315		43		6,358

		At December 31, 2021
Consolidated Statement of Cash Flows ($ in millions)		As Previously Reported		Adjustments		As Revised
Cash flows from operating activities:
Net income (loss)	$	(2,319)	$	15	$	(2,304)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Taxes (including items settled with Parent)		989		5		994
Other assets and other liabilities		842		(20)		822

		At December 31, 2020
Consolidated Statement of Cash Flows ($ in millions)		As Previously Reported		Adjustments		As Revised
Cash flows from operating activities:
Net income (loss)	$	(2,011)	$	4	$	(2,007)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Taxes (including items settled with Parent)		297		1		299
Other assets and other liabilities		(360)		(5)		(365)

		At December 31, 2019
Consolidated Statement of Cash Flows ($ in millions)		As Previously Reported		Adjustments		As Revised
Cash flows from operating activities:
Net income (loss)	$	(943)	$	4	$	(939)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Taxes (including items settled with Parent)		397		2		399
Other assets and other liabilities		(238)		(6)		(244)