Company: HEI-A
Filing Date: 2025-12-22
Form Type: 10-K
Source: 0000046619-25-000082
Chunk: 91

Company: HEICO CORP
Filing Date: 2025-12-22
Form: 10-K
Item: Item 8
Chunk 91
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 the basis of cost.The Company accounts for contract modifications prospectively when the remaining goods or services are distinct and on a cumulative catch-up basis when the remaining goods or services are not distinct.The Company provides assurance type warranties on many of its products and services.  Since customers cannot purchase such warranties independently of the products or services under contract and they are not priced separately, warranties are not separate performance obligations.The Company utilizes the cost-to-cost method as a measure of progress for performance obligations that are satisfied over time as it believes this input method best represents the transfer of control to the customer.  Under this method, revenue for the current period is recorded at an amount equal to the ratio of costs incurred to date divided by total estimated contract costs multiplied by (i) the transaction price, less (ii) cumulative revenue recognized in prior periods.  Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation.Under the cost-to-cost method, the extent of progress toward completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation.  These projections require the Company to make numerous assumptions and estimates relating to items such as the complexity of design and related development costs, performance of subcontractors, availability and cost of materials, labor productivity and cost, overhead, capital costs, and manufacturing efficiency.  The Company reviews its cost estimates on a periodic basis, or when circumstances change and warrant a modification to a previous estimate.  Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends and other economic projections.For certain contracts with similar characteristics and for which revenue is recognized using an over time model, the Company uses a portfolio approach to estimate the amount of revenue to recognize.  For each portfolio of contracts, the respective work in process and/or finished goods inventory balances are identified and the portfolio-specific margin is applied to estimate the pro rata portion of the transaction price to recognize in relation to the costs incurred.  This approach is utilized only when the resulting revenue recognition is not expected to be materially different than if the accounting was applied to the individual contracts.Certain of the Company’s contracts give rise to variable consideration when they contain items such as customer rebates, credits, volume purchase discounts, penalties and other provisions that may impact the total consideration the Company will receive.  The Company includes variable consideration in the transaction price generally by applying the most likely amount method of the consideration that it expects to be entitled to receive based on