Company: BWNB
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001630805-25-000007
Chunk: 35

Company: Babcock & Wilcox Enterprises, Inc.
Filing Date: 2025-03-31
Form: 10-K
Item: Item 8
Chunk 35
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 revenue for the year ended December 31, 2024.

We identified revenue on certain fixed price long-term contracts as a critical audit matter because of the judgments necessary for management to estimate total costs and profit for the performance obligations used to recognize revenue for fixed price long-term contracts. This required extensive audit effort due to the complexity of fixed price long-term contracts and required a high degree of auditor judgment when performing audit procedures to audit management’s estimates of total costs and profit and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of total costs and profit for the performance obligations used to recognize revenue for certain fixed price long-term contracts included the following, among others:

–We selected a sample of fixed price long-term contracts recognized over time and performed the following:

–Evaluated whether the fixed price contracts were properly included in management’s calculation of fixed price long-term contract revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation.

–Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers.

–Tested management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both were highly interdependent and interrelated.

–Tested the accuracy and completeness of the costs incurred to date for the performance obligation.

–With the assistance of our capital projects specialists we evaluated the estimates of total cost and profit for the performance obligation by: 

–Comparing costs incurred to date to the costs which management estimated to be incurred to date.

–Evaluating management’s ability to achieve the estimates of total cost and profit by performing corroborating inquiries with the Company’s project managers and engineers, and comparing the estimates to management’s work plans, engineering specifications, and supplier contracts, if applicable.

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–Comparing management’s estimates for the selected contracts to costs and profits of similar performance obligations, when applicable.

–Performing multiple live project site visits.

–Tested the mathematical accuracy of management’s calculation of revenue for the performance obligation.

–Tested management’s retrospective review of each contract’s revenue to determine whether revenue is accurately recognized during the period under audit. 

–Evaluated the Company’s disclosures related to revenue recognition and contracts to assess their conformity with the applicable accounting standards.

Impact on Audit of Financial Statements Because of Material Weaknesses in Internal Control Over Financial Reporting – Refer