Table of Contents

  1. Policy
  2. Applicability
  3. Responsibility
  4. Definitions
  5. Reporting Procedure

Gross Orders Received and Backlog

1. Policy

It is Company policy to include in Backlog and to report as Gross Order Received only those awards which will be future Sales.

2. Applicability

This procedure applies to The Company, Inc. and all its subsidiaries.

3. Responsibility

Vice President, Worldwide Sales and Vice President, Finance are responsible for assuring compliance with this policy.

4. Definitions

4.1 Backlog

Backlog is the value of unfilled orders (or the incomplete portion of ongoing work) that provide authority for Company to incur costs, perform “the work” and subsequently to submit invoices and report the Sales. Backlog at the end of the year is the sum of backlog at the beginning of the year, plus Gross Orders Received, less Sales, and plus or minus Adjustments to Backlog during the year.

4.2 Gross Orders Received

Gross Orders Received (GOR) are the dollar amounts assigned to contracts, letter agreements, letters of intent, purchase orders and the like when the terms and conditions are firm enough to assure the likelihood of near-term start of work and subsequent payment to Company. The following documents provide authority for orders to be considered received, to the extent that customers have authorized Company to commit funds:

a. Executed contracts,

b. Executed Change Orders or contract amendments that alter an executed contract and the contract value, and

c. Letter contracts, purchase orders, letters of intent, and telefaxed authorizations, after acceptance by Company.

Inclusions and Exclusions

Fixed Price Contracts

The total contract price will be reported as GOR.

Cost Reimbursable Contracts

GOR includes the value of professional services. It excludes the value of craft labor, subcontracts, equipment and material unless the risk is deemed material.

Measurement Standards

Conditional Awards

Conditional awards, which authorize commencement of work upon obtaining government approvals, completion of financing arrangements and such, are reported as GOR when these conditions have been met.

Phased Awards

Phased awards are reported as GOR in increments as the awards are received.

Verbal awards

Verbal awards are reported as GOR if documented by a memorandum signed by the Vice President, Worldwide Sales and countersigned by the Vice President, Finance.

Spending Limits

If the amount of spending authorization or customer limit of liability is less than the contract value, it is the lesser amount that is reported as GOR.


GOR includes increased spending authorizations arising from contract amendments and change orders.


GOR is adjusted for decreases which include cancellations and terminations for the value of the terminated portion of contract, decreased spending authorizations arising from contract amendments and change orders, and cancellations and reductions of orders received.

4.3 Adjustments to Backlog

Adjustments to Backlog include items other than additions to or reductions in GOR that must be taken into consideration for the proper statement of reported backlog. Some examples are:

Cost experiences

Cost experience is the difference from estimated contract values due to cost trends not documented by contract amendments, purchase order revisions or change orders.

Termination estimates

Upon first notice of a contract termination, reduction of backlog is classified as an adjustment. When the actual value of the terminated portion of the contract can be determined from the termination agreement, the adjustment directly to backlog should be eliminated with an appropriate reduction made to the GOR total.

Price changes

Due, for example, to cash discounts or credit memos.

Sales adjustments

Due, for example, to cash discounts or credit memos.

Agents’ commissions

Contract closeouts

Currency rate variations


Other differences between reported GOR and net sales not specifically covered above.

5. Reporting Procedure

5.1 Individual Projects

The “Award of Job to Company” (Form B-LT-204 - Attachment A) is prepared in accordance with Sect. 4.2 by the Sales Manager and the Project Manager (if appointed), approved by the General Manager and distributed by the Sales Department.

5.2 Monthly GOR Report

The Monthly GOR Report for each engineering office is prepared by the Sales Department, reviewed by the Accounting Department, signed by the appropriate Vice President, Sales and the Accounting Manager, and distributed by the Sales Department.

5.2.1 Document and Record Review

The Accounting Department reviews the documents described in Section 4.2.

5.2.2 Report of indicated GOR

The Accounting Department prepares a report listing, by project, indicated GOR not reported by the Sales Department.

5.2.3 Accounting/Sales Conference

Representative of the Sales and Accounting departments meet and review the report of indicated GOR>

5.2.4 Due Date

Monthly GOR Reports are due in Main Office the first Tuesday after close of the Fiscal Month.

5.3 Quarterly Adjustments to Backlog


It is the Accounting Department’s responsibility to review and verify the Company’s quarterly.


When preparing quarterly financial statements, the Accounting Department analyzes each job/contract. The total value of each contract is reassessed based upon the best available information: Current Cost Outlook, current contract value, Accounting Department estimate, or total amount billed to or received from the customer. For each contract the difference between this reassessment and the previously reported GOR is recorded as an Adjustment to Backlog.