Revisions in Estimates

9 Months Ended

Sep. 30, 2023

Quarterly Financial Information Disclosure [Abstract]

Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. Changes in estimates of transaction price and costs to complete may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. In addition, the estimated or actual recovery related to estimated costs associated with unresolved affirmative claims and back charges may be recorded in future periods or may be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates.

When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period. For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future.

In our review of these changes for the three and nine months ended September 30, 2023 and 2022, we did not identify any material amounts that should have been recorded in a prior period.

The projects with increases from revisions in estimates, which individually had an impact of $5.0 million or more on gross profit, are summarized as follows (dollars in millions, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
				As Restated				As Restated
		2023		2022		2023		2022
Number of projects with upward estimate changes		1		1		1		—

Increase to project profitability, net	$	8.6	$	6.6	$	8.1	$	—
Increase to net income/decrease to net loss	$	6.5	$	5.1	$	6.1	$	—
Amounts attributable to non-controlling interests	$	—	$	—	$	3.3	$	—
Increase to net income/decrease to net loss attributable to Granite Construction Incorporated	$	6.5	$	5.1	$	2.8	$	—
Increase to net income/decrease to net loss per diluted share attributable to common shareholders	$	0.12	$	0.10	$	0.06	$	—

The increases during the three months ended September 30, 2023 and September 30, 2022 were due to changes in the estimated amount of probable recovery on outstanding claims. The increase during the nine months ended September 30, 2023 was due to decreases in estimated costs from mitigated risks.

The projects with decreases from revisions in estimates, which individually had an impact of $5.0 million or more on gross profit, are summarized as follows (dollars in millions, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
								As Restated
		2023		2022		2023		2022
Number of projects with downward estimate changes		1		1		3		6
Range of reduction in gross profit from each project, net	$	8.4	$	15.2	$	5.3 - 40.5	$	5.7 - 21.2
Decrease to project profitability, net	$	8.4	$	15.2	$	51.1	$	64.6
Decrease to net income/increase to net loss	$	6.3	$	11.7	$	38.3	$	49.8
Amounts attributable to non-controlling interests	$	4.2	$	7.6	$	20.2	$	13.2
Decrease to net income/increase to net loss attributable to Granite Construction Incorporated	$	2.1	$	4.1	$	18.1	$	36.6
Decrease to net income/increase to net loss per diluted share attributable to common shareholders	$	0.04	$	0.08	$	0.41	$	0.70

The decreases during the three and nine months ended September 30, 2023 were due to additional costs related to changes in project durations, lower productivity than originally anticipated and increased labor and materials costs. The decreases during the three and nine months ended September 30, 2022 were due to additional costs related to extended project duration, increased labor and materials costs, and disputed work being performed where there were ongoing legal claims.