DRC » Topics » Revenue Recognition

These excerpts taken from the DRC 10-K filed Feb 23, 2009.
Revenue Recognition
 
We recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when we have persuasive evidence of an arrangement, delivery of the product or service has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Delivery does not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client and client acceptance has been obtained, client acceptance provisions have lapsed, or we have objective evidence that the criteria specified in the client acceptance provisions have been satisfied. The amount of revenue related to any contingency is not recognized until the contingency is resolved.
 
We enter into multiple-element revenue arrangements or contracts, which may include any combination of designing, developing, manufacturing, modifying, erecting and commissioning complex products to customer specifications and providing services related to the performance of such products. These contracts normally take between six and fifteen months to complete. The criteria described below are applied to determine whether and/or how to separate multiple element revenue arrangements into separate units of accounting and how to allocate the arrangement consideration among those separate units of accounting:
 
  •  The delivered unit(s) has value to the client on a stand-alone basis.
 
  •  There is objective and reliable evidence of the fair value of the undelivered unit(s).
 
Our sales arrangements do not include a general right of return of the delivered unit(s). If the above criteria are not met, the arrangement is accounted for as one unit of accounting which results in revenue being recognized when the


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Table of Contents

 
DRESSER-RAND GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
($ in millions, except per share amounts)
 
last undelivered unit is delivered. If these criteria are met, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative fair value. If, however, there is objective and reliable evidence of fair value of the undelivered unit(s) but no such evidence for the delivered unit(s), the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered unit(s) equals the total arrangement consideration less the aggregate fair value of the undelivered unit(s).
 
We are required to estimate the future costs that will be incurred related to sales arrangements to determine whether any arrangement will result in a loss. These costs include material, labor and overhead. Factors influencing these future costs include the availability of materials and skilled laborers.
 
Revenue Recognition
 
We recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when we have persuasive evidence of an arrangement, delivery of the product or service has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Delivery does not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client and client acceptance has been obtained, client acceptance provisions have lapsed, or we have objective evidence that the criteria specified in the client acceptance provisions have been satisfied. The amount of revenue related to any contingency is not recognized until the contingency is resolved.
 
We enter into multiple-element revenue arrangements or contracts, which may include any combination of designing, developing, manufacturing, modifying, erecting and commissioning complex products to customer specifications and providing services related to the performance of such products. These contracts normally take between six and fifteen months to complete. The criteria described below are applied to determine whether and/or how to separate multiple element revenue arrangements into separate units of accounting and how to allocate the arrangement consideration among those separate units of accounting:
 
  •  The delivered unit(s) has value to the client on a stand-alone basis.
 
  •  There is objective and reliable evidence of the fair value of the undelivered unit(s).
 
Our sales arrangements do not include a general right of return of the delivered unit(s). If the above criteria are not met, the arrangement is accounted for as one unit of accounting which results in revenue being recognized when the


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Table of Contents

 
DRESSER-RAND GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
($ in millions, except per share amounts)
 
last undelivered unit is delivered. If these criteria are met, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative fair value. If, however, there is objective and reliable evidence of fair value of the undelivered unit(s) but no such evidence for the delivered unit(s), the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered unit(s) equals the total arrangement consideration less the aggregate fair value of the undelivered unit(s).
 
We are required to estimate the future costs that will be incurred related to sales arrangements to determine whether any arrangement will result in a loss. These costs include material, labor and overhead. Factors influencing these future costs include the availability of materials and skilled laborers.
 
Revenue
Recognition



 



We recognize revenue when it is realized or realizable and
earned. We consider revenue realized or realizable and earned
when we have persuasive evidence of an arrangement, delivery of
the product or service has occurred, the sales price is fixed or
determinable and collectibility is reasonably assured. Delivery
does not occur until products have been shipped or services have
been provided to the client, risk of loss has transferred to the
client and client acceptance has been obtained, client
acceptance provisions have lapsed, or we have objective evidence
that the criteria specified in the client acceptance provisions
have been satisfied. The amount of revenue related to any
contingency is not recognized until the contingency is resolved.


 



We enter into multiple-element revenue arrangements or
contracts, which may include any combination of designing,
developing, manufacturing, modifying, erecting and commissioning
complex products to customer specifications and providing
services related to the performance of such products. These
contracts normally take between six and fifteen months to
complete. The criteria described below are applied to determine
whether
and/or how
to separate multiple element revenue arrangements into separate
units of accounting and how to allocate the arrangement
consideration among those separate units of accounting:


 


























  • 

The delivered unit(s) has value to the client on a stand-alone
basis.
 
  • 

There is objective and reliable evidence of the fair value of
the undelivered unit(s).


 



Our sales arrangements do not include a general right of return
of the delivered unit(s). If the above criteria are not met, the
arrangement is accounted for as one unit of accounting which
results in revenue being recognized when the





F-9





Table of Contents





 




DRESSER-RAND
GROUP INC.




 




NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)






($ in
millions, except per share amounts)


 



last undelivered unit is delivered. If these criteria are met,
the arrangement consideration is allocated to the separate units
of accounting based on each unit’s relative fair value. If,
however, there is objective and reliable evidence of fair value
of the undelivered unit(s) but no such evidence for the
delivered unit(s), the residual method is used to allocate the
arrangement consideration. Under the residual method, the amount
of consideration allocated to the delivered unit(s) equals the
total arrangement consideration less the aggregate fair value of
the undelivered unit(s).


 



We are required to estimate the future costs that will be
incurred related to sales arrangements to determine whether any
arrangement will result in a loss. These costs include material,
labor and overhead. Factors influencing these future costs
include the availability of materials and skilled laborers.


 




Revenue
Recognition



 



We recognize revenue when it is realized or realizable and
earned. We consider revenue realized or realizable and earned
when we have persuasive evidence of an arrangement, delivery of
the product or service has occurred, the sales price is fixed or
determinable and collectibility is reasonably assured. Delivery
does not occur until products have been shipped or services have
been provided to the client, risk of loss has transferred to the
client and client acceptance has been obtained, client
acceptance provisions have lapsed, or we have objective evidence
that the criteria specified in the client acceptance provisions
have been satisfied. The amount of revenue related to any
contingency is not recognized until the contingency is resolved.


 



We enter into multiple-element revenue arrangements or
contracts, which may include any combination of designing,
developing, manufacturing, modifying, erecting and commissioning
complex products to customer specifications and providing
services related to the performance of such products. These
contracts normally take between six and fifteen months to
complete. The criteria described below are applied to determine
whether
and/or how
to separate multiple element revenue arrangements into separate
units of accounting and how to allocate the arrangement
consideration among those separate units of accounting:


 


























  • 

The delivered unit(s) has value to the client on a stand-alone
basis.
 
  • 

There is objective and reliable evidence of the fair value of
the undelivered unit(s).


 



Our sales arrangements do not include a general right of return
of the delivered unit(s). If the above criteria are not met, the
arrangement is accounted for as one unit of accounting which
results in revenue being recognized when the





F-9





Table of Contents





 




DRESSER-RAND
GROUP INC.




 




NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)






($ in
millions, except per share amounts)


 



last undelivered unit is delivered. If these criteria are met,
the arrangement consideration is allocated to the separate units
of accounting based on each unit’s relative fair value. If,
however, there is objective and reliable evidence of fair value
of the undelivered unit(s) but no such evidence for the
delivered unit(s), the residual method is used to allocate the
arrangement consideration. Under the residual method, the amount
of consideration allocated to the delivered unit(s) equals the
total arrangement consideration less the aggregate fair value of
the undelivered unit(s).


 



We are required to estimate the future costs that will be
incurred related to sales arrangements to determine whether any
arrangement will result in a loss. These costs include material,
labor and overhead. Factors influencing these future costs
include the availability of materials and skilled laborers.


 




These excerpts taken from the DRC 10-K filed Feb 26, 2008.
Revenue Recognition
 
The Company recognizes revenue when realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery of the product or service has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Volume price rebates are recognized when thresholds are met. Delivery does not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client and client acceptance has been obtained, client acceptance provisions have lapsed, or the Company has objective evidence that the criteria specified in the client acceptance provisions have been satisfied. The amount of revenue related to any contingency is not recognized until


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Table of Contents

 
DRESSER-RAND GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
($ in millions, except per share and per unit amounts)
 
the contingency is resolved. Provisions for anticipated losses on arrangements are recorded in the period in which they become probable.
 
The Company enters into multiple-element revenue arrangements or contracts, which may include any combination of designing, developing, manufacturing, modifying, erecting and commissioning complex products to customer specifications and providing services related to the performance of such products. These contracts normally take between six and fifteen months to complete. The criteria described below are applied to determine whether and how to separate multiple element revenue arrangements into separate units of accounting and how to allocate the arrangement consideration among those separate units of accounting:
 
  •  The delivered unit(s) has value to the client on a stand-alone basis.
 
  •  There is objective evidence of the fair value of the undelivered unit(s).
 
Our sales arrangements do not include a general right of return of the delivered unit(s). If the above criteria are not met, the arrangement is accounted for as one unit of accounting which results in revenue being recognized when the last unit is delivered. If these criteria are met, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative fair value. If, however, there is objective evidence of fair value of the undelivered unit(s) but no such evidence for the delivered unit(s), the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered unit(s) equals the total arrangement consideration less the aggregate fair value of the undelivered unit(s).
 
The maximum amount of revenue that may be recognized for delivered product(s) or service(s) is limited to the amount of consideration that has been received or is currently collectible related to the delivered item(s).
 
The Company recognizes revenue and related cost of sales on a gross basis for equipment purchased as specified by the customer that is installed into the Company’s new units in accordance with Emerging Issues Task Force No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent.
 
Revenue
Recognition



 



The Company recognizes revenue when realized or realizable and
earned. The Company considers revenue realized or realizable and
earned when it has persuasive evidence of an arrangement,
delivery of the product or service has occurred, the sales price
is fixed or determinable and collectibility is reasonably
assured. Volume price rebates are recognized when thresholds are
met. Delivery does not occur until products have been shipped or
services have been provided to the client, risk of loss has
transferred to the client and client acceptance has been
obtained, client acceptance provisions have lapsed, or the
Company has objective evidence that the criteria specified in
the client acceptance provisions have been satisfied. The amount
of revenue related to any contingency is not recognized until





F-9





Table of Contents





 




DRESSER-RAND
GROUP INC.




 




NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)






($ in
millions, except per share and per unit amounts)


 



the contingency is resolved. Provisions for anticipated losses
on arrangements are recorded in the period in which they become
probable.


 



The Company enters into multiple-element revenue arrangements or
contracts, which may include any combination of designing,
developing, manufacturing, modifying, erecting and commissioning
complex products to customer specifications and providing
services related to the performance of such products. These
contracts normally take between six and fifteen months to
complete. The criteria described below are applied to determine
whether and how to separate multiple element revenue
arrangements into separate units of accounting and how to
allocate the arrangement consideration among those separate
units of accounting:


 


























  • 

The delivered unit(s) has value to the client on a stand-alone
basis.
 
  • 

There is objective evidence of the fair value of the undelivered
unit(s).


 



Our sales arrangements do not include a general right of return
of the delivered unit(s). If the above criteria are not met, the
arrangement is accounted for as one unit of accounting which
results in revenue being recognized when the last unit is
delivered. If these criteria are met, the arrangement
consideration is allocated to the separate units of accounting
based on each unit’s relative fair value. If, however,
there is objective evidence of fair value of the undelivered
unit(s) but no such evidence for the delivered unit(s), the
residual method is used to allocate the arrangement
consideration. Under the residual method, the amount of
consideration allocated to the delivered unit(s) equals the
total arrangement consideration less the aggregate fair value of
the undelivered unit(s).


 



The maximum amount of revenue that may be recognized for
delivered product(s) or service(s) is limited to the amount of
consideration that has been received or is currently collectible
related to the delivered item(s).


 



The Company recognizes revenue and related cost of sales on a
gross basis for equipment purchased as specified by the customer
that is installed into the Company’s new units in
accordance with Emerging Issues Task Force
No. 99-19,
Reporting Revenue Gross as a Principal versus Net as an
Agent
.


 




This excerpt taken from the DRC 10-K filed Mar 7, 2007.
Revenue Recognition
 
The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery of the product or service has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Delivery does not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client and client acceptance has been obtained, client acceptance provisions have lapsed, or the Company has objective evidence that the criteria specified in the client acceptance provisions have been satisfied. The amount of revenue related to any contingency is not recognized until the contingency is resolved. Provisions for anticipated losses on arrangements are recorded in the period in which they become probable.
 
The Company enters into multiple-element revenue arrangements or contracts, which may include any combination of designing, developing, manufacturing, modifying, erecting and commissioning complex products to customer specifications and providing services related to the performance of such products. These contracts normally take between six and fifteen months to complete. The criteria described below are applied to determine whether and how to separate multiple element revenue arrangements into separate units of accounting and how to allocate the arrangement consideration among those separate units of accounting:
 
  •  The delivered unit(s) has value to the client on a stand-alone basis.
 
  •  There is objective and reliable evidence of the fair value of the undelivered unit(s).
 
Our sales arrangements do not include a general right of return of the delivered unit(s). If the above criteria are not met, the arrangement is accounted for as one unit of accounting which results in revenue being recognized when the last unit is delivered. If these criteria are met, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative fair value. If, however, there is objective and reliable evidence of fair value of the undelivered unit(s) but no such evidence for the delivered unit(s), the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered unit(s) equals the total arrangement consideration less the aggregate fair value of the undelivered unit(s).
 
The maximum amount of revenue that may be recognized for delivered product(s) or service(s) is limited to the amount of consideration that has been received or is currently collectible related to the delivered item(s).
 
The Company recognizes revenue and related cost of sales on a gross basis for equipment purchased as specified by the customer that is installed into the Company’s new units in accordance with Emerging Issues Task Force No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. Customer progress payments in excess of the related investment in inventory are recorded as customer advance payments in current liabilities.
 
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