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ROHL NETWORKS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (SEE INDEPENDENT ACCOUNTANT'S REVIEW REPORT) OCTOBER 31,2013 AND 2012 1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Risks and Uncertainties During the normal course of business, the Partnership encounters significant economic and business risk. The Partnership,as well as the construction industry as a whole,is affected by changes in economic conditions(such as interest rates, personal income, unemployment levels and consumer confidence) and operates in an intensely competitive environment. In addition, the Partnership enters into fixed-price contracts under competitive bidding requiring the Partnership to make estimates of total costs and estimated gross profits. Changes in job performance, job conditions, estimated profitability,the economic environment,and market conditions may result in revisions to costs and income.Any adjustments,which ultimately may be made because of inherent uncertainties in estimating costs,could have a material impact on the financial statements. During the year ended October 31,2012,the Partnership was notified by the Department of Labor that an incorrect wage classification was used for certain workers by its subcontractors for one of its contracts.This resulted in the subcontractors underpaying its workers by approximately 5542,000. Management believes that the Partnership followed the requirements under the contract and the wage misclassification error was caused by the contract owner. Management believes the contract owner is liable to pay the Department of Labor directly and is being negotiated as part of the settlement agreement discussed in NOTE 8. Recent Accounting Pronouncements Revenue From Contracts With Customers In May 2014, the Financial Accounting Standards Board issued an accounting standard update which affects the revenue recognition of entities that enter into either(1)certain contracts to transfer goods or services to customers or (2)certain contracts for the transfer of nonfinancial assets.The update indicates an entity should recognize revenue in an amount that reflects the consideration the entity expects to be entitled to in exchange for the goods or services transferred by the entity.The update is to be applied to the beginning of the year of implementation or retrospectively and is effective for annual periods beginning after December 15, 2017 and in interim periods in annual periods beginning after December 15, 2018. Early application is permitted, but no earlier than annual reporting periods beginning after December 15, 2016.The Partnership is currently evaluating the effect the update will have on its financial statements. Subsequent Events The Partnership has evaluated subsequent events through November 12, 2014 which is the date the financial statements were available to be issued. ( 2. CONTRACTS RECEIVABLE INCLUDING RETAINAGE Contracts receivable including retainage consisted of the following at October 31: 2013 2012 Contracts in progress $ 960,548 $ 1,000,726 Completed contracts 2,249,660 2,698,571 Retainage 642,368 1,260,455 $ 3,852,576 $ 4,959,752 -8-