NOTE 3—REVENUE RECOGNITION

Effect of ASC Topic 606 Adoption―The cumulative effect of adopting ASC 606 due to change in method to measure project progress, as discussed in Note 1, Basis Of Presentation and Significant Accounting Policies, is as follows:

	Impact of ASC 606 adoption
	Legacy GAAP			Adjustment			As reported
	(In thousands)
Consolidated Statements of Operations for the quarter ended March 31, 2018
Revenues	$	590,307		$	17,511		$	607,818
Cost of operations		459,991			15,720			475,711

Operating Income		66,648			1,791			68,439

Provision for income taxes		19,979			736			20,715

Net income		34,134			1,055			35,189

Consolidated Balance Sheets as of March 31, 2018
Assets
Current assets:
Contracts in progress		493,750			12,670			506,420

Liabilities and equity
Current liabilities:
Advance billings on contracts		49,310			(9,103	)		40,207
Income taxes payable		39,934			736			40,670

Stockholders' equity:
Retained earnings (Accumulated deficit)		(14,125	)		21,037			6,912

⁽¹⁾ Includes $20 million of cumulative catch-up adjustment to opening Retained earnings (Accumulated deficit) on January 1, 2018, upon adoption of ASC 606.

Remaining performance obligations (“RPOs”)―Our RPOs are generally satisfied over time as work progresses under our contracts with customers. As of March 31, 2018, we had $3.4 billion of RPOs. The following table summarizes changes to our RPOs (in thousands):

RPOs at December 31, 2017	$	3,901,443
ASC 606 cumulative effect adjustment at January 1, 2018		(228,126	)
RPOs at January 1, 2018		3,673,317
Bookings from new contracts		193,170
Additions on existing contracts, net		128,004
Less: Amounts recognized in revenues		607,818
RPOs at March 31, 2018 ⁽¹⁾	$	3,386,673

⁽¹⁾	At March 31, 2018, approximately 48% of our RPOs were attributable to Saudi Aramco

Our RPOs by segment were as follows:

	March 31, 2018
	(in approximate millions)
AEA	$	969	28	%
MEA		2,021	60	%
ASA		397	12	%
Total	$	3,387	100	%

Of the March 31, 2018 RPOs, we expect to recognize revenues as follows:

	2018		2019		Thereafter
	(in approximate millions)
Total RPOs	$	1,826	$	1,252	$	309

Contract types―We execute our contracts using a variety of pricing models, including fixed-price, unit-basis, cost-plus, or some combination of those methods, with fixed-price being the most prevalent. Additional detail regarding our revenues by contract types is disclosed in Note 16, Segment Reporting.

Change orders—As of March 31, 2018 and 2017, variable consideration associated with unapproved change orders that have been included in transaction prices aggregated to approximately $110 million and $118 million, of which approximately $8 million and $12 million were included in RPOs, respectively.

Claims Revenue―As of March 31, 2018, there were no material claims revenues included in operating results. The amount of revenues included in our transaction prices associated with claims as of March 31, 2018 and 2017 was $10 million, all in our Middle East segment. Claim amounts are determined based on various factors, including our analysis of the underlying contractual language and our experience in making and resolving claims. Our unconsolidated joint ventures did not include any material claims revenues or associated costs in their financial results for the three months ended March 31, 2018 and 2017.

None of the claims as of March 31, 2018, whether material or immaterial, were the subject of any litigation proceedings. We continue to actively engage in negotiations with our customers on our outstanding claims. These claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses. However, we currently do not expect any significant reversals of revenues.

Loss Recognition―A risk associated with fixed-priced contracts is that revenue from customers may not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor and vessel productivity, vessel repair requirements, weather downtime, subcontractor or supplier performance, pipeline lay rates or steel and other raw material prices and penalties associated with missed completion deadlines. For all contracts, if a current estimate of total contract cost indicates a loss, the projected loss is recognized in full immediately and reflected in cost of operations in the Consolidated Statements of Operations. It is possible that these estimates could change due to unforeseen events such as changes in productivity, actual downtime and the resolution of change orders and claims with the customers, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year.

In our Consolidated Balance Sheets, the provision for estimated losses on all active uncompleted projects is included in “Advance billings on contracts.”

There were no material active projects as of March 31, 2018 which we determined to be in a substantial loss position.

The provision for estimated losses on all active uncompleted projects in our Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017 were not material.