Company: LGN
Filing Date: 2025-04-30
Form Type: DRS/A
Source: 0000950123-25-003868
Chunk: 149

Company: Legence Corp.
Filing Date: 2025-04-30
Form: DRS/A
Chunk 149
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 Corp.

Pursuant to 17 C.F.R. Section 200.83

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our Consolidated Financial
Statements. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Our significant accounting policies are discussed in the “Note 2—Summary of Significant Accounting Policies” in the Notes to
Consolidated Financial Statements. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to areas involving a significant level of estimation uncertainty
and have had or are likely to have a material impact on our financial statements.

Revenue Recognition

The Company recognizes revenue at the time the related performance obligation is satisfied by transferring the promised good or service to its
customers. A good or service is considered to be transferred when the customer obtains control. The Company can transfer control of a good or service and satisfy its performance obligations either over time or at a point in time, though the majority
of the Company’s contracts have over time performance obligations.

Management has concluded performance obligations related to
construction and service contracts are satisfied over time because the Company’s performance typically creates or enhances an asset that the customer controls. The Company primarily measures the progress toward complete satisfaction of the
performance obligation(s) using an input method (i.e., “cost-to-cost”), though some contracts use an output method (i.e., “milestone achievement”)
when our performance does not produce significant amounts of work in process prior to complete satisfaction of such performance obligation(s).

The accuracy of the Company’s revenue and profit recognition in each year at the balance sheet date depends on the accuracy of
management’s estimates of the cost to complete each project as well as variable consideration. There are several factors that can contribute to changes in estimates of contract cost and profitability, such as changes in project scope, input
costs and productivity, among others. Such factors may cause fluctuations in gross profit and gross profit margin from period to period. These changes may have a significant impact on the financial statements. At the time a loss on a contract
becomes probable, the entire amount of the estimated loss is accrued. Management monitors for circumstances that may affect the accuracy of its estimates, and material changes in