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ROHL NETWORKS LIMITED PARTNERSHIP
<br /> NOTES TO FINANCIAL STATEMENTS
<br /> (SEE INDEPENDENT ACCOUNTANT'S REVIEW REPORT)
<br /> OCTOBER 31,2013 AND 2012
<br /> 1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
<br /> General and Operating Cycle
<br /> Rohl Networks Limited Partnership('Partnership')was established in the State of Delaware on March 17,2010 and is
<br /> engaged in the business of providing telecommunication construction services in the United States of America.The
<br /> Partnership is owned 99.9%by Rohl Group International,Ltd.,a foreign Canadian Limited Partnership and.1%by
<br /> Rohl Networks GP, LLC. The Partnership will continue until the Partnership is dissolved.
<br /> The Partnership specializes in fiber optic engineering and installation in both urban and rural areas. The services
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<br /> include wireline, wireless, broadband, FTTH and CATV plowing, trenching, directional drilling, conduit/manhole
<br /> systems, serial construction,local and wide area networks, optical ground wire (OPGW), long-haul and local loop
<br /> infrastructure/equipment,emergency call out and repair,maintenance and removal of existing telephone plant,make
<br /> ready engineering and construction,broadband systems,cable pulling,splicing and maintenance(copper,fiber and
<br /> coax)and other services.
<br /> Management's Plan
<br /> The Partnership secured through bids, additional fiber related projects throughout the United States. Significant
<br /> contracts secured include services to Lake County,Minnesota with an estimated contract value of$20,000,000.The
<br /> Partnership commenced running the Lake County Phase 28 contract in the second quarter of 2014, which
<br /> management expects will increase the Partnership's cash flows.
<br /> Subsequent to year end, a partner contributed $600,000 to the operations of the Partnership. Additionally, the
<br /> Partnership is looking into other sources of financing,including a line of credit.
<br /> Revenue and Cost Recognition
<br /> Revenues from contracts are recognized on the percentage-of-completion method, measured by estimates of
<br /> completion determined by the percentage of job costs incurred to total estimated job costs. That method is used
<br /> because management considers total cost to be the best available measure of progress on the contracts. Because of
<br /> the inherent uncertainties in estimating costs,it is at least reasonably possible that the estimates used will change
<br /> within the near term.
<br /> Contract costs include all direct material and labor costs and those indirect costs related to contract performance,
<br /> such as indirect labor,supplies,tools and repairs.Selling,general,and administrative costs are charged to expense
<br /> as incurred.Provisions for estimated losses on uncompleted contracts are made in the period in which such losses
<br /> are determined.Changes in job performance,job conditions and estimated profitability,including those arising from
<br /> contract penalty provisions and final contract settlements, may result in revisions to costs and income and are
<br /> recognized in the period in which the revisions are determined.
<br /> As is customary in the construction industry, the Partnership will incur costs which it believes were not part of the
<br /> original contract specifications. In many cases, these costs will be submitted as a change order to the party
<br /> authorizing the work under the contract.The Partnership's accounting policy is to recognize revenue pursuant to
<br /> these change orders upon approval by the counterparty to the contract.As of October 31,2013 and 2012,there were
<br /> no unapproved change orders.
<br /> The asset, 'Costs and estimated earnings in excess of billings on uncompleted contracts,' represents revenues
<br /> recognized in excess of amounts billed. The liability, 'Billings in excess of costs and estimated earnings on
<br /> uncompleted contracts,'represents billings in excess of revenues recognized.
<br /> Combining Construction Contracts
<br /> In accordance with Accounting Standards Codification('ASCD 650-35-25-5,the Partnership accounts for contracts
<br /> that meet certain criteria as a single profit center.For the years ended October 31,2013 and 2012,the contracts with
<br /> the Oklahoma Department of Transportation were accounted for as one profit center.
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