Costs and Estimated Earnings Related to Billings on Uncompleted Contracts

12 Months Ended

Feb. 28, 2014

Costs and Estimated Earnings Related to Billings on Uncompleted Contracts

Note 2. Costs and Estimated Earnings Related to Billings on Uncompleted Contracts

Information relative to contracts in progress consisted of the following (in thousands):

	February 28, 2013
Costs incurred to date on uncompleted contracts	$	816
Estimated earnings recognized to date on these contracts		269
		1,085
Billings to date		(1,018	)
Costs and estimated earnings in excess of billings, net	$	67
Costs and estimated earnings in excess of billings	$	108
Billings in excess of costs and estimated earnings		(41	)
	$	67

The Company had two divisions in previous reporting periods who accounted for material contracts on the percentage of completion basis, Aydin Displays and VDC Display Systems. As of February 28, 2014, VDC Display Systems did not have any open contracts in progress and the Aydin Displays division had been sold. The February 28, 2013 balances have been reclassified to reflect only the balances of VDC Display Systems.

Costs and estimated earnings in excess of billings are the results of contracts in progress (jobs) in completing orders to customers’ specifications on contracts accounted for under FASB ASC Topic 605-35, “Revenue Recognition: Construction-Type and Production-Type Contracts.” Costs included are material, labor, and overhead. These jobs require design and engineering effort for a specific customer purchasing a unique product. The Company records revenue on these fixed-price and cost-plus contracts on the percentage of completion basis using the ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward completion and revenue recognition. Any losses identified on contracts are recognized immediately. Contract accounting requires significant judgment relative to assessing risks, estimating contract costs and making related assumptions for schedule and technical issues. With respect to contract change orders, claims, or similar items, judgment must be used in estimating related amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is probable. Billings are generated based on specific contract terms, which might be a progress payment schedule, specific shipments, etc. None of the above contracts in progress contains post-shipment obligations.

Changes in job performance, manufacturing efficiency, final contract settlements, and other factors affecting estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined. There were no open contracts at February 28, 2014 accounted for under FASB ASC Topic 605-35, “Revenue Recognition: Construction-Type and Production-Type Contracts.”

As of February 28, 2014 and 2013, there were no production costs that exceeded the aggregate estimated cost of all in process and delivered units relating to long-term contracts. Additionally, there were no claims outstanding that would affect the ultimate realization of full contract values. As of February 28, 2014 and 2013, there were no progress payments that had been netted against inventory.