Company: LGN
Filing Date: 2025-02-14
Form Type: DRS
Source: 0000950123-25-002471
Chunk: 247

Company: Legence Corp.
Filing Date: 2025-02-14
Form: DRS
Chunk 247
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 recognized reflects the consideration that the Company expects to receive in exchange for those goods or services
provided. The five-step model is applied as follows:

1) Identify the contract

Management determines if a contract exists using the following factors: (a) the parties have approved the contract and are committed to perform their
respective obligations, (b) the rights of the parties can be identified, (c) payment terms can be identified, (d) the arrangement has commercial substance, and (e) collectability of consideration is probable. The Company
transacts with customers that management believes are credit worthy, and management considers historical customer practices and payment history when determining whether collection is probable.

2) Identify performance obligations in the contract

A
performance obligation is a contractual promise to transfer a distinct good or service. The Company applies judgment in determining whether each promise or groups of promises are both (a) capable of being distinct and (b) distinct within
the context of the contract. Most of the Company’s contracts are considered to have a single performance obligation because (a) the Company provides a significant service of integrating complex tasks and components into a single project or
capability, and (b) the risks associated with the Company’s performance,

F-18

Confidential Treatment Requested by Legence Corp.

Pursuant to 17 C.F.R. Section 200.83

Legence Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

including customer acceptance clauses, warranty provisions, and liquidated damages, are tied to the overall project.

Contracts with customers are often modified through change orders that may impact the scope or price of the goods or services the Company is providing. The
Company evaluates change orders to determine whether they create separate performance obligations. Many change orders are for goods or services that are not distinct within the context of the original contract, and, therefore, are not treated as a
separate performance obligation.

3) Determine the transaction price

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods and services to the
customer. The consideration promised in a contract with customers may include fixed amounts, variable amounts, or both. After contract inception, the transaction price may change for various reasons, including executed or unresolved change orders,
executed or unresolved contract modifications, claims to or from the customer or owner, and back-charge recoveries. The customers may partially or fully agree with such modifications or affirmative claims. Most changes are considered variable
consideration until approved