Changes in Estimates

9 Months Ended

Sep. 30, 2014

Changes in Estimates (Details) [Abstract]

Changes in Estimates [Text Block]

(12)  Changes in Estimates

       Orbital's revenues, costs and operating income are derived primarily from long-term contracts that are accounted for using the percentage-of-completion method of accounting.   Revenues are recorded based on the percentage that costs incurred to date bear to the most recent estimates of total costs to complete each contract.  Estimating future revenues, costs and profit is a process requiring a high degree of management judgment, including management's assumptions regarding the company's operational performance as well as general economic conditions.  In the event of a change in total estimated contract revenue, cost or profit, the cumulative effect of such change is recorded in the period the change in estimate occurs.

Changes in contract estimates, both increases and decreases, occur for a variety of reasons including unanticipated changes in contract scope or contract value and unforeseen positive or negative changes in contract cost estimates resulting from the resolution of contract execution risks at lower costs than previously anticipated, unanticipated cost growth in connection with risks, changes in estimated overhead costs or other unexpected revisions in cost estimates. Aggregate net changes in contract estimates recognized using the cumulative catch-up method of accounting increased operating income by approximately $23 million and $16 million in the third quarter of 2014 and 2013, respectively, and $38 million and $49 million in the first nine months of 2014 and 2013, respectively.  The adjustments recorded in 2014 were largely attributable to an approximately $12 million cumulative operating income adjustment resulting from an increase in the estimated profit margin from 5.5% to 6.25% on the CRS contract following the successful completion of another mission during the quarter.   The 2014 adjustments also included net profit improvements in connection with cost efficiencies and reduced operational risks as key contract execution milestones were accomplished and as certain contracts were completed.  The adjustments recorded in 2013 were primarily due to net profit improvements in connection with the successful completion of certain satellite contracts.