STERLING CONSTRUCTION CO INC | 2013 | FY | 3

5.
Costs and Estimated Earnings and Billings on Uncompleted Contracts

Billing practices for our contracts are governed by the contract terms of each project based on progress toward completion approved by the owner, achievement of milestones or pre-agreed schedules. Billings do not necessarily correlate with revenue recognized under the percentage-of-completion method of accounting. The current liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized. The current asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenues recognized in excess of amounts billed to the customer, which are usually billed during normal billing processes following achievement of contractual requirements.

The two tables below set forth the costs incurred and earnings accrued on uncompleted contracts (revenues) compared with the billings on those contracts through December 31, 2013 and 2012 and reconcile the net excess billings to the amounts included in the consolidated balance sheets at those dates (in thousands).

   
As of December 31,
 
   
2013
 
2012
 
Costs incurred and estimated earnings on uncompleted   contracts
  $ 1,334,322     $ 1,361,973  
Billings on uncompleted contracts
    (1,354,214 )     (1,360,299 )
Excess of costs incurred and estimated earnings over billings (excess of billings over costs incurred and estimated earnings) on uncompleted contracts
  $ (19,892 )   $ 1,674  

Included in the accompanying balance sheets under the following captions:

   
As of December 31,
 
   
2013
 
2012
 
Costs and estimated earnings in excess of billings on uncompleted contracts
  $ 11,684     $ 20,592  
Billings in excess of costs and estimated earnings on uncompleted contracts
    (31,576 )     (18,918 )
Net amount of costs and estimated earnings on uncompleted contracts above (below) billings
  $ (19,892 )   $ 1,674  

Revenues recognized and billings on uncompleted contracts include cumulative amounts recognized as revenues and billings in prior years.

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