Revenue Recognition

12 Months Ended

Sep. 30, 2020

Revenue Recognition

Revenue Recognition

Note 4 — Revenue Recognition

Contract Estimates

As described in Note 1 above, many of our contracts are accounted for on the percentage-of-completion cost-to-cost method, under which the impact of revisions in profit or loss estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. The aggregate impact of net changes in contract estimates to our operating results are presented in the table below (in thousands, except per share amounts):

	Years Ended September 30,
	2020		2019		2018
Operating income (loss)	$	7,527	$	(2,235)	$	(6,986)
Net loss from continuing operations attributable to Cubic		(8,131)		(2,351)		(5,146)
Diluted loss per share attributable to Cubic		(0.26)		(0.08)		(0.19)

For the year ended September 30, 2020, operating income increased by $17.2 million and $14.0 million due to changes in estimates recognized by Boston OpCo and CTS respectively, related to the Amended MBTA Contract. Operating

income (loss) reflects 100% of Boston OpCo’s change in contract estimates. However, because we only own 10% of Boston OpCo, net loss from continuing operations attributable to Cubic reflects only 10% of Boston OpCo’s change in contract estimates. See “Note 3 – Variable Interest Entities” for further details. This increase was partially offset by losses from incremental investments in technologies being developed for certain secure communications contracts.

Backlog

As of September 30, 2020, our ending backlog was $3.667 billion, compared to $3.401 billion at September 30, 2019. We expect to recognize approximately 30% of our September 30, 2020 backlog over the next 12 months as revenue, and approximately 45% over the next 24 months as revenue, with the remainder recognized thereafter.

Accounts Receivable

The components of accounts receivable are as follows (in thousands):

	September 30,
	2020		2019
Accounts receivable
Billed	$	161,473	$	127,406
Allowance for doubtful accounts		(1,498)		(1,392)
Net accounts receivable	$	159,975	$	126,014

Amounts billed include $82.2 million and $60.3 million due on U.S. federal government contracts at September 30, 2020 and September 30, 2019, respectively.

In our normal course of business, we may sell trade receivables to financial institutions as a cash management technique. We do not retain financial or legal obligations for these receivables that would result in material losses. Our ongoing involvement is limited to the remittance of customer payments to the financial institutions with respect to the sold trade receivables; therefore, our sold trade receivables are not included in our Consolidated Balance Sheet in any period presented. As of September 30, 2020 and 2019, we sold $18.4 million and $31.1 million, respectively, of outstanding trade receivables to financial institutions. During fiscal 2020, we received $5.5 million related to withheld proceeds from receivables we sold as of September 30, 2019, which is included in cash provided by investing activities in our Consolidated Statements of Cash Flows.

Contract Assets and Liabilities

Contract assets and contract liabilities were as follows (in thousands):

	September 30,
	2020		2019
Contract assets	$	268,773	$	349,559
Contract liabilities	$	75,546	$	46,170

Contract assets decreased $80.8 million during the year ended September 30, 2020, due to billings in excess of revenue recognized related to the satisfaction or partial satisfaction of performance obligations. There were no significant impairment losses related to our contract assets during the years ended September 30, 2020 and 2019.

Contract liabilities increased $29.4 million during the year ended September 30, 2020, due to payments received in excess of revenue recognized on these performance obligations. During the year ended September 30, 2020, we recognized $22.8 million of our contract liabilities at October 1, 2019 as revenue. We expect our contract liabilities to be recognized as revenue over the next 24 months.